1

A

SUMMER INTERNSHIP PROJECT

ON

MEASURING EFFECTIVENESS OF TRAINING IN THE SURAT PEOPLES

CO-OPERATIVE BANK LTD

Submitted to

S.R. LUTHRA INSTITUTE OF MANAGEMENT

IN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

In

Gujarat Technological University

UNDER THE GUIDANCE OF

Faculty Guide: Company Guide:

Ms. Parinaz Todiwala Mr. Mukesh Patel

Assistant Professor Chief Manager

(Surat Peoples Co-op Bank)

Submitted by

Mr. CHITRAK M SAWADIYAWALA [Batch No. 2013-15, Enrollment

No. 138050592091]

MBA SEMESTER III

S.R. LUTHRA INSTITUTE OF MANAGEMENT 805

MBA PROGRAMME

Affiliated to Gujarat Technological University

Ahmedabad

July, 2014

2

Company Certificate

This is certified that Mr. Chitrak Sawadiyawala from S.R. LUTHRA

INSTITUTE OF MANAGEMENT, have carried out the research on the subject

titled Measuring Effectiveness of Training in The Surat Peoples Co-

operative Bank Ltd. at The Surat Peoples Co-operative Bank under the

supervision of Mr. Mukesh Patel, from June 2014 to August, 2014. I also

certify that, the above mentioned student has carried the research work

satisfactorily.

Place: - Surat

Date: - 22th July 2014

________________

(Name & Designation)

3

Students Declaration

I, Mr. Chitrak Sawadiyawala, hereby declare that the report for Summer

Internship Project entitled Measuring Effectiveness Of Training in The

Surat Peoples Co-Operative Bank Ltd is a result of my own work and my

indebtedness to other work publications, references, if any, have been duly

acknowledged.

Place: Surat

Date: _____________

__________________

(Chitrak Sawadiyawala)

4

Institutes Certificate

Certified that this Summer Internship Project Report Titled Measuring

Effectiveness Of Training In The Surat Peoples Co-operative Bank Ltd.

is the bonafide work of Mr. Chitrak Sawadiyawala (Enrollment No.

138050592091), who has carried out the research under my supervision. I

also certify further, that to the best of my knowledge the work reported herein

does not form part of any other project report or dissertation on the basis of

which a degree or award was conferred on an earlier occasion on this or any

other candidate.

Place: Surat

Date: ________________

___________________

(Parinaz Todiwala)

Assistant Professor

___________________

(J. M. Kapadia)

I/C Director

5

PREFACE

In the era of rapid industrialization and technological innovation which has

made Gujarat emerge as industrial state with newer avenues and

opportunities.

As per university, it is must for the student of M.B.A., to prepare report on

practical study by visiting a particular industry to acquire practical as well as

theoretical knowledge pertaining to that industry in different aspects about its

internal environment.

My main focus and study was on Measuring Effectiveness of Training in

The Surat Peoples Co-Operative Bank Ltd.

I have put up my best efforts and enumerated each possible information after

observing the activities carried over there, to make this report a satisfactory

report.

It was a great opportunity and memorable experience interacting with people

working there, collecting information regarding their job and acquiring

knowledge.

Lastly, I have tried my level best to prepare the best informative report.

6

ACKNOWLEDGEMENT

With knowledge you

Know the words,

But with experience

You know the world.

In this, one and a half months of ONCE IN A LIFETIME EXPERIENCE I

have learnt a world of things and would really like to thank a few people who

made a difference during this exciting project tenure.

I would like to extend special thanks to Mr. Mukesh Patel (Chief Manager),

Ms. Rajeshree Parikh(Senior Officer) & Ms. Dipti Kapadia (Officer) Surat

Peoples Co-op. Bank, Surat for their support and important guidance.

I would like to thank Gujarat technological university who give me this

opportunity to work on the Summer Internship Program as a part of

Curriculum.

I would also like to my special thanks to Dr. Jimmy Kapadia, I/C Director, who

guide me about my project report.

Furthermore, I would like to thank my Faculty Guide Ms. Parinaz Todiwala for

his excellent guidance throughout the project without whom would not have

been able to complete this project successfully and who was behind me

throughout my project tenure.

Lastly but heartily I am very appreciate that all the respondents are give me

responses and spare their valuable time to fill up my questionnaire.

7

EXECUTIVE SUMMARY

As the management student of GUJARAT TECHNOLOGICAL UNIVERSITY,

AHMEDABAD, there is subject of partial training followed by project report

and also as per the requirement of the MBA study and to do develop our

personal knowledge, for that I have chosen the project report on Measuring

Effectiveness of Training in The Surat Peoples Co-operative Bank Ltd.

The Surat Peoples Co-operative bank is the First Registered Urban Co-

operative Bank of India and among the first 13 Co-operative Banks to get

Scheduled Bank Status.

The main objective of the study is to analyze and measure the effectiveness

of training in SPB. For this report 100 respondents are been covered from

banks central office, Main branch and udhna branch employee and the

questionnaire is filled up by each employees to know the motivation level and

their performance. Through this research the bank will come to know whether

employees are satisfied or not with the training program.

In order to achieve this aim, both primary and secondary sources of data were

used. This primary data were collected through the administrating

questionnaire. Convenient sampling procedure was used to obtain 100

responses from employees and managers on the training effectiveness in

Surat Peoples Co-Operative bank. All important points such as motivation

level of employees & their communication skills are covered.

In data analysis, the simple mathematical tool such as percentage and charts

were used with the help of MSEXCEL 2007.

The Surat Peoples Bank is performing its role up to the mark and trainees

enjoy the training imparted and it meets the major objectives such as

performance of employees, their skills and knowledge and also helps to

motivate employees and helps in avoiding mistakes.

8

Report

D i g i t a l s i g n e d

Author: Owner

Processing date: Mon, 4.8.2014 19:41:42 CEST

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http://www.polaris.co.in/media/media-release/2009-oct-Axis-Bank-Polaris.pdf

http://www.christuniversity.in/uploadimages/Chaanakya 4_17.pdf

http://www.sustainable-scotland.net/documents/8621_SSN Newsletter93-

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1 fragment found in a text with the title: "Eternal University", located on:

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1 fragment found in a text with the title: "Banking in India", located on:

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TABLE OF CONTENTS

Sr. No.

Particulars Page No.

1. Introduction 1

2. Industry Profile 4

a. Global

b. National

c. State

d. PESTEL

e. Current trends

f. Major Players

g. Major Offerings

6

11

19

20

25

29

32

3. Company Profile 40

a. Company Profile

b. Organogram

c. Divisions/ Departments

d. SWOT

e. Market Position

40

50

51

52

55

34

4. Review of Literature 59

5. Research Methodology 63

a. Problem Statement

b. Research Objective

c. Research Design

i. Type of Design

ii. Sampling

iii. Data Collection

iv. Tools for Analysis

v. Limitations of the Study

63

63

63

6. Data Analysis & Interpretation 66

7. Findings 91

8. Conclusion & Recommendation 94

9. Recommendation 95

Bibliography 96

12

LIST OF TABLES

SR NO.

PARTICULAR TABLE NO.

PAGE NO.

1. Products comes under the category of Retail Banking 2.2 32

2. Products comes under the category of Wholesale Banking 2.3 33

3. Products comes under the category of Treasury Banking 2.4 34

4. SPCBL Profile 3.1 40

5. Board of Director & General Manager 3.2 41

6. Bank Charges on DD 3.3 45

7. Bank Charges on NEFT Services 3.4 46

8. Bank Charges on RTGS Service for Outward Transaction 3.5 47

9. Market Position 3.6 55

10. Gender Respondents 6.1 66

11. Designation of Respondents 6.2 67

12. Department of Respondents 6.3 68

13. Marital Status of Respondents 6.4 70

14. Experience of Respondents 6.5 71

15. Basis of Employed 6.6 72

16. Type of Training 6.7 73

17. Method of Training 6.8 74

18. Training Topics 6.9 76

19. Training Approaches 6.10 78

20. Training Program 6.11 79

21. Quality of Training 6.12 80

22. Helpfulness of Training 6.13 81

23. Motivation Level 6.14 82

24. Training Infrastructure 6.15 83

25. Training Time Duration 6.16 84

26. Training Complaints 6.17 86

27. Trainers Knowledge 6.18 88

13

28. Trainers Preparations 6.19 90

14

LIST OF FIGURES

SR NO.

PARTICULAR FIGURE NO.

PAGE NO.

1. Structure of Indian Banking Industry 2.1 19

2. Organogram 3 50

3. Gender Respondents 6.1 66

4. Designation of Respondents 6.2 67

5. Department of Respondents 6.3 68

6. Marital Status of Respondents 6.4 70

7. Experience of Respondents 6.5 71

8. Basis of Employed 6.6 72

9. Type of Training 6.7 73

10. Method of Training 6.8 74

11. Training Topics 6.9 76

12. Training Approaches 6.10 78

13. Training Program 6.11 79

14. Quality of Training 6.12 80

15. Helpfulness of Training 6.13 81

16. Motivation Level 6.14 82

17. Training Infrastructure 6.15 83

18. Training Time Duration 6.16 84

19. Training Complaints 6.17 86

20. Trainers Knowledge 6.18 88

21. Trainers Preparations 6.19 90

15

CHAPTER 1 INTRODUCTION

16

Introduction

Any organization that wants to succeed, and to continue to succeed, has to

maintain workforce consisting of people who are willing to learn and develop

continuously. Training and developing human capital is tremendously

important in the effective management and maintenance of a skilled

workforce. Training is one of the ways of improving organizations

effectiveness. In order to implement right training methods, organization

should be aware of the training methods and their effectiveness. Study

provides conceptual framework of determining which methods to use when

developing training program. The various training methods- both off-the-job

and on-the-job- are described along with their strengths and limitations. Paper

also explores the measurement methods of training evaluation which is very

crucial for the training effectiveness. This study tries to give general overview

of training methods and measurement models.

Training is a part of the human resource development, along with the other

human resources activities, such as recruitment, selection and compensation.

The role of human re-source department is to improve the organizations

effectiveness by providing employees with knowledge, skills and attitudes that

will improve their current or future job performance. In order to implement the

right training methods, the training specialist should be aware of the pros and

cons and effectiveness of each training method. Besides, for evaluating

training effectiveness, measurement should be done according to the models.

TRAINING

The verb to train is derived from the old French word trainer, meaning to

drag. Hence such English definitions may be found as; to draw along; to

allure; to cause; to grow in the desired manner; to prepare for performance by

instruction, practice exercise, etc. Training can be described as providing the

conditions in which people can learn effectively. To learn is to gain

knowledge, skill, and ability

17

To understand the function of training in a company, it is needed to ask the

question of what training is state for the company. Training is an opportunity

for learning and it is accomplished by providing employees with opportunities

to learn how to perform more effectively and by preparing them for any

changes in their job. Training focuses on the acquisition of knowledge, skills

and attitudes needed to perform more effectively on ones current job. Role of

training may be seen as ensuring that the organization has the people with

the correct mix of attributes, through providing appropriate learning

opportunities and motivating people to learn, and thus enabling them to

perform to the highest levels of quality and service

TRAINING METHODS Many training techniques are created almost every year by the rapid

development in technology. Deciding among methods usually depends on the

type of training intended, the trainees selected, the objectives of the training

program and the training method. Training is a situational process that is why

no single method is right for every situation. While some objectives could be

easily achieved through one method, other objectives could necessitate other

methods. Many training programs have learning objective in more than one

area. When they do, they need to combine several training methods into an

integrated whole. Training methods could be classified as cognitive and

behavioral approaches. Cognitive methods provide verbal or written

information, demonstrate relationships among concepts, or provide the rules

for how to do something. These types of methods can also be called as off

the-job training methods. On the other hand, behavioral methods allow trainee

to practice behavior in real or simulated fashion. They stimulate learning

through behavior which is best for skill development and attitude change.

These methods can be called as on-the-job training methods. Thus; either

behavioral or cognitive learning methods can effectively be used to change

attitudes, though they do so through different means. Cognitive methods are

best for knowledge development and behavioral methods for skills. The

decision about what approach to take to training depends on several factors

that include the amount of funding available for training, specificity and

18

complexity of the knowledge and skills needed, timeliness of training needed,

and the capacity and motivation of the learner.

To be effective, training method should; motivate the trainee to improve his or

her performance, clearly demonstrate desired skills, provide an opportunity for

active participation by the trainee, provide an opportunity to practice, provide

timely feedback on the trainees performance, provide some means for

reinforcement while the trainee learns, be structured from simple to complex

tasks, be adaptable to specific problems, encourage positive transfer from

training to the job.

19

CHAPTER 2

BANKING INDUSTRY

PROFILE

20

Banking industry Introduction

The bulk of all money transactions today involve the transfer of bank

deposits. Depository institutions, which we normally call banks, are at the

very center of our monetary system.

Banking is the business of a bank or other financial institution. Banking

includes such activities as holding money in saving and checking accounts, as

well as issuing loans and credit. A bank is a financial intermediary.

There are several different types of banks which engage in different types of

banking. Some of these types include: central bank, advising bank,

commercial bank, credit union and investment bank.

It is not uncommon for some banks to offer many different types of services.

For example a bank may offer personal and commercial banking services to

clients.

The banking industry is highly regulated by the government. In 2008, the

banking industry suffered from a crisis caused by risky lending, particularly in

the mortgage loan sector also known as the subprime mortgage crisis.

Though this may be viewed as a setback by some, the banking industry is

continually evolving and offering innovative services to meet clients needs.

An example of this is the somewhat recent addition of online banking which is

growing in popularity.

Routine banking activities include paying on checks written by clients,

collecting deposits and issuing loans. Issuing loans and charging interest is

the main source of revenue in the banking industry.

There are many banking channels which clients can use to access accounts

and conduct their business. Some of these include: bank teller at a branch or

retail location, call center or telephone banking, online or mobile banking,

video banking and ATM machines. The oldest bank still operating is located in

Italy. Monte dei Paschi di Siena has been banking since 1472.

21

Definition

Bank is a financial institution which receives deposits from the public and

lends them for investment purpose i.e., deposits of money and advances of

the Main function of banks, but in the era of globalization banks indulges

themselves in many activities like Insurance, Mutual Fund Business and

Investment in Stock Exchanges. These activities of banking are considered as

Para Banking Activities.

Features of banking

1. Money Dealing

2. Acceptance of deposit

3. Grant of loan and advances

4. Payment and withdrawal of deposits

5. Transfer of funds

6. Portfolio management

7. Foreign Exchange dealing

History of Banking

The History of Banking begins with the first prototype banks of merchants in

the ancient world, which made grain loans to farmers and traders who carried

goods between cities. This began around 2000 BC in Assyria and Babylonia.

Later, in ancient Greece and during the Roman Empire, lenders based in

temples made loans and added two important innovations: they

accepted deposits and changed money. Archaeology from this period

in ancient China and India also shows evidence of money lending activity.

Banking, in the modern sense of the word, can be traced to medieval and

early Renaissance Italy, to the rich cities in the north such

as Florence, Venice and Genoa. The Bardi and Peruzzi families dominated

banking in 14th century Florence, establishing branches in many other parts

of Europe. Perhaps the most famous Italian bank was the Medici bank,

established by Giovanni Medici in 1397. The position of the Medicis was

eventually taken over by the Fugger sand the Welders. The oldest bank still in

existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which

22

has been operating continuously since 1472. It is followed by Berenberg

Bank of Hamburg (1590).

The development of banking spread from northern Italy through Europe and a

number of important innovations took place in Amsterdam during the Dutch

Republic in the 16th century and in London in the 17th century. During the

20th century, developments in telecommunications and computing caused

major changes to banks' operations and let banks dramatically increase in

size and geographic spread. The financial crisis of 20072008 caused many

bank failures, including some of the world's largest banks, and provoked much

debate about bank regulation.

A. Banking Industry at Global level

Both international banks and central banks of the world play an important role

in global banking and global money market operations.

Global banking can be characterized by the types of services international

banks provide that distinguish them from domestic or region banks

1. Facilitate the imports and exports of their clients by arranging trade

financing.

2. Serve their clients by arranging for foreign exchange necessary to conduct

cross-border transactions and make foreign investments.

Assist their clients in hedging exchange rate risk in foreign currency

receivable and payable through forward and options contracts.

Generally also trade foreign exchange products for their own account.

The global banking industry shows its prominence in line with the growth of

worlds economy. It is not only taking deposits from investors at lower interest

rate and loaning out to borrowers at a higher rate that simple, the modern

banking system also have become global industrial powerhouses with a lot of

financial services for both private and commercial perspectives. Although the

international banking market was affected by the financial crises in late 2007,

and IMF estimates that more than $1.3 trillion in bad loans was written off

between 2007 and first half of 2009, the size of global banking industry shows

23

an overall expanding trend over the last few years. The assets of the worlds

largest 1000 banks increased by 6.8% in 2009 financial year to reach $96.4

trillion yet profits declined by 85% to $115 billion. According to the report from

IFSL, EU banks held the largest share of the total, 56% in 2009, down from

61% in the previous year. Asian banks' share increased from 12% to 14%

during the year, while the share of US banks increased from 11% to 13%. Fee

revenue generated by global investment banking totaled $66.3 billion in 2009,

up 12% on the previous year.

Central banks around the world have taken unprecedented support measures

in an effort to boost liquidity. More than $200 billion in new capital was

injected into the top 20 banks alone. With regulators requiring banks to

increase their capital base, there has also been a great deal of issuance

activity on capital markets. Globally, banks raised nearly $1 trillion in new

capital between the start of the credit crisis and first half of 2009. US banks

raised nearly a half of this total, Europe followed with nearly $400 billion.

Global banking development

Introduction

The global banking system in 2011 and 2012, so far, witnessed severe

setbacks as it continued to be affected by tepid recovery in global growth;

the re-emergence of the euro area sovereign debt crisis; and funding and

deleveraging risks for global banks. Uncertainties emanating from the

ongoing euro area sovereign debt crisis, the downgrade in the outlook of

several advanced economies (AEs), and stability issues of euro area

banks amidst bank recapitalization concerns, among other factors, kept

international financial markets and the banking system volatile during most

of 2011-12.

Global credit growth demonstrated a mixed picture: in emerging market

economies it was sustained, in the US it showed some revival; but in

Europe it decelerated. The return on assets (RoA) improved for banks in

24

the US and some EMEs, but declined in European countries. The banking

trends in select regions and countries show that the US banking system

has made substantial progress in repairing balance sheets and enhancing

capital. In the euro zone banking system, the risks remain at an elevated

level on account of the vicious circle between banks and sovereigns. The

crisis in the euro area has affected the UK financial system also and the

funding costs for banks have risen sharply, leading to higher interest rates

and lower credit availability for household and corporate borrowers in the

UK.

An analysis of the performance of the top 100 global banks shows that the

share of emerging economies in global banking continued to increase.

Among emerging and developing countries, Chinese banks have

registered substantial gains in the top 100 bank ratings. On the global

policy reforms front, there has been some progress in rule framework for

the Basel Rule, systemically important financial institutions (SIFIs),

shadow banking, resolution regimes and bail-in mechanisms.

The global economy suffered a major setback in late 2011 as concerns

about financial stability in the euro area came to the fore. Market stress

spread throughout the euro area and bond yields soared in peripheral

economies as investors were increasingly concerned about the risk of a

sovereign default. These developments dramatically highlighted the risk of

adverse, self-fulfilling shifts in market sentiment that could rapidly push

fragile sovereigns into a bad equilibrium of rising yields, a funding squeeze

for domestic banks, and a worsening economy [IMFs Global Financial

Stability Report (GFSR) April 2012

Global growth moderated to 3.8 per cent in 2011 compared with 5.1 per

cent achieved in 2010 (Chart II.1). The slow growth was mainly driven by

weakening growth in the advance economies. On the other hand,

emerging market economies continued to grow at a higher rate. For the

year 2012, various forecasts have suggested the continuation of sluggish

global growth. The IMFs World Economic Outlook (WEO) October 2012

has projected global growth to moderate to 3.3 per cent in 2012 with

significant downward risks.

25

Against this global macroeconomic setting, Section 2 reviews the

performance of the global banking system using major indicators of

banking activity and soundness for select advanced and emerging

economies. Section 3 looks into the detailed individual performance of the

banking systems in few advanced and emerging economies/ economy

groups. Section 4 analyses the performance of the top-100 banks having

major global presence. Section 5 highlights the major regulatory and

supervisory policy initiatives with regard to the global banking system

during the year. Section 6 presents the overall assessment and outlook for

the global banking sector for 2013.

Analysis of the Performance of Top 100 Global Banks

1. Share of EMEs in global banking continued to increase.

The analysis of the top 100 global banks by the Banker Database shows

that the trend of moderate shift in the global banking business from

advanced economies to EMEs continued in the year 2011, as evident from

both the composition of number and assets of the top 100 global banks.

This shift reflects the continued credit growth in the EMEs, as well as the

decline in credit growth in the advanced economies. The decline in the

asset share of advanced economies between 2010 and 2011 was

concentrated in US and European banks. Among EMEs, Chinese banks

have exhibited a significant improvement in the top 100 banks ratings, as

four banks are listed among the top 10 banks based on Tier 1 capital for

the first time.

2. Profitability of global banks remains subdued.

The profits of the top 100 banks, which had staged a recovery after the

financial crisis received a setback during 2011. The aggregate profits of

these banks recorded a moderate fall to US$ 702 billion in 2011 from US$

709 billion in 2010. Moreover, the percentage of loss making banks

26

[reporting negative return on assets (RoA)] also recorded an increase from

5 per cent in 2010 to 10 per cent in 2011.

3. Global banks strengthen their capital adequacy position

The capital adequacy position of the top 100 banks reveals that the

number of banks in the higher bracket of capital adequacy ratio, i.e., 13 to

17 per cent, showed an increase, reflecting global initiatives to strengthen

the capital position of banks. However, the number of banks with a CRAR

range of more than 17 per cent declined. All the top 100 banks (barring

one for which data are not available) show that they are maintaining a

higher capital adequacy level than the BCBS norm of 8 per cent CRAR

stipulated under the Basel II framework.

4. Some progress is evident in the deleveraging of global banks.

With the pressure on global banks to deleverage, especially after the

global financial crisis, the banks have made some progress in reducing

their leverage. At the end of 2011, the number of banks that are highly

leveraged with a capital to assets ratio a measure of financial leverage

of less than 4 per cent and between 4 - 6 per cent came down, while the

number of banks in the range of 6 - 8 per cent showed an increase.

27

B. Banking Industry at National level

Banking in India originated in the last decades of the 18th century. The first

banks were Bank of Hindustan (1770-1829) and The General Bank of India,

established 1786 and since defunct.

The largest bank, and the oldest still in existence, is the State Bank of India,

which originated in the Bank of Calcutta in June 1806, which almost

immediately became the Bank of Bengal. This was one of the three

presidency banks, the other two being the Bombay and the Bank of Madras,

all three of which were established under charters from the British East India

Company. The three banks merged in 1921 to form the Imperial Bank of India,

which, upon India's independence, became the State Bank of India in 1955.

For many years the presidency banks acted as quasi-central banks, as did

their successors, until the Reserve Bank of India was established in 1935.

In 1969 the Indian government nationalized all the major banks that it did not

already own and these have remained under government ownership. They

are run under a structure known as 'profit-making public sector undertaking'

(PSU) and are allowed to compete and operate as commercial banks. The

Indian banking sector is made up of four types of banks, as well as the PSUs

and the state banks; they have been joined since 1990s by new private

commercial banks and a number of foreign banks.

Banking in India was generally fairly mature in terms of supply, product range

and reach-even though reach in rural India and to the poor still remains a

challenge. The government has developed initiatives to address this through

the State bank of India expanding its branch network and through the

NABARD (National Bank for Agriculture and Rural Development) with things

like microfinance.

Banks act as payment agents by conducting checking or current accounts for

customers, paying Cheques drawn by customers on the bank, and collecting

Cheques deposited to customers' current accounts. Banks also enable

customer payments via other payment methods such as Automated Clearing

28

House , Wire transfers or telegraphic transfer, EFTPOS, and automated teller

machine

The Indian banking sector has emerged as one of the strongest drivers of

Indias economic growth. The Indian banking industry has made outstanding

advancement in last few years, even during the times when the rest of the

world was struggling with financial meltdown. India's economic development

and financial sector liberalization have led to a transformation of the Indian

banking sector over the past two decades.

Today Indian Banking is at the crossroads of an invisible revolution. The

sector has undergone significant developments and investments in the recent

past. Most of banks provide various services such as Mobile banking, SMS

Banking, Net banking and ATMs to their clients.

Indian banks, the dominant financial intermediaries in India, have made high-

quality progress over the last five years, as is evident from several factors,

including annual credit growth, profitability, and trend in gross non-performing

assets (NPAs). While annual rate of credit growth clocked 23% during the last

five years, profitability (average Return on Net Worth) was maintained at

around 15% during the same period, while gross NPAs fell from 3.3% as on

March 31, 2006 to2.3% as on March 31, 2011.

The Indian banking sector is a mixture of public, private and foreign

ownerships. The below table highlights top 10 banks which contributed 58%

share of the total credit as on March 31, 2011. The State bank of India has

recorded highest market share. The Net Interest Margin of HDFC Banks is

4.2% which is highest among others.

Broad Classification of Banks in India:

1. The RBI: The RBI is the supreme monetary and banking authority in the

country and has the responsibility to control the banking system in the

country. It keeps the reserves of all scheduled banks and hence is known

as the Reserve Bank

29

2. Publ ic Sec tor Banks:

State Bank of India and its Associates (7)

Nationalized Banks (22)

Regional Rural Banks Sponsored by Public Sector Banks (46)

3. Private Sector Banks:

Private Banks (17)

Foreign banks operating in India(32)

4. Co-operative Sector Banks:

State Co-operative Banks

Central Co-operative Banks

Primary Agricultural Credit Societies

Land Development Banks

State Land Development Bank

5. Development Banks: Development Banks mostly provide long term finance

for setting up industries. They also provide short-term finance (for export

and import activities)

Industrial Finance Co-operation of India (IFCI)

Industrial Development of India (IDBI)

Industrial Investment Bank of India (IIBI)

Small Industries Development Bank of India (SIDBI)

National Bank for Agriculture and Rural Development (NABARD)

Export-Import Bank of India

Co-operative Bank

The Co-operative bank has a history of almost 100 years. The Co-operative

banks are an important constituent of the Indian Financial System, judging by

the role assigned to them, the expectations they are supposed to fulfill, their

number, and the number of offices they operate. The co-operative movement

originated in the West, but the importance that such banks have assumed in

India is rarely paralleled anywhere else in the world. Their role in rural

financing continues to be important even today, and their business in the

30

urban areas also has increased phenomenally in recent years mainly due to

the sharp increase in the number of co-operative banks.

While the co-operative banks in rural areas mainly finance agricultural based

activities including farming, cattle, milk, hatchery, personal finance etc. along

with some small-scale industries and self-employment driven activities, the

co-operative banks in urban areas mainly finance various categories of people

for self-employment, industries, small scale units, home finance, consumer

finance, personal finance, etc. Some of the co-operative banks are quite

forward looking and have developed sufficient core competencies to

challenge state and private sector banks.

According to NAFCUB the total deposits & lendings of Co-operative Banks is

much more than Old Private Sector Banks & also the New Private Sector

Banks. This exponential growth of Co-operative Banks is attributed mainly to

their much better local reach, personal interaction with customers, and their

ability to catch the nerve of the local clientele. Though registered under the

Co-operative Societies Act of the Respective States (where formed originally)

the banking related activities of the co-operative banks are also regulated by

the Reserve Bank of India. They are governed by the Banking Regulations

Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

There are two main categories of the co-operative banks.

(a) Short term lending oriented co-operative Banks

Within this category there are three subcategories of banks viz. state co-

operative banks, District co-operative banks and Primary Agricultural co-

operative societies.

(b) Long term lending oriented co-operative Banks

Within the second category there are land development banks at three

levels state level, district level and village level.

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Features of Cooperative Banks

Co-operative Banks are organized and managed on the principal of co-

operation, self-help, and mutual help. They function with the rule of one

member, one vote. Functions on no profit no loss basis. Co-operative

banks, as a principle, do not pursue the goal of profit maximizations co-

operative bank performs all the main banking functions of deposit

mobilization, supply of credit and provision of remittance facilities. Co-

operative Banks provide limited banking products and are functionally

specialists in agriculture related products. However, co-operative banks now

provide housing loans also.

The State Co-operative Banks (SCBs), Central Co-operative Banks (CCBs)

and Urban Co-operative Banks (UCBs) can normally extend housing loans up

to Rs 1 lakh to an individual. The scheduled UCBs, however, can lend up to

Rs 3 lakh for housing purposes.

The UCBs can provide advances against shares and debentures also. Co-

operative bank do banking business mainly in the agriculture and rural sector.

However, UCBs, SCBs, and CCBs operate in semi urban, urban, and

metropolitan areas also.

The urban and non-agricultural business of these banks has grown over the

years. The co-operative banks demonstrate a shift from rural to urban, while

the commercial banks, from urban to rural. Co-operative banks are perhaps

the first government sponsored, government-supported, and government-

subsidized financial agency in India. They get financial and other help from

the Reserve Bank of India NABARD, central government and state

governments. They constitute the most favored banking sector with risk of

nationalization. For commercial banks, the Reserve Bank of India is lender of

last resort, but co-operative banks it is the lender of first resort which provides

financial resources in the form of contribution to the initial capital (through

state government), working capital, refinance.

32

Co-operative Banks belong to the money market as well as to the capital

market. Primary agricultural credit societies provide short term and medium

term loans. Land Development Banks (LDBs) provide long-term loans. SCBs

and CCBs also provide both short-term and term loans. Co-operative banks

are financial intermediaries only partially. The sources of their funds

(resources) are (a) central and state government, (b) the Reserve Bank of

India and NABARD, (c) other co-operative institutions, (d) ownership funds

and, (e) deposits or debenture issues. It is interesting to note that intra-

sectorial flows of funds are much greater in co-operative banking than in

commercial banking. Inter-bank deposits, borrowings, and credit from a

significant part of assets and liabilities of co-operative banks. This means that

intra-sectorial competition is absent and intra-sectorial integration is high for

co-operative bank.

Some co-operative banks are scheduled banks, while others are non-

scheduled banks. For instance, SCBs and some UCBs are scheduled banks

but other co-operative banks are non-scheduled banks. At present, 28 SCBs

and 11 UCBs with Demand and Time Liabilities over Rs 50 crore each

included in the Second Schedule of the Reserve Bank of India Act .Co-

operative Banks are subject to CRR and liquidity requirements as other

scheduled and non-scheduled banks are. However, their requirements are

less than commercial banks. Since 1966the lending and deposit rate of

commercial banks have been directly regulated by the Reserve Bank of India.

Although the Reserve Bank of India had power to regulate the rate co-

operative bank but this have been exercised only after 1979 in respect of non-

agricultural advances they were free to charge any rates at their discretion.

Although the main aim of the co-operative bank is to provide cheaper credit to

their members and not to maximize profits, they may access the money

market to improve their income so as to remain viable.

The Indian banking industry is shortly explained through the following point.

The Indian banking industry has its foundations in the 18th century, and

has had a bumpy evolutionary growth path since then. The industry in

33

recent times has recognized the importance of private and foreign players

in a competitive scenario and has moved towards greater liberalization

Indian banks have mobilized around 80% of funding from deposits, thus

their ability to win market share profitably is key to stock returns

In todays scenario, Current and saving accounts (CASA) is the banks

lifeline for profitable growth, but during FY2012 high interest rate choked

them of such deposits, slowing expansion to a five-year low of 7%.

Credit growth of the Scheduled Commercial Banks (SCBs) slowed down to

18.10%on FY2012, which was 22.90%1 in FY2011 on account of the

slowdown of the general economy. It is expected that the credit growth in

FY2013 will be in the range of 16 18% as there is increasing demand for

working capital loans and refinancing of forex loans by Indian corporates.

The growth of total deposits of the (SCBs) stood at 14.92%1 on FY2012,

Vs.18.31% in FY2011. The deposit growth is expected to moderate to 14-

17%2 over FY 2013-15 with stable Net Interest Margins (NIM). NIM of

SCBs in FY2012 was 2.90%1 on average.

In the present competitive scenario, Private Banks are targeting the faster

growing retail loans and also improving the growth rate in fee income by

increasing transaction fees, whereas Public Sector Banks are targeting to

push for higher recoveries and upgrades in Non-Performing Loans (NPL)

and also improving their deposits mix by reducing the share of bulk

deposits.

34

Important Milestone of Indian Banking industry.

Prior to 1950 / Evolutionary Phase

Enactment of the RBI Act, 1935

High levels of deprivation in economy

Foundation Phase / 1948-1968

Government adopted the system of planned economic development

Complex Interest rates

Establishment of Banking Regulation Act, 1949

1968-1984/Expansion Phase

14 banks in 1969 and 6 banks in 1980 were nationalized termed as First

Banking Revolution

Rapid branch expansion

Retail lending to risk prone areas at concessional interest rates

1985-1990/ Consolidation

Lack of professionalism and transparency in the functioning of public

sector

Series of policy initiatives taken with the objectives of consolidation of

banks

1991 Onwards/Reformatory phase

The Economic liberalization of 1990 was initiated to ensure an efficient,

competitive and mature financial market

RBI gave licenses to new private sector banks as a part of its liberalization

process

Various guidelines (e.g. Basel rules, FEMA, FERA,LAF) were introduced

Banking Laws( Amendment) Bill, 2011 passed

35

Figure name: Structure of Indian Banking Industry

Figure no.:2.1

http://www.icacec.com/images/content/indianbankindustry.gif

C. Banking at State level

During the year 2011-2012, total number of bank branches increased by 342

(Metro-82, Urban-118, Semi-Urban-54 and Rural-88 ) taking the total network

of branches from 6091 as of March, 2010 to 6433 as of March, 2011 in the

state.

The aggregate deposits of the banks in Gujarat increased by Rs. 46,777

crores in absolute terms from Rs. 2,25,299 crores as of March,2010 to Rs.

2,72,076 crores as of March, 2011 registering a growth of 20.76 percent

during the year ended March 2011, as compared to 17.42% recorded during

the previous year.

36

During the year 2010-11, the aggregate credit increased by Rs. 32,228 crores

in absolute terms from Rs. 1,55,575 crores as of March, 2010 to Rs. 1,87,803

crores as of March, 2011 registering a growth of 20.72 percent during the

year ended March 2011, as against 18.00 percent recorded during the

previous year.

The Credit-Deposit ratio stood at 69.03 % as of March 2011, which has

slightly declined by 0.02 %, over the ratio of 69.05 percent as of March 2010.

D. PESTEL Analysis of Banking Industry

What is PESTEL Analysis?

PESTLE analysis, which is sometimes referred as PEST analysis is a concept

in marketing principles. Moreover, this concept is used as a tool by companies

the world over to track the environment theyre operating in or are planning to

launch a new project/product/service etc.

PESTLE is a mnemonic which in its expanded form denotes P for Political, E

for Economic, S for Social, T for Technological, L for Legal and E for

Environmental. It gives a birds eye view of the whole environment from many

different angles that one wants to check and keep a track of while

contemplating on a certain idea/plan.

Political factor affecting banking industry

Indian banking sector is least affected as compared to other developed

countries- thanks to robust policy framework of RBI.

Government affects the performance of banking sector most by legislature

and framing policy government through its budget affects the banking

activities securitization act has given more power to banking sector against

defaulting borrowers.

A stricter prudential regulation with respect to capital and liquidity gives

India an advantage in terms of credibility over other countries.

37

To support capitalization, the government has infused Rs 23,200 crore

(US$ 5.2 billion) into state-owned banks during the last three fiscals.

The Indian banking Industry is mostly dependent on the monetary policy

decided by the RBI

Stricter regulations with respect to capital and liquidity directly affects the

business of banks

Banks need to adjust their interest rates accordingly, which may or may

not favor them

Banks are forced to lend as per the guidelines of RBI, that includes credit

growth in all sectors

Budgetary Measures announced by the government at the beginning of

every financial year also lay down guidelines to banks to lend or accept

deposits

The government can also increase credit in particular sectors such as

increase in farm credit, increase in infrastructure credit etc.(priority

lending)

Sometimes the government gives debt waivers to certain sections of the

society that need to be adhered to by banks as well

Economic factors affecting banking industry

Economic factors in the country also effect the Banking Industry both

favorably or unfavorably

When the economy is in good shape in terms of high per capita income,

good agriculture harvest and normal inflation, banks have an edge as

people are left with more money to deposit them with banks

This helps in more capital formation as more deposits can be realized

Also In the times of economic boom, more and more FDI is brought into

India through banking channels, that actually improves business for banks

and the economy in general

Economic prosperity encourages lending business for the banks but in

times of recession banks face tough times to recover their money, issue

fresh credit and NIMs are lower too.

38

Social factors affecting banking industry

The Indian banking system has been progressing rapidly. There are still

several untapped rural markets, despite the large number of banks in India

Many farmers still take loans from moneylenders at a very high interest

rate and small-scale industries continue to remain important for banks

However changes could be expected in the near future for the

unorganized sector

The growing population of India is a great opportunity for Indian banks as

a lot of people in the country want to open a bank account and develop

good savings habits

Changing lifestyle of the Indian urban population who wants easy ways of

financing to their desires

Technological factors affecting banking industry

Indian banking has been consistently working towards the development of

technological changes and its usage in its operations.

With the application of new and improved technologies banks are

expected to reduce costs, time and provide higher customer satisfaction.

Internet banking or banking via the phone can be considered a remarkable

development in the banking industry.

Mobile banking enables customers to check their account balance,

transfer funds 24x7, bill payments, booking of bus/flight tickets, recharge

prepaid mobile and do a lot more effortlessly and securely.

Banking through cell phone benefits the banks too. It cuts down on the

cost of in-person banking and helps reduce headcount at branches.

Technological developments facilitate the flow of information and data

faster leading to faster appraisal and decision-making as well.

39

Environmental factors affecting banking industry

Indian economy has registered a high growth for last three years and is

expected to maintain robust growth rate as compare to other developed

and developing countries Banking Industry is directly related to the growth

of the economy

The growth rate of different industries were: Agriculture : 18.5%Industry :

26.3%Services : 55.2%

It is great news that today the service sector is contributing more than half

of the Indian GDP. It takes India one step closer to the developed

economies of the world. Earlier it was agriculture which mainly contributed

to the Indian GDP.

This increases the avenues of investment by the industrial sector. This

would further increase the borrowings by the industrys leading to the

banking Industry

In regards with the service sector , as the income of the people will

increase, lending and savings will increase leading to increased business

for the banks

Legal factors affecting banking industry

There are two major factors determining the legal aspects of the Banking

Industry

1. Banking regulation act

In 1949, the Banking Regulation Act was enacted which empowered the

Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in

India. The Banking Regulation Act also provided that no new bank or

branch of an existing bank could be opened without a license from the

RBI, and no two banks could have common directors

2. Intervention by RBI

The Reserve Bank of India (RBI) will intervene to smooth sharp

movements in the rupee and prevent a downward spiral in its value, but

40

will balance this with the need to retain reserves in the event of prolonged

turbulence.

41

E. Current Trends in Banking Industry

Global Banking Trends

The recent financial crisis brought to the fore the weaknesses in the global

banking industry, which, in turn, was manifested in dwindling public

confidence in the banking industry. The recent financial crisis has led to a

realization of the inadequacies in the banking sector. Banks had failed to

secure stable and diversified sources of income and to contain costs, which

resulted in liquidity stress for the institutions. Secondly, opaque balance

sheets significantly impaired analysis of risk, thus preventing timely

awareness of the weakness of banks capital buffers (BIS Annual Report

2011-12).

Banking Trends in Select Regions and Countries

US Banking System

The US banking system has made considerable progress towards repairing

balance sheets and building capital since the recent financial crisis. Large US

banks have reduced their reliance on short-term wholesale funding. The

banks have reduced impaired assets through charge-offs, write-downs and

asset disposals and increased the Tier-1 capital. Concurrently, the banks

equity capital and equity assets ratio has seen an improvement

The Stress Tests for US banks show improved resilience

The stress tests conducted under the Comprehensive Capital Analysis and

Review (CCAR) in March 2012 show that most of the 19 banking firms would

have sufficient capital to withstand a period of intense economic and financial

stress and still be able to sustain their lending capacity.

Improvement in the credit quality of US banks

There has been significant growth in credit to the industrial sector, but credit

to real estate and individual loans remains muted. The overall delinquency

rates on loan portfolios have fallen, but given the wide difference across

sectors in terms of asset quality, concerns remain Euro area banking system

42

The current euro area debt crisis has highlighted the existence of a vicious

circle between banks and sovereigns. Their increasing inter-linkage has

led to a prolonged collapse of market confidence in the European Union

(EU) banking sector, affecting adversely the cost and availability of funds.

Risk aversion during euro area crisis led to freezing of inter-bank market

The EU banks are more reliant on wholesale funds than customer

deposits. The ratio of residential deposits to total liabilities for these banks

is placed at around 51 per cent.

In order to ease the funding pressures on EU banks, the ECB undertook

Long-Term Refinancing Operations (LTRO) on December 21,2011 and

February 29, 2012 amounting to more than 1 trillion. This has

temporarily alleviated the funding pressures on EU banks and reduced the

financial stress. The EU banks, however, have not used the LTRO funds

to extend private credit, but sought to protect their balance sheets. The

predominant share of LTRO funds has been re-deposited with the ECB.

As the crisis continued to escalate, the markets were increasingly

concerned about asset quality, the size of capital buffers and their ability to

cope with future credit losses. In order to alleviate these concerns, the

European Banking Authority (EBA) undertook an EU-wide stress test as

well as conducted a capital exercise of 71 banks in November 2011 to

assess their capital needs and advised the banks to build a temporary

capital buffer to reach a 9 per cent core Tier 1 ratio by June 30, 2012. The

EBA found that 27 banks across Europe needed to raise capital

totaling76 billion to meet the 9 per cent core Tier 1 ratio. The final report

by the EBA on October 3, 2012showed that 27 banks have strengthened

their capital position by 116 billion as of June 2012.Though the results

are positive, concerns remain as several of the banks surveyed require

bailouts, particularly, banks in Greece and Spain.

UK banking system

The crisis in the euro area has affected the UK financial system and has led to

a marked deterioration in the outlook for the UK economy. Even though UK

banks have built up considerable buffers of loss-absorbing capital, they were

affected by the general increase in the market uncertainty and widespread

43

risk aversion associated with problems in the euro area. This, in turn has

caused funding costs for banks to rise sharply, leading to higher interest rates

and lower credit availability for household and corporate borrowers in the UK

(Bank of England). In spite of the policy actions of the authorities, the flow of

credit through the banking system which households and many businesses

necessarily rely on has remained impaired. Recent data show that the stock

of lending to UK businesses has contracted.

Chinese banking system

The Chinese banking system continued to grow in 2011, with higher capital to

assets ratio and low level of non-performing loans (NPLs) at just about 1 per

cent. However, concerns remain, as the rapid growth of the Chinese banking

industry may be hard to sustain due to the slowdown in the national economy

and large exposure to Chinese property markets.

Trends in Indian Banking Industry

Credit take off of the corporate sector slowed down particularly because of

down-sized capital expenditure programs.

Banks have been focusing on secured lending products (such as

mortgage and auto loans) for retail customers to drive credit off take.

Policy uncertainty over the micro finance institutions and recent changes

to banks credit off take to non-banking.

Pressure to meet targets under Financial Inclusion also increased the cost

of lending and decreased returns on advances for banks.

CASA growth slowed because of High Interest rates and pressure on

corporate cash flows which affect all banks.

Due to Deregulation of Interest rates on saving deposits large amount of

competition is seen in Saving Deposits.

According to the Reserve Bank of India (RBI)'s 'Quarterly Statistics on

Deposits and Credit of Scheduled Commercial Banks', March 2012,

Nationalized Banks accounted for 53.0 per cent of the aggregate deposits,

while the State Bank of India (SBI) and its Associates accounted for 21.8

per cent. The share of New Private Sector Banks, Old Private Sector

44

Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits

was 13.0 per cent, 4.8 per cent, 4.4 per cent and 3.0 per cent,

respectively. Nationalized Banks accounted for the highest share of 52.0

per cent in gross bank credit followed by State Bank of India and its

Associates (22.5 per cent) and New Private Sector Banks (13.5 per cent).

Foreign Banks, Old Private Sector Banks and Regional Rural Banks had

shares of around 4.8 per cent, 4.8 per cent and 2.4 per cent, respectively.

Another statement issued by the RBI revealed that foreign exchange

reserves increased by US$ 1.05 billion and stood at US$ 293.37 billion for

the week ended March 22, 2013. Foreign currency assets (FCAs), a major

component of the forex reserves, stood at US$ 260.41 billion while the

gold reserves amounted to US$ 26.292 billion.

Furthermore, India's economic expansion has made Indian banks more

global in their approach. Ten banks have opened 100 branches in foreign

jurisdictions as of February, 2013.

Increasing mobile penetration, coupled with higher smart phone adoption

has led an uptrend in mobile banking. Number of transactions through

mobile banking witnessed a jump of 64 per cent in the April-December

2012 period, according to data from the RBI.

Banks in India are highly alert in grabbing opportunities to increase

transaction volumes in their automated teller machines (ATMs) through

religious gatherings in the country. Private sector banks have introduced

mobile ATMs that migrate from one religious fair to another throughout the

year. For instance, HDFC Bank, the second largest private lender in the

country, had sent its mobile ATM to the MahaKumbh Mela-2013 in

Allahabad. Over 100 million people are estimated to have attended this fair

and the bank has noticed that the transaction volumes were phenomenal.

Similarly, Kerala-based Federal Bank stationed a couple of portable ATMs

near Sabarimala temple during the last festival season when thousands of

devotees visited the place.

France-based multinational bank Society Generate has recently opened its

third corporate banking branch at Sanand, near Ahmedabad in Gujarat. It

already has branches in Mumbai and Delhi. Believing that Gujarat is one

of the robust places in India and will provide good opportunities for bank to

45

expand its base in the country, the Bank will provide all-types of financing,

both short-term working capital lines and medium-long term equipment or

project finance, in Indian as well as foreign currencies. It will also provide

other specialized advisory and financing activities like M&A, project

finance, equipment and commodities financing to its clients. The Bank will

expand in Bangalore, Chennai, Hyderabad and Pune by 2016.

The ministry of Finance is believed to have infused Rs 12, 517 crore (US$

2.28 billion) into 13 public sector banks before March 2013, in order to

keep them adequately capitalized. In 2013-14, it proposes to provide

additional capital of Rs 14, 000 crore (US$ 2.55 billion) to ensure that

public sector banks always meet the Basel III regulations as they come

into force in a phased manner.

The Government is also working with the RBI and NABARD to bring all

banks, including some co-operative banks on core banking solution (CBS)

and on the electronic payment systems (like NEFT and RTGS) by the end

of 2013. All scheduled commercial banks and all regional rural banks

(RRBs) are already on CBS.

Apart from this, the ministry is also contemplating to come up with India's

first Women's Bank as a public sector bank and shall provide Rs 1,000

crore (US$ 182.45 million) as initial capital. Necessary approvals and

banking license are expected to be obtained by October 2013.

The Government intends to provide Rs 6,000 crore (US$ 1.09 billion) to

the Rural Housing Fund in 2013-14 while it may start a fund for urban

housing to mitigate the huge shortage of houses in urban areas. It would

provide Rs 2,000 crore (US$ 364.89 million) to the Fund in 2013-14.

F. Major players in banking industry

Oriental bank of commerce, Federal Allahabad are the small banks in

terms of market capitalization.

UBI bank, Yes bank, Canara, Induslnd, Bank of India is the mid-sized

bank.

Axis Bank, Bank of Baroda, Punjab National Bank, Kotak Mahindra Bank

are the growing banks.

SBI, ICICI, HDFC are the premium old generation banks.

46

At present, along with the above bank there are five major foreign banks

including Standard Chartered, HSBC, Citibank, RBS and Deutsche,

account for over 70 percent of the total asset size of overseas lenders in

the country.

Current Players in Banking Industry

Indian banks consist mostly of Scheduled commercial bank (SCBs), which

includes both Public Sector Banks and the Private Sector Banks. In Public

Sector Banks, the government must retain a 51% stake.

Old Private sector banks are those banks which were not nationalized at

the time of bank nationalization that took place during 1969 and 1980.

Most of the old private-sector banks are closely held by certain

communities and their operations are mostly restricted to the areas in and

around their place of origin. e.g. Federal Bank, Dhanalaxmi Bank, ING

Vysya Bank.

New private sector banks include those that were established in the past

twenty years such as Yes Bank, Axis bank and existing institutions that

were converted into commercial banks, such as the former development

institution ICICI and specialized lenders such as HDFC.

Cooperative banks are small-sized units registered under the Co-operative

Societies Act. That essentially lend to small borrowers and businesses.

E.g. Punjab & Maharashtra Co-op. Bank Ltd., New India Co-op. Bank Ltd.

Regional Rural Banks are mainly focused on the agro sector. These banks

are in every corner of the country and extend a helping hand in the growth

of the country. E.g. National Bank for Agriculture and Rural Development

(NABARD), Haryana State Cooperative Apex Bank Limited.

Also, under the recently passed The Banking Laws (Amendment) Bill

2011, the government is likely to give the new banking licenses in the next

year or so.

47

The information related to some of the major players is as follows

State Bank of India

The State bank of India (SBI) is the largest state-owned banking and financial

services company in India. It is the 29th most reputed company in the world

according to Forbes and it is the only bank to get featured in the coveted "top

10 brands of India" list in an annual survey conducted by Brand Finance and

The Economic Times in 2010. SBI posted a net profit of INR91.6 billion for

2009-10, registering a moderate growth of 0.49% as compared to 2008-09.

ICICI

ICICI bank has a network of 2,016 branches (as on 31 March 2010) and about

5,219 ATMs in India and presence in 18 countries. ICICI Bank the largest

issuer of credit cards in India offers a wide range of banking products and

financial services to corporate and retail customers. The net profit of the bank

for the financial year ending 2010 was INR40.25 billion, 7.1% higher than

2009.

HDFC Bank

In 2010, HDFC Bank had over 1,725 branches and 4,232 ATMs, in 779 cities

in India, and all branches of the bank were linked on an online real-time basis.

HDFC bank registered a net profit of INR29.4 billion as of March 31 2010, an

increase of 31% over 2009.

Axis Bank

Axis Bank is a financial services firm that began operations in 1994, after the

Government of India allowed new private banks to be established. At the end

of September 2010, the bank had a very wide network of more than 1,095

branches and over 4,846 ATMs. In the year 20092010, Axis bank posted a

net profit of INR25.1 billion, an increase of 38.5% over 2009.

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G. Major Offerings

The major offering of banking industry is divided into 3 categories.

1. Retail Banking

2. Wholesale Banking

3. Treasury Banking.

1. Retail Banking

Retail banking is a buzzword in India that focuses strictly on the consumer

market.

Most banks have retail portfolios as part of their total lending portfolio

(18.4%1 on average). This sector has been growing at a high rate of 30 to

35%per annum.

As per a survey conducted by CLSA, Consumer credit penetration is only

8% of the GDP in India, which is expected to rise further quickly.

The growth is mainly led by growth in credit card receivables and other

personal loans.

Housing loans continued to constitute almost half of the total retail Portfolio

of banks.

Table name: Products comes under the category of Retail Banking

Table no. 2.2

Loan Products Deposit Products Other Products /

Services

Auto Loan Deposits NRI services

Gold Loan Saving Accounts POS Terminals

House Loan Current Accounts Private Banking

Credit cards Fixed / Recurring Demat Services

Education Loan Corporate Salary A/C Mutual Fund Sales

Loan against

Securities

Foreign Exchange

Retail Banking

Business

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2. Wholesale Banking

Wholesale banking provides services to large corporate bodies, mid-sized

companies, international trade, other banks and financial Institutions.

This service contributes 30%1 to India's total banking revenues, with ROE

in the range of 15% to 30%.

From $16 billion in FY 2010, wholesale banking revenues are expected to

rise to a whopping $35 billion to $40 billion by FY 2015.

Besides large corporates, a growing number of SMEs, this contributed

more than 40% of exports & 17% of GDP in 2011, offer huge opportunity

for banks.

Investments in infrastructure totaling $240 billion between 2007 and 2010

have already been made under Indias 11th Five-Year Plan. To sustain

Indias economic growth, the Planning Commission therefore envisages

that $1 trillion (about 10% of GDP) will be spent on infrastructure during

the 12th plan from 2012 to 2017.

Infrastructure development, simplified FDI and globalization in Indian

Companies are key drivers of wholesale banking.

Table name: Products comes under the category of Wholesale Banking

Table no.2.3

Commercial

Banking

Transaction Banking Key Segment

Term Loan Cash Management Large Corporates

Guarantees Custodian Services Emerging Corporates

Bill Collection Clearing Bank Services Financial Institutions

Letter of Credit Tax Collections Government/PSUs

Working Capital Banker to Public Issues

Commodities(Inc. Hedging)

Agriculture

Commodities

Forex & Derivatives

Wholesale Deposits

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3. Treasury Banking

The core function of a treasury is the measuring, monitoring, and

controlling of interest rate risk (IRR). Typically the department would

employ a variety of standard and proprietary models to measure this risk.

Traditionally, the treasury function in banks was limited to funds

management i.e., maintaining adequate cash balances to meet the day-to-

day requirements and deploying surplus funds from operations.

The scope of treasury has now expanded beyond liquidity management

and it has now evolved as a profit center with its own trading and

investment activity.

Treasury activity in a bank depends on its size, complexity of operations,

and risk profile.

Table name: Products comes under the category of Treasury Banking

Table no. 2.4

Product Segment Other Financing

Equities Cash Management

Derivatives Statutory Reserve

Capital Market Financial Decisions

Debt Securities Asset Liability Management

Foreign Exchange

51

CHAPTER 3

INTRODUCTION OF

THE SURAT PEOPLES

CO-OP BANK LTD

52

The Surat Peoples Co-operative Bank ltd

About the bank:-

Nine decades of Trust, Excellence & Services.

The Surat Peoples Co-op Bank has been a pillar of support for the thriving

Industry and Trade in the city.

The bank is the First Registered Urban Co-operative Bank of India and

among the first 13 Co-operative Banks to get Scheduled Bank Status. It

is the first Bank to provide the Depository participant Services in South

Gujarat.

The Surat Peoples Co-Operative Bank Ltd. is serving since last 90 years

to the people of Surat having network of 23 computerized branches out of

them 21 in Surat and 1 in Vapi and 1 in Navsari.

Vision:-

Our vision is to be Indias most respected and admired urban Co-

Operative bank by influencing peoples lives through personalized banking

services and partnering them in realizing their dreams.

Mission:-

Our mission is to be a preferred financial service provider with a special

focus on innovative quality products, technical expertise & efficient

services for customer achieve their objectives and goals.

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Values:-

We have accepted cardinal principle of corporate social responsibility and

accordingly we have tried to fulfill our social obligations to be recognized as

Surat peoples bank in real sense.

History of Surat Peoples Co-operative Bank

With the advent of the 20th century co-operative Movement Started in India.

Late Shri Raosaheb Vrundavandas Jadav- a visionary dreamt of establishing

Co-operative Bank. This Dream turned into reality in the name of The Surat

Peoples Co-operative Bank Ltd.

The Surat Peoples Co-operative Bank Ltd was established in 1922 at

Surat. Bank was registered on 10th March, 1922 and started functioning from

21st April, 1922.The Bank was first registered Urban Co-Operative Bank in

India and became Scheduled Bank on 1st September, 1988.

The Bank is serving since last 91 years to the people of Surat and also to the

people of south Gujarat. The bank is having network of 23 branches, 21 in

Surat and 1 branch at Vapi and 1 branch at Navsari.

One of the glorious name amongst Surats uncountable Bank means

Surat Peoples bank to whom the peoples of the Surat to say as one of the

part of unanimous Our Bank & the take the pride of its as a service,

sharable & base for the Facilities & the immediate field of customer service

has supposed many endeavours & even today in the field of development to

passes the new endeavours go ahead My Banks development services to

look at a glance I am proud of it & filling the happiness.

From today approximately 80 to 90 years before in the area of British emperor

of salivary to reform of the small farmers to save from the economic

exploitation from the money lenders & businessman etc. to fulfill the needs of

their social & economic fore that the British emperor have passed the law of

54

money landing for the co-operative society. Afterwards these societies divided

in to two parts as rural & civics co-operatives.

One of this arrangement in the rural areas for the small farmers & in the urban

areas residing the middle & lower house persons to provide them the finance

at the reasonable rate of interest from the co-operative basis.

Incremental growth in the business industries import-export, increase in the

money & for the changing of the economic conditions to meet of these various

needs of economic & as a western countries in India the number of joint stock

banks increased gradually. But no one has thought over this that for to do the

work in the co-operation sector.

Small Industries the middle & the lower persons to get form them the deposits

in small & they have o interest to satisfy their small & big need of banking.

Due to this the small cities neglected. So the non-development of its

industries-business & due to lack of banking arrangement their development

is at stake. To change this atmosphere in the year 1920 & nearby from the

British emperor to start the civic banks in the small towns & at the tehsil level,

to emphasis on this & too issued the circulars from the register Shri

authorothfield.

By this way the starting the story of our own Surat People s Co-operative

Bank & salute to Shri Vrundavandas Jadav who has established the Surat

peoples Co-operative Bank on the day of 10th March in the year 1922 which

will a remarkable day for us.

Having the vast knowledge in the field of banking & in economics in the

pioneer of switch bank, banking in the guidance of Shri Chunilal Sarvaiya, shri

Vrundavandas Jadav Saheb inhabitant & Surat, enthusiastic, intellectual &

having the development mind has taken the banking training & have decided

to established the Surat Peoples Bank. He has prepared the draft of the

banks bye-laws from get the materials from the civic co-operative societys

bye laws & from the unnamed bankers & from the without naming banks who

55

doing the business of banking more or less by reforming & amending in its.

Such type of bank is not there in the Mumbai District or any other district at

that time with its own bye laws.

After that the local business & industries & engaged in the money landing and

having the remarkable personalities persons among them discuss details,

how to get the preliminary capital fund & from whom to get for inquiry in this

directions & after effects the organization of Surat Peoples Co-op Bank as

per the Mumbai Co-operative laws to prepare the necessary documents &

legally on 10th March 1922 it was registered & succeeds. From this the

development of the Surat Peoples Bank started up till now.

On the First Year from the 134 members received Rs. 9815 & with the capital

total deposits of Rs. 42184 started the bank. The authorized capital of the

bank was Rs. 100000.

Bank has passed approximately 25 years on his own. In the golden era of

independence in 1947 the bank has celebrated its silver jubilee with the chair

of Shri Vaikunthbhai Mehta who was the Finance Minister & the eminent

economist of Mumbai District.

Up to 1995 Shri Vrundavandas Jadav has handled the various designations &

guided the bank.

In the year 1965 bank have got its own ownership glorious building in the

Parsi Sheri & its name ceremony known as Vasudhara was done by the

eminent personality & the Gujarat language literate Shri Vishnu Prasad

Trivedi.

The banks have celebrated its golden jubilee in the year 1972 with the

hands of Shri Ghanshyambhai Oza who was the Chief Minister of Gujarat at

that time. On that year the total deposits of the bank was Rs. 5.02 crores &

the advances were of Rs. 2.77 crores & the working capital of Rs. 5.94 crore.

56

The platinum jubilee year has been celebrated on 21/4/97 und