narendra vyas final report.docx

8/18/2019 narendra vyas final report.docx

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PREFACE

This project study has been conducted in the lieu of requirement laid down for the degree of

course of master of business administration. Under this requirement, every student is supposed to

undergo summer training in the industrial unit or commercial organization .It enables the

students to understand the practical aspect of the conceptual studies learn by them in the

commercial subject.

The summer training in PUSHTIKAR SAKH SAHKARI SAMITI LIMITED was a complete

experience in itself which has provided me with the understanding, which has become an

inseparable part of my nowledge of management being learned in management program

Implementing and learning the concept of mareting in a wor place provides an opportunity to

learn practically. I got a chance to apply over theory and acquaint myself with the functioning of

maret methodology.

!eeping in view the responsiveness of people and findings, I gathered the data and information

and have drawn up some suggestion that would help to improve and the systematize the

"mareting mix elements in baning sector#.

$eal learning place its worth on the when it give sweet fruits in future. %ummer training is oneway to learn at wor. I enjoyed the interesting experience and every part of it.


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ACKNOWLEDGEMENT

It is great pleasure and privilege for me to present this seminar report titled Intrusion Detection

System. In this %eminar report, I have been very fortunate in having received the active co&

operation of my guide, whom I would lie to than humbly. I would this opportunity to thans

each one of them for intellectual exchange valuable suggestion, critical reviews and technical

assistance.I lie to express my gratitude to Dee!" M!t#ur Sir '(uide), for helping me to

understand the seminar topic I*% and help ma lot on this topic. They guided and encouraged me

throughout my project wor .I am equally than full to all those who helped me directly or

indirectly in successful completion of the project.

'%ignature of student)

N!ren$r! %y!s

MBA 3rd SEM


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T+- /0 1/2T2T%

%.2/ 1/2T2T%

3 4reface

5 +cnowledgement

6 /verview of baning

7 Indian aning history

8 4rofile of company

9 aning in india

: ;areting mix strategies of ban

< 4roduct promotion

= ibliography

/verview of baning


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1>+4T$ 3

+2 /?$?I@ /0 T> +2!I2( %1T/$

%1TI/2 A IB +2!I2( %C%T; I2 I2*I+

3.3 Introduction D3E D5E

+ ban is a financial institution that provides baning and other financial services to their

customers. + ban is generally understood as an institution which provides fundamental

baning services such as accepting deposits and providing loans. There are also nonbaning

institutions that provide certain baning services without meeting the legal

definition of a ban. ans are a subset of the financial services industry.

+ baning system also referred as a system provided by the ban which offers cash

management services for customers, reporting the transactions of their accounts and

portfolios, through out the day. The baning system in India, should not only be hassle

free but it should be able to meet the new challenges posed by the technology and any

other external and internal factors. 0or the past three decades, IndiaFs baning system has

several outstanding achievements to its credit. The ans are the main participants of the

financial system in India. The aning sector offers several facilities and opportunities to

their customers. +ll the bans safeguards the money and valuables and provide loans,

credit, and payment services, such as checing accounts, money orders, and cashierFs

cheques. The bans also offer investment and insurance products. +s a variety of models

for cooperation and integration among finance industries have emerged, some of the

traditional distinctions between bans, insurance companies, and securities firms have

diminished. In spite of these changes, bans continue to maintain and perform their

primary roleGaccepting deposits and lending funds from these deposits.

53

3.5 2eed of the ans


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efore the establishment of bans, the financial activities were handled by money lenders

and individuals. +t that time the interest rates were very high. +gain there were no

security of public savings and no uniformity regarding loans. %o as to overcome such

problems the organized baning sector was established, which was fully regulated by the

government. The organized baning sector wors within the financial system to provide

loans, accept deposits and provide other services to their customers. The following

functions of the ban explain the need of the ban and its importanceB

H To provide the security to the savings of customers.

H To control the supply of money and credit

H To encourage public confidence in the woring of the financial system, increase

savings speedily and efficiently.

H To avoid focus of financial powers in the hands of a few individuals and

institutions.

H To set equal norms and conditions 'i.e. rate of interest, period of lending etc) to all

types of customers

3.6 >istory of Indian aning %ystem D9E D:E

The first ban in India, called The (eneral an of India was established in the year

3:


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form the Imperial an of India which was run by uropean %hareholders. +fter that the

$eserve an of India was established in +pril 3=68.

+t the time of first phase the growth of baning sector was very slow. etween 3=36 and

3=7< there were approximately 33JJ small bans in India. To streamline the functioning

and activities of commercial bans, the (overnment of India came up with the aning

1ompanies +ct, 3=7= which was later changed to aning $egulation +ct 3=7= as per

amending +ct of 3=98 '+ct 2o.56 of 3=98). $eserve an of India was vested with

extensive powers for the supervision of baning in India as a 1entral aning +uthority.

+fter independence, (overnment has taen most important steps in regard of Indian

aning %ector reforms. In 3=88, the Imperial an of India was nationalized and was

given the name K%tate an of IndiaK, to act as the principal agent of $I and to handle

baning transactions all over the country. It was established under %tate an of India

+ct, 3=88. %even bans forming subsidiary of %tate an of India was nationalized in

3=9J. /n 3=th Luly, 3=9=, major process of nationalization was carried out. +t the same

time 37 major Indian commercial bans of the country were nationalized. In 3=


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3=8= B 2ationalization of %I subsidiaries.

3=93 B Insurance cover extended to deposits.

3=9= B 2ationalisation of 37 major ans.

3=:3 B 1reation of credit guarantee corporation.

3=:8 B 1reation of regional rural bans.

3=


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and resulted in the reduction of the number of nationalised bans from 5J to 3=. +fter

this, until the 3==Js, the nationalised bans grew at a pace of around 7M, closer to the

average growth rate of the Indian economy. The nationalised bans were credited by

someN including >ome minister 4. 1hidambaram, to have helped the Indian economy

withstand the global financial crisis of 5JJ:&5JJ=.

3.6.5 -iberalisation D6E

In the early 3==Js, the then 2arsimha $ao government embared on a policy of

liberalisation, licensing a small number of private bans. These came to be nown as

2ew (eneration tech&savvy bans, and included (lobal Trust an 'the first of such

new generation bans to be set up), which later amalgamated with /riental an of

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1ommerce, +xis an'earlier as UTI an), I1I1I an and >*01 an. This move

along with the rapid growth in the economy of India revolutionized the baning sector in

India which has seen rapid growth with strong contribution from all the three sectors of

bans, namely, government bans, private bans and foreign bans. The next stage for

the Indian baning has been setup with the proposed relaxation in the norms for 0oreign

*irect Investment, where all 0oreign Investors in bans may be given voting rights which

could exceed the present cap of 3JM, at present it has gone up to 7=M with some

restrictions.

The new policy shoo the baning sector in India completely. aners, till this time,

were used to the 7&9&7 method 'orrow at 7MN -end at 9MN (o home at 7) of functioning.

The new wave ushered in a modern outloo and tech&savvy methods of woring for the

traditional bans. +ll this led to the retail boom in India. 4eople not just demanded more

from their bans but also received more. 1urrently '5JJ:), baning in India is generally

fairly mature in terms of supply, product range and reach&even though reach in rural India


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still remains a challenge for the private sector and foreign bans. In terms of quality of

assets and capital adequacy, Indian bans are considered to have clean, strong and

transparent balance sheets as compared to other bans in comparable economies in its

region. The $eserve an of India is an autonomous body, with minimal pressure from

the government. The stated policy of the an on the Indian $upee is to manage

volatility but without any fixed exchange rate&and this has mostly been true. @ith the

growth in the Indian economy expected to be strong for quite some time&especially in its

services sector&the demand for baning services, especially retail baning, mortgages and

investment services are expected to be strong.

In ;arch 5JJ9, the $eserve an of India allowed @arburg 4incus to increase its stae

in !ota ;ahindra an 'a private sector ban) to 3JM. This is the first time an investor

has been allowed to hold more than 8M in a private sector ban since the $I announced

norms in 5JJ8 that any stae exceeding 8M in the private sector bans would need to be

voted by them. In recent years critics have charged that the non&government owned bans

are too aggressive in their loan recovery efforts in connection with housing, vehicle and

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personal loans. There are press reports that the bansO loan recovery efforts have driven

defaulting borrowers to suicide.

3.6.6 (overnment policy on baning industry '%ourceB&The federal $eserve +ct 3=36 and

The aning +ct 3=66)

ans operating in most of the countries must contend with heavy regulations, rules

enforced by 0ederal and %tate agencies to govern their operations, service offerings, and

the manner in which they grow and expand their facilities to better serve the public. +

baner wors within the financial system to provide loans, accept deposits, and provide

other services to their customers. They must do so within a climate of extensive


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regulation, designed primarily to protect the public interests.

The main reasons why the bans are heavily regulated are as followsB

H To protect the safety of the publicFs savings.

H To control the supply of money and credit in order to achieve a nationFs broad

economic goal.

H To ensure equal opportunity and fairness in the publicFs access to credit and other

vital financial services.

H To promote public confidence in the financial system, so that savings are made

speedily and efficiently.

H To avoid concentrations of financial power in the hands of a few individuals and

institutions.

H 4rovide the (overnment with credit, tax revenues and other services.

H To help sectors of the economy that they have special credit needs for eg.

>ousing, small business and agricultural loans etc.

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3.6.7 -aw of baning D6E

aning law is based on a contractual analysis of the relationship between the ban and

customerGdefined as any entity for which the ban agrees to conduct an account.

The law implies rights and obligations into this relationship as followsB

H The ban account balance is the financial position between the ban and the

customerB when the account is in credit, the ban owes the balance to the

customerN when the account is overdrawn, the customer owes the balance to the

ban.

H The ban agrees to pay the customerOs cheques up to the amount standing to the

credit of the customerOs account, plus any agreed overdraft limit.


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H The ban may not pay from the customerOs account without a mandate from the

customer, e.g. cheques drawn by the customer.

H The ban agrees to promptly collect the cheques deposited to the customerOs

account as the customerOs agent, and to credit the proceeds to the customerOs

account.

H The ban has a right to combine the customerOs accounts, since each account is

just an aspect of the same credit relationship.

H The ban has a lien on cheques deposited to the customerOs account, to the extent

that the customer is indebted to the ban.

H The ban must not disclose details of transactions through the customerOs

accountGunless the customer consents, there is a public duty to disclose, the

banOs interests require it, or the law demands it.

H The ban must not close a customerOs account without reasonable notice, since

cheques are outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the

customer and the ban. The statutes and regulations in force within a particular

jurisdiction may also modify the above terms andor create new rights, obligations or

limitations relevant to the ban&customer relationship.

5:

3.6.8 $egulations for Indian bans D7E

1urrently in most jurisdictions commercial bans are regulated by government entities

and require a special ban license to operate. Usually the definition of the business of

baning for the purposes of regulation is extended to include acceptance of deposits, even

if they are not repayable to the customerOs orderGalthough money lending, by itself, is

generally not included in the definition.


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Unlie most other regulated industries, the regulator is typically also a participant in the

maret, i.e. a government&owned 'central) ban. 1entral bans also typically have a

monopoly on the business of issuing bannotes. >owever, in some countries this is not

the case. In U!, for example, the 0inancial %ervices +uthority licenses bans, and some

commercial bans 'such as the an of %cotland) issue their own bannotes in addition to

those issued by the an of ngland, the U! governmentOs central ban.

%ome types of financial institutions, such as building societies and credit unions, may be

partly or wholly exempted from ban license requirements, and therefore regulated under

separate rules. The requirements for the issue of a ban license vary between jurisdictions

but typically includeB

H ;inimum capital

H ;inimum capital ratio

H O0it and 4roperO requirements for the banOs controllers, owners, directors, andor

senior officers

H +pproval of the banOs business plan as being sufficiently prudent and plausible.

3.7 1lassification of aning Industry in India D3E D5E D=E D36E

Indian baning industry has been divided into two parts, organized and unorganized

sectors. The organized sector consists of $eserve an of India, 1ommercial ans and

1o&operative ans, and %pecialized 0inancial Institutions 'I*I, I1I1I, I01 etc). The

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unorganized sector, which is not homogeneous, is largely made up of money lenders and

indigenous baners.

+n outline of the Indian aning structure may be presented as followsB&

3. $eserve bans of India.

5. Indian %cheduled 1ommercial ans.


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a) %tate an of India and its associate bans.

b) Twenty nationalized bans.

c) $egional rural bans.

d) /ther scheduled commercial bans.

6. 0oreign ans

7. 2on&scheduled bans.

8. 1o&operative bans.

3.7.3 $eserve ban of India

The reserve ban of India is a central ban and was established in +pril 3, 3=68 in

accordance with the provisions of reserve ban of India act 3=67. The central office of

$I is located at ;umbai since inception. Though originally the reserve ban of India

was privately owned, since nationalization in 3=7=, $I is fully owned by the

(overnment of India. It was inaugurated with share capital of $s. 8 1rores divided into

shares of $s. 3JJ each fully paid up.

$I is governed by a central board 'headed by a governor) appointed by the central

government of India. $I has 55 regional offices across India. The reserve ban of India

was nationalized in the year 3=7=. The general superintendence and direction of the ban

is entrusted to central board of directors of 5J members, the (overnor and four deputy

(overnors, one (overnmental official from the ministry of 0inance, ten nominated

directors by the government to give representation to important elements in the economic

life of the country, and the four nominated director by the 1entral (overnment to

represent the four local boards with the headquarters at ;umbai, !olata, 1hennai and

5=

2ew *elhi. -ocal oard consists of five members each central government appointed for


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a term of four years to represent territorial and economic interests and the interests of

cooperative

and indigenous bans.

The $I +ct 3=67 was commenced on +pril 3, 3=68. The +ct, 3=67 provides the

statutory basis of the functioning of the ban. The ban was constituted for the need of

followingB

& To regulate the issues of bannotes.

& To maintain reserves with a view to securing monetary stability

& To operate the credit and currency system of the country to its advantage.

0unctions of $I as a central ban of India are explained briefly as followsB

an of IssueB The $I formulates, implements, and monitors the monitory policy. Its

main objective is maintaining price stability and ensuring adequate flow of credit to

productive sector.

$egulator&%upervisor of the financial systemB $I prescribes broad parameters of

baning operations within which the countryFs baning and financial system functions.

Their main objective is to maintain public confidence in the system, protect depositorFs

interest and provide cost effective baning services to the public.

;anager of exchange controlB The manager of exchange control department manages

the foreign exchange, according to the foreign exchange management act, 3===. The

managerFs main objective is to facilitate external trade and payment and promote orderly

development and maintenance of foreign exchange maret in India.

Issuer of currencyB + person who wors as an issuer, issues and exchanges or destroys

the currency and coins that are not fit for circulation. >is main objective is to give the

public adequate quantity of supplies of currency notes and coins and in good quality.

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*evelopmental roleB The $I performs the wide range of promotional functions to

support national objectives such as contests, coupons maintaining good public relations

and many more.

$elated functionsB There are also some of the related functions to the above mentioned

main functions. They are such as, baner to the government, baner to bans etcP.

H aner to government performs merchant baning function for the central and the

state governmentsN also acts as their baner.

H aner to bans maintains baning accounts to all scheduled bans.

1ontroller of 1reditB $I performs the following tassB

H It holds the cash reserves of all the scheduled bans.

H It controls the credit operations of bans through quantitative and qualitative

controls.

H It controls the baning system through the system of licensing, inspection and

calling for information.

H It acts as the lender of the last resort by providing rediscount facilities to

scheduled bans.

%upervisory 0unctionsB In addition to its traditional central baning functions, the

$eserve an performs certain non&monetary functions of the nature of supervision of

bans and promotion of sound baning in India. The $eserve an +ct 3=67 and the

baning regulation act 3=7= have given the $I wide powers of supervision and control

over commercial and co&operative bans, relating to licensing and establishments, branch

expansion, liquidity of their assets, management and methods of woring, amalgamation,

reconstruction and liquidation. The $I is authorized to carry out periodical inspections

of the bans and to call for returns and necessary information from them. The

nationalisation of 37 major Indian scheduled bans in Luly 3=9= has imposed new


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responsibilities on the $I for directing the growth of baning and credit policies

towards more rapid development of the economy and realisation of certain desired social

objectives. The supervisory functions of the $I have helped a great deal in improving

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the standard of baning in India to develop on sound lines and to improve the methods of

their operation.

4romotional 0unctionsB @ith economic growth assuming a new urgency since

independence, the range of the $eserve anFs functions has steadily widened. The ban

now performs a variety of developmental and promotional functions, which, at one time,

were regarded as outside the normal scope of central baning. The $eserve ban was

ased to promote baning habit, extend baning facilities to rural and semi&urban areas,

and establish and promote new specialized financing agencies.

3.7.5 Indian %cheduled 1ommercial ans

The commercial baning structure in India consists of scheduled commercial bans, and

unscheduled bans.

%cheduled ansB %cheduled ans in India constitute those bans which have been

included in the second schedule of $I act 3=67. $I in turn includes only those bans

in this schedule which satisfy the criteria laid down vide section 75'9a) of the +ct.

"%cheduled bans in India# means the %tate an of India constituted under the %tate

an of India +ct, 3=88 '56 of 3=88), a subsidiary ban as defined in the s %tate an of

India 'subsidiary bans) +ct, 3=8= '6< of 3=8=), a corresponding new ban constituted

under section 6 of the aning companies '+cquisition and Transfer of Undertaings)

+ct, 3=


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categories those bans as public sector bans, old private sector bans, new private sector

bans and foreign bans, i.e. private sector, public sector, and foreign bans come under

the umbrella of scheduled commercial bans.

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$egional $ural anB The government of India set up $egional $ural ans '$$s) on

/ctober 5, 3=:8 D3JE. The bans provide credit to the weaer sections of the rural areas,

particularly the small and marginal farmers, agricultural labourers, and small

enterpreneurs. Initially, five $$s were set up on /ctober 5, 3=:8 which was sponsored

by %yndicate an, %tate an of India, 4unjab 2ational an, United 1ommercial an

and United an of India. The total authorized capital was fixed at $s. 3 1rore which has

since been raised to $s. 8 1rores. There are several concessions enjoyed by the $$s by

$eserve an of India such as lower interest rates and refinancing facilities from

2++$* lie lower cash ratio, lower statutory liquidity ratio, lower rate of interest on

loans taen from sponsoring bans, managerial and staff assistance from the sponsoring

ban and reimbursement of the expenses on staff training. The $$s are under the

control of 2++$*. 2++$* has the responsibility of laying down the policies for

the $$s, to oversee their operations, provide refinance facilities, to monitor their

performance and to attend their problems.

Unscheduled ansB "Unscheduled an in India# means a baning company as defined

in clause 'c) of section 8 of the aning $egulation +ct, 3=7= '3J of 3=7=), which is not

a scheduled ban#.

3.7.6 2++$*

2++$* is an apex development ban with an authorization for facilitating credit flow

for promotion and development of agriculture, small&scale industries, cottage and village

industries, handicrafts and other rural crafts. It also has the mandate to support all other


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allied economic activities in rural areas, promote integrated and sustainable rural

development and secure prosperity of rural areas. In discharging its role as a facilitator

for rural prosperity, 2++$* is entrusted withB

3. 4roviding refinance to lending institutions in rural areas

5. ringing about or promoting institutions development and

6. valuating, monitoring and inspecting the client bans

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esides this fundamental role, 2++$* alsoB

H +ct as a coordinator in the operations of rural credit institutions

H To help sectors of the economy that they have special credit needs for eg.

>ousing, small business and agricultural loans etc.

3.7.7 1o&operative ans D3JE

1o&operative bans are explained in detail in %ection A II of this chapter

3.8 %ervices provided by baning organizations D5E

aning $egulation +ct in India, 3=7= defines baning as "+ccepting# for the purpose of

lending or investment of deposits of money from the public, repayable on demand and

withdrawable by cheques, drafts, orders etc. as per the above definition a ban essentially

performs the following functionsB&

H +ccepting *eposits or savings functions from customers or public by providing

ban account, current account, fixed deposit account, recurring accounts etc.

H The payment transactions lie lending money to the public. an provides an

effective credit delivery system for loanable transactions.

H 4rovide the facility of transferring of money from one place to another place. 0or

performing this operation, ban issues demand drafts, banerFs cheques, money

orders etc. for transferring the money. an also provides the facility of


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Telegraphic transfer or tele& cash orders for quic transfer of money.

H + ban performs a trustworthy business for various purposes.

H + ban also provides the safe custody facility to the money and valuables of the

general public. an offers various types of deposit schemes for security of

money. 0or eeping valuables ban provides locer facility. The locers are small

compartments with dual locing system built into strong cupboards. These are

stored in the banFs strong room and are fully secured.

H ans act on behalf of the (ovt. to accept its tax and non&tax receipt. ;ost of the

government disbursements lie pension payments and tax refunds also tae place

through bans.

67

There are several types of bans, which differ in the number of services they provide and

the clientele '1ustomers) they serve. +lthough some of the differences between these

types of bans have lessened as they have begun to expand the range of products and

services they offer, there are still ey distinguishing traits. These bans are as followsB

1ommercial bans, which dominate this industry, offer a full range of services for

individuals, businesses, and governments. These bans come in a wide range of sizes,

from large global bans to regional and community bans.

(lobal bans are involved in international lending and foreign currency trading, in

addition to the more typical baning services.

$egional bans have numerous branches and automated teller machine '+T;) locations

throughout a multi&state area that provide baning services to individuals. ans have

become more oriented toward mareting and sales. +s a result, employees need to now

about all types of products and services offered by bans.

1ommunity bans are based locally and offer more personal attention, which many


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individuals and small businesses prefer. In recent years, online bansGwhich provide all

services entirely over the InternetGhave entered the maret, with some success.

>owever, many traditional bans have also expanded to offer online baning, and some

formerly Internet&only bans are opting to open branches.

%avings bans and savings and loan associations, sometimes called thrift institutions,

are the second largest group of depository institutions. They were first established as

community&based institutions to finance mortgages for people to buy homes and still

cater mostly to the savings and lending needs of individuals.

1redit unions are another ind of depository institution. ;ost credit unions are formed

by people with a common bond, such as those who wor for the same company or belong

to the same labour union or church. ;embers pool their savings and, when they need

money, they may borrow from the credit union, often at a lower interest rate than that

demanded by other financial institutions.

0ederal $eserve bans are (overnment agencies that perform many financial services

for the (overnment. Their chief responsibilities are to regulate the baning industry and

to help implement our 2ationFs monetary policy so our economy can run more efficiently

68

by controlling the 2ationFs money supplyGthe total quantity of money in the country,

including cash and ban deposits. 0or example, during slower periods of economic

activity, the 0ederal $eserve may purchase government securities from commercial

bans, giving them more money to lend, thus expanding the economy. 0ederal $eserve

bans also perform a variety of services for other bans. 0or example, they may mae

emergency loans to bans that are short of cash, and clear checs that are drawn and paid

out by different bans.

The money bans lend, comes primarily from deposits in checing and savings accounts,


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certificates of deposit, money maret accounts, and other deposit accounts that

consumers and businesses set up with the ban. These deposits often earn interest for

their owners, and accounts that offer checing, provide owners with an easy method for

maing payments safely without using cash. *eposits in many bans are insured by the

0ederal *eposit Insurance 1orporation, which guarantees that depositors will get their

money bac, up to a stated limit, if a ban should fail.


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I2*I+2 +2!I2( >I%T/$C


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>I%T/$C

+lthough some form of baning, mainly of the money&lending type, has been in existence in

India since ancient times, it

was only over a century ago that proper baning began. The first ban in India, though

conservative, was established in

3:


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baning system has done fairly well in adjusting to the new maret dynamics, greater challenges

lie ahead.

%T$U1TU$

The $eserve an of India, the nationFs central ban, began operations on +pril J3, 3=68. It wasestablished with the

objective of ensuring monetary stability and operating the currency and credit system of the

country to its advantage.

In India, the bans are being segregated in different groups. ach group has their own benefits,

own dedicated target

marets, limitations in operating in India. The commercial baning structure in India consists of

%cheduled 1ommercial

ans and Unscheduled ans.

%cheduled commercial ans constitute those bans which have been included in the %econd

%chedule of $eserve an

of India '$I) +ct, 3=67. 0or the purpose of assessment of performance of bans, the $eserve

an of India categorise

them as public sector bans, old private sector bans, new private sector bans and foreign

bans.

usiness

*ivision

$etail

baning

/ther

aning

usinesses

Treasury

/perations

@holesale


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baning

U%I2%% *I?I%I/2

%@/T +2+-C%I%

%T$2(T>%

?aluable contributor to (*4

$egulatory environment

(overnment %upport

@+!2%%%

Increasing 24+

-ow penetration

-ac of product differentiation

/44/$TU2ITI%

;odern Technology

Untapped $ural ;aret

(lobalization

T>$+T%

Unorganized money lending

maret

1ustomer dissatisfaction

$ise of monopolistic structures

4/$T$F% 0I? 0/$1% ;/*-

aning is mainly a client oriented business. + high&quality of services to the client is crucial for

the growth and stability

of any ban. + wider distribution and access of financial services helps both consumers and

producers to raise their


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welfare and productivity. %uch access is especially powerful for the poor as it provides them

opportunities to build

savings, mae investments, avail credit, and more important, insure themselves against income

shocs and emergencies.

To survive in an increasingly competitive environment, ban need to come up with various

facilities lie Internet

baning, mobile baning etc. @ith the onset of mobile baning, the industry finds itself at the

threshold of the next

major technological leap.

$etail baning & -oans to Individuals '+uto loan,

>ousing -oan, ducation -oan and other personal

loan) or small businesses.

@holesale baning A -oans to ;id and -arge

corporate '@oring 1apital loans, 4roject finance,

Term loans, -ease 0inance)

Treasury /perations A Investment in quity,

*erivates, 1ommodities, ;utual 0unds, onds,

Trading and 0orex operations

/ther aning usinesses A ;erchant aning,

-easing business, >ire purchase, %yndication service etc.

4$0/$;+21

The empirical studies have found a strong relationship between economic growth and financial

development. 0inance

plays an important role in the economic growth. The charts depict the performance of anex in

last 3J year and

$elative performance of % anex Q % %ensex in 5J3J&33. The performance of anex

accelerated during the period


31/89

;arch 5JJ5 to ;arch 5JJigh bargaining power of customerFs on

account of bans renders uniform services to the

clients. 2ow a dayFs almost all bans would lie to

provide requisite information very easily by way to

Internet, ;obile baning to the clients

%upplier 4ower& -ow bargaining power of supplierFs on

account of $I regulatory benchmars. ans have to

meet numerous regulatory standards created by $I

1ompetitive $ivalry& >igh competition of account of

number of prominent public, private, foreign along

with cooperative bans

+vailability of %ubstitutes & >igh menace from


32/89

substitutes lie 201Fs, ;utual funds, (overnment

securities and T&bills

Threat of new entrants & -ow threat of new entrants

on account of baning regulations. efore setting up of

a new ban, it is essential to tae the consent of $I.

$(U-+TI/2

The expected integration of various intermediaries in the financial system would require a strong

regulatory framewor.

It would also require a number of legislative changes to enable the baning system to remain

contemporary and

competitive.

1/2/;I1 +2+-C%I%

The Indian economy has recorded remarable growth over

the past decade. IndiaOs economic growth is expected to

robust in 5J35 and 5J36. The International ;onetary 0und

'I;0) has pared IndiaFs economic growth projection to 9.=M

in 5J35 from its Lanuary estimate of :M, the only emerging

economy for which it has done so. ans provide capital

formation to various sectors which directly help in the

growth of Indian economy.

%/1I+- +2+-C%I%

Indian baning system has been progressing rapidly. There

are ample opportunities for the bans to cover untapped rural maret. Cet, baning facilities are

not available in many

rural areas. ;any farmers are taing loan from moneylender at a very high rate of interest.

%mall&scale industries would

remain important for bans. 1hanges could be expected in near future for unorganised sectors.


33/89

T1>2/-/(I1+- +2+-C%I%

In recent time, Indian baning industry has been consistently woring towards the development

of technological

changes and its usage in the baning operations for the improvement of their efficiency. @ith theapplication of new

and improved technologies bans expected to reduce costs, time and give customer satisfaction.

1ore baning has

changed the face of baning by offering value added services. 1ore baning applications helps to

provide complete front

and bacend automation of bans. Technological developments would render flow of

information and data faster

leading to faster appraisal and decision&maing. This would enable bans to mae credit

management more effective,

besides leading to an appreciable reduction in transaction cost.

Internet baning or baning via the Internet can be considered a remarable

development in the baning sector. The ability to carry out baning transactions

through the Internet has empowered customers to execute their financial transactions

within the comfort of their homes and offices. In todays busy world, when people do

not have much time even for personal wor, Internet baning appears as a boon.

Internet aning helped give the customerOs anytime access to their bans. ut for Internet

baning there is a

requirement of a 41 -aptop with an Internet connection. ;obile usage has seen an explosive

growth in economies lie India. India has reached


34/89

+T; '+utomated Teller ;achine) is electronic machine, which is operated by a

customer himself to deposit or to withdraw cash from ban. +T;s reduce the

wor pressure on banOs staff and avoid queues in ban premises. +T;s are of

great help to travellers. They need not carry large amount of cash with them.

They can withdraw cash from any city or state, across the country and even from

outside the country with the help of +T;.

1/21-U%I/2

The financial sector reforms have brought about significant improvements in the financial

strength and the

competitiveness of the Indian baning system. The prudential norms, accounting and disclosurestandards, ris

management practices, etc are eeping pace with global standards, maing the baning system

resilient to global

shocs.

In the recent past, the Indian baning sector has undergone significant developments and

investments. In this sector,

there are huge opportunities and numerous challenges. ;oney laundering is a growing menaceand it not only poses

serious threat to the stability and integrity of the financial system but also to the sovereignty and

safety of nations

worldwide. In the coming days, challenges before bans would primarily lie in saving

themselves from the growing

threat of money laundering.


35/89

4$/0I- /0 1/;4+2C


36/89


37/89

PUSTIKAR SAKH SAHKARI SAMITI LTD&

4ustiar -aghu ?yapari 4ratistan achat vam %ah %ahari %amiti -td. Lodhpur, a co&

operative socieity registered under The ;ulti %tate 1o&operative %ocieties +ct 5JJ5.The basic philosophy behind woring of the samiti is to wor as an effective and alternative

micro finance institution by providing quic and adequate financial assistance along with

technical assistance, where ever necessary , for income generating and shell improving activities

of its members especially belonging to the poor, middle and lower middle class of the society.

%amiti concentrates its entire efforts to achieve fundamental and essential components required

for an over all economic devlopment of the community at large and particularly of its members.

conomic empowerment of its member is the nucleus of its various activiites with a goal to help

the poorest of the poor. %amiti mobilises unemployed poor and underprivileged specially women

through %>( movement.

Saving Deposits

• Rate Of Interest • 6%

Fixed Deposits ( F.D.R.)

TIME PERIOD INTEREST RATE

• 3 Months or More

• 6 Months or More

• Less than 1 Year and 3 Years

• 3 Years

• 3 years and More

• 7%

• 7.%

• 1!%

• 11%

• "%


38/89

Recurring Deposits ( R.D.)

On De#os$t$n Rs.&1!!!

TIME PERIOD 'ENERAL SENIOR & RETIRED

• After 1( Months

• After () Months

• After 36 Months

• After )" Months

• After 6! Months

• 11!3

• 1(1"

• 13")

• 137(

• 1)"

• 111)

• 1()(

• 1)(

• 1)(7

• 16!

Daily Deposits

On De#os$t$n Rs.&1!!

TIME PERIOD RATE AMO*NT

• After 1( Months

• After () Months

• After 36 Months

• After )" Months

• After 6! Months

• ". %

• +.! %

• +. %

• +. %

• +. %

• 1(6

• (637

• )17)

• ")"

• 76"7

LOANS


39/89

The livelihood loan schemes at 4ustiar 1redit 1ooperative are characterized by relatively small

loans, a few thousand rupees at most. The repayment period is relatively short, about a year or so. @omen are a major beneficiary of their activities, and the destination of the funds primarily

includes agriculture, distribution, trading, small craft and processing industries. The

administrative structure is generally light and the entire process is participatory in nature. The

impact of credit lending is as widespread as in the rural areas and urban areas.

4ustiar 1redit 1ooperative extends livelihood loans between 3JJJJ& 8JJJJ for various

purposes, lie ;anufacturing, %ervicing, %mall usiness, +griculture Q +llied +ctivities, etc.

T#e 'o!n sc#emes !'so simu't!neous'y un$ert!"e ! soci!' $e%e'oment !(en$!& T#is #e's

to)

*& R!ise t#e soci!' !n$ o'itic!' consciousness o+ mem,ers

-& Focus incre!sin('y on .omen/ .#ose ur(e +or sur%i%!' #!s ! +!r (re!ter ,e!rin( on

t#e $e%e'oment o+ t#e +!mi'y

0& Encour!(e t#eir monitorin( o+ soci!' !n$ #ysic!' in+r!structure ro1ects 2 #ousin(/

s!nit!tion/ $rin"in( .!ter/ e$uc!tion/ entrereneurs#i/ ,usiness $e%e'oment/!(ricu'ture/ etc&

The lending practices are characterized by an unusually high degree of fairness, flexibility and

service. 4rogram loans are provided for any reasonable purpose. The interest rates charged to

borrowers are below or at maret levels, and repayment terms are arranged to accommodate the

needs of the borrowing organization.

The terms and conditions of the loan agreement entered into with borrowers are significantly less

restrictive and obtrusive than most commercial loan contracts. The agreement is nevertheless a

detailed and comprehensive one that is fully protective of the legal rights and financial solvency

of 4ustiar 1redit 1ooperative. $eporting requirements are quite strict in requiring borrowers to

submit substantial information on a regular and timely basis.4ustiar 1redit 1ooperative is thus


40/89

able to closely monitor the financial performance and organizational development of its

borrowers. 4ustiar 1redit 1ooperative provides technical assistance services to its borrowers in

connection with the loan application process and subsequently as circumstances warrant. The

education and experience of staff and Trustees allow it to provide a wide range of qualityservices, particularly in the areas of organizational development, financial management, and

training in consensus process

MICRO FINANCE

4ustiar 1redit 1ooperative %ociety -imited sees to empower women living below the poverty

line through the %elf&>elp (roup loans they offer. *isbursed solely to ladies who possess the

sills to begin a craft business but lac the money necessary to start up or expand their own

businesses, 4ustiar 1redit 1ooperativeFs %elf&>elp (roup loans comprise the vast majority of

their financial operations. 1ase study research specifically on 4ustiar 1redit 1ooperativeFs %elf&

>elp (roup process indicates that ladies involved in %amitiOs %elf&>elp (roup program initially

discover about 4ustiar %amiti via their friends and neighbors. @ord&of&mouth publicity has

indeed proven to be an effective means of advertising for 4ustiar 1redit 1ooperative

concerning the %elf&>elp (roup loan scheme, as 553 %elf&>elp (roups have formed under

4ustiar 1redit 1ooperative since the societyFs birth, a figure that continues to grow.

+fter initially hearing about 4ustiar 1redit 1ooperative, ladies who are interested visit 4ustiar

1redit 1ooperativeFs branch to learn more about the process of taing out a loan. 0ollowing this

educational session, the ladies recruit other women, usually friends, family or neighbors

partaing in the same craft, to form a 3J&woman %elf&>elp (roup. This group then elects a

group leader who assumes the responsibility of tracing individual payments within the group as

well as maintaining contact with 4ustiar 1redit 1ooperative each month to pay the loan

installments. +fter the initial %elf&>elp (roup formation the ladies return to 4ustiar 1redit

1ooperative to fill out a loan application. /nce this application has been processed, 4ustiar

1redit 1ooperative staff travels to the homes of the women in the %elf&>elp (roup to investigate

their business and wor ethic, assessing whether or not these women will be reliable in repaying

their loan installments. *uring this assessment visit, 4ustiar 1redit 1ooperativeFs staff members

loo for hardworing and organized women who have strong relationships with their fellow


41/89

%elf&>elp (roup members, and consequentially are more liely to hold each other accountable

and pay bac their loan. If the %elf&>elp (roup applying to 4ustiar 1redit 1ooperative passes

this assessment visit, they return to 4ustiar 1redit 1ooperative within days of the investigatoryvisit for the loan signing ceremony, at which time they receive their money.

SCHEMES

SEL, -ELP 'RO*P LOANS S-' LOAN/

• ,$nan0$n to the #oorest of the #oor $s done throh S-' 0on0e#t. Se2f -e2f

'ro#s of #oor en and 4oen are fored se#erat2y to de52o# s#r$r$t of ta2

0oo#erat$on there y $n0reas$n ta2 0onf$den0e.

Meers of the S-'8s are ot$5ated to ado#t a ha$t of re2ar sa5$n of a f$9ed

aont to 0onst$tte a 0o22e0t$5e fnd: 4h$0h 0an e sed to eet the eerent

f$nan0$a2 needs of the fe22o4 eers of the ro#.

After ensr$n sat$sfa0tory fn0t$on$n of the ro# sa$t$ #ro5$des 2oans to the

S-' for nderta;$n any $n0oe enerat$n e0ono$0 a0t$5$t$es e$ther 0o22e0t$5e2y

or $nd$5$da22y.

MI


42/89

5ery soft and rea0ha2e ters. Aont of 2oans ranes fro !.1! La;h to (.!!

La;h 4$th easy re#ayent s0hed2e. =e #ro5$de 2oan #to 1.! La0 on #ersona2

arntee of a00e#ta2e eer a2on4$th #ost dated 0he>es for onth2y

$nsta2ents.

Trans#ort o#erators are $5en 2oan for #r0hase of ne4 or o2d 5eh$02es and $t

rea$ns hy#othe0ated $n fa5or of the sa$t$ t$22 0o#2et$on of 2oan. Mortae of

$o5a2e #ro#ersty $s ta;en for 2oan ao5e 1.! La0 a2on4$th #ersona2

arantee and #ost dated 0he>es.

'ENERAL LOAN

• Sa$t$ a2so #ro5$des f$nan0$a2 ass$stan0e to $ts eers for eet$n #erosna2 &

so0$a2 2$a$2$t$es and sa5e the fro reedy 02t0hes of oney 2enders.

The aont of 2oan ranes fro !.1! La0 to .!! La0 4$th re#ayent #er$od of

a9$ 6! onths.

CON!C "S

#st$;ar?a$2.0o

'ET IN TO*


43/89

S.No. #ranc$ Na%e !ddress &$one No.

3. aba 2adi 4ratap 2agar,-in $oad,

2ear heeha 4yaauu,

Lodhpur,'$ajasthan.)

Tel B J5=3&5988988

5. 4halodi 2ear 2agar 4alia, 2agore $oad,

4halodi,'$ajasthan.)

Tel B J5=58&5569=J

6. ianer ;ohatto a chow,ianer'$ajasthan.)

Tel B J383&55JJ=97

7. Laisalmer 2ear $amesh Talies,!ela padaa,

Laisalmer,'$ajasthan.)

Tel B J5==5&588338

8. 4ali 65, ;eera ;arg,hairo (haat,

4ali, ;arwar,'$ajasthan.)

Tel B J5=65&55J:::

+2!I2( I2 I2*I+


44/89


45/89


46/89

Banking in India

3!n"in( in In$i! in the modern sense originated in the last decades of the 3industan '3::J&3


47/89

was one of the three presidency bans, the other two being the an of ombay and the an of ;adras, all three of which were established under charters from the ritish ast India 1ompany.

The three bans merged in 3=53 to form the Imperial an of India, which, upon IndiaOsindependence, became the %tate an of India in 3=88. 0or many years the presidency bans

acted as quasi&central bans, as did their successors, until the $eserve an of India was

established in 3=68.In 3=9= the Indian government nationalised all the major bans that it did not already own and

these have remained under government ownership. They are run under a structure nown asOprofit&maing public sector undertaingO '4%U) and are allowed to compete and operate

as commercial bans. The Indian baning sector is made up of four types of bans, as well as the4%Us and the state bans, they have been joined since the 3==Js by new private commercial

bans and a number of foreign bans.

(enerally baning in India was fairly mature in terms of supply, product range and reach&eventhough reach in rural India and to the poor still remains a challenge. The government hasdeveloped initiatives to address this through the %tate an of India expanding its branch

networ and through the 2ational an for +griculture and $ural *evelopment with things liemicrofinance. This also included the 5J37 plan by the then prime minister to bring ban accounts

to the estimated 7JM of the population that were still unbaned.

>istory

In ancient India there is evidence of loans from the ?edic period 'beginning 3:8J 1). -ater during the ;aurya dynasty'653 to 3


48/89

itself in engal in 3


49/89

4e!rsNum,er o+ ,!n"s

t#!t +!i'e$

Aut#orise$ C!it!'

5 L!"#s6

P!i$2u C!it!'

5 L!"#s6

3=38 33 89 8

3=39 36 563 7

3=3: = :9 58

3=3< : 5J= 3

Post2In$een$ence

The partition of India in 3=7: adversely impacted the economies of 4unjab and @est engal, paralysing baning activities for months. IndiaOs independence mared the end of a regime of the -aissez&faire for the Indian baning. The (overnment of India initiated measures to play an

active role in the economic life of the nation, and the Industrial 4olicy $esolution adopted by thegovernment in 3=7< envisaged a mixed economy. This resulted into greater involvement of thestate in different segments of the economy including baning and finance. The major steps to

regulate baning includedB

• The $eserve an of India, IndiaOs central baning authority, was established in +pril3=68, but was nationalised on 3 Lanuary 3=7= under the terms of the $eserve an of India

'Transfer to 4ublic /wnership) +ct, 3=7< '$I, 5JJ8b).

• In 3=7=, the aning $egulation +ct was enacted which empowered the $eserve an of

India '$I) Kto regulate, control, and inspect the bans in IndiaK.

• The aning $egulation +ct also provided that no new ban or branch of an existing

ban could be opened without a license from the $I, and no two bans could have commondirectors.

N!tion!'i7!tion in t#e *89:s

*espite the provisions, control and regulations of the $eserve an of India, bans in Indiaexcept the %tate an of India'%I), continued to be owned and operated by private persons. y

the 3=9Js, the Indian baning industry had become an important tool to facilitate thedevelopment of the Indian economy. +t the same time, it had emerged as a large employer, and a

debate had ensued about the nationalization of the baning industry. Indira (andhi, the

http://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Punjab,_Indiahttp://en.wikipedia.org/wiki/Punjab,_Indiahttp://en.wikipedia.org/wiki/West_Bengalhttp://en.wikipedia.org/wiki/West_Bengalhttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Laissez-fairehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Punjab,_Indiahttp://en.wikipedia.org/wiki/West_Bengalhttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Laissez-fairehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/Indira_Gandhi


50/89

then 4rime ;inister of India, expressed the intention of the (overnment of India in the annualconference of the +ll India 1ongress ;eeting in a paper entitled "Stray thoughts on Bank

Nationaliation." D:E The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The (overnment of India issued an ordinance'Oaning 1ompanies '+cquisition and Transfer of Undertaings) /rdinance, 3=9=O)

and nationalised the 37 largest commercial bans with effect from the midnight of 3= Luly 3=9=.These bans contained *01 an . This move, along with the rapid growth in the economy of India,

revitalised the baning sector in India, which has seen rapid growth with strong contributionfrom all the three sectors of bans, namely, government bans, private bans and foreign bans.

The next stage for the Indian baning has been set up with the proposed relaxation in the normsfor foreign direct investment, where all foreign investors in bans may be given voting rights

which could exceed the present cap of 3JM at present. It has gone up to :7M with somerestrictions.

The new policy shoo the aning sector in India completely. aners, till this time, were usedto the 7A9A7 method 'borrow at 7MN lend at 9MN go home at 7) of functioning. The new waveushered in a modern outloo and tech&savvy methods of woring for traditional bans. +ll this

led to the retail boom in India. 4eople demanded more from their bans and received more.

1urrent period

+ll bans which are included in the %econd %chedule to the $eserve an of India +ct, 3=67 are%cheduled ans. These bans comprise %cheduled 1ommercial ans and %cheduled 1o&

operative ans. %cheduled 1ommercial ans in India are categorised into five different groupsaccording to their ownership andor nature of operation. These ban groups areB

• %tate an of India and its +ssociates

http://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-Austin-7http://en.wikipedia.org/wiki/Banking_in_India#cite_note-Austin-7http://en.wikipedia.org/wiki/Nationalizationhttp://en.wikipedia.org/wiki/Nationalizationhttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-Austin-7http://en.wikipedia.org/wiki/Jayaprakash_Narayanhttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/wiki/New_Bank_of_Indiahttp://en.wikipedia.org/wiki/New_Bank_of_Indiahttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-AryaTandon2003-8http://en.wikipedia.org/wiki/Banking_in_India#cite_note-AryaTandon2003-8http://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-Austin-7http://en.wikipedia.org/wiki/Nationalizationhttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-Austin-7http://en.wikipedia.org/wiki/Jayaprakash_Narayanhttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/wiki/New_Bank_of_Indiahttp://en.wikipedia.org/wiki/New_Bank_of_Indiahttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Banking_in_India#cite_note-AryaTandon2003-8http://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/Economy_of_India


51/89

• 2ationalised ans

• 4rivate %ector ans

• 0oreign ans

• $egional $ural ans.

In the ban group&wise classification, I*I an -td. is included in 2ationalised ans.%cheduled 1o&operative ans consist of %cheduled %tate 1o&operative ans and %cheduled

Urban 1ooperative ans.

Gro.t# o+ 3!n"in( in In$i! o+ Sc#e$u'e$ Commerci!' 3!n"s D=E

In

$ic

!t

or

s

0* M!rc# o+

-::; -::9 -::< -::= -::8 -:*: -:** -:*- -:*0

2um ber of 1om

mercialan

s

5


52/89


In

$ic!t

or

s

0* M!rc# o+

-::; -::9 -::< -::= -::8 -:*: -:** -:*- -:*0

ands)

+ggr egate

*eposits

3:JJ5 billion'

U%R5


53/89


In

$ic!t

or

s

0* M!rc# o+

-::; -::9 -::< -::= -::8 -:*: -:** -:*- -:*0

a1redi

tU%R3:J) U%R55J) U%R5


54/89

+doption of baning technology

The IT revolution has had a great impact on the Indian baning system. The use of computershas led to the introduction of online baning in India. The use of computers in the baning sector

in India has increased many fold after the economic liberalisation of 3==3 as the countryOs baning sector has been exposed to the worldOs maret. Indian bans were finding it difficult to

compete with the international bans in terms of customer service, without the use of information technology.

The $I set up a number of committees to define and co&ordinate baning technology. Thesehave includedB

• In 3=


55/89

3r!nc#es !n$ ATMs o+ Sc#e$u'e$ Commerci!' 3!n"s !s o+ en$ M!rc# -::; D39E

3!n" tyeNum,er o+

,r!nc#es

On2site

ATMs

O++2site

ATMs

Tot!'

ATMs

2ationalised bans 66,95: 6


56/89

• 2et 24+ less than 8MN

• 2o default in 1$$ %-$ for the last yearN

• 2et profit in the last financial yearN

• 1% compliant.

• *omestic %1s have been advised that while preparing their +nnual ranch xpansion

4lan '+4), they should allocate at least 58M of the total number of branches proposed to be opened during the year in unbaned Tier 8 and Tier 9 centres i.e. 'population up to =,===)

centres which do not have a bric and mortar structure of any %1 for customer based baning transactions.

• $$s have also been advised to allocate at least 58M of the total number of branches

proposed to be opened during a year in unbaned rural 'Tier 8 and Tier 9) 1entres).

• 2ew private sector bans are required to ensure that at least 58M of their total branches

are in semi&urban and rural centres on an ongoing basis.

http://en.wikipedia.org/wiki/Non-performing_assethttp://en.wikipedia.org/wiki/Non-performing_assethttp://en.wikipedia.org/wiki/Core_bankinghttp://en.wikipedia.org/wiki/Non-performing_assethttp://en.wikipedia.org/wiki/Core_banking


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MARKETING MI>

In the previous lesson you learnt that mareting identifies consumersF needs and supplies variousgoods and services to satisfy those needs most effectively. %o the businessman needs toB

'a) produce or manufacture the product according to consumersF needN'b)mae available it at a price that the consumersF find reasonableN'c) supply the product to the consumers at different outlets they can conveniently approachN and'd) inform the consumers about the product and its characteristics through the media they have

access to.

%o the mareting manager concentrates on four major decision areas while planning themareting activities, namelyB

'i) products,'ii) price,

'iii) place 'distribution)'iv) promotion.

These 7 4Fs are called as elements of mareting and together they constitutethe mareting mix.+ll these are inter&related because a decision in one area affects decisionsin other areas. In this

lesson you will learn about the basic aspects relating to these 74Fsviz., product, price, place and promotion.

O3?ECTI@ES

After studying this lesson, you will be able to :

3. explain the concept of mareting mix and its componentsN

5. explain the meaning of product and its classificationN6. state the various factors affecting pricing decisionsN

7. describe different methods of pricingN8. state the meaning of channels of distributionN9. identify the various channels of distributionN

:. state the factors affecting choice of a channel of distributionN and

;areting involves a number of activities. To begin with, an organisation may decide on itstarget group of customers to be served. /nce the target group is decided, the product is to be

placed in the maret by providing the appropriate product, price, distribution and promotionalefforts. These are to be combined or mixed in an appropriate proportion so as to achieve themareting goal. %uch mix of product, price, distribution and promotional efforts is nown as

;areting ;ixF. +ccording to 4hilip !otler ";areting ;ix is the set of controllable variables


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that the firm can use to influence the buyerFs response#. The controllable variables in this contextrefer to the 7 4Fs Dproduct, price, place 'distribution) and promotionE. ach firm strives to buildup such a composition of 74Fs, which can create highest level of consumer satisfaction and at

the same time meet its organisational objectives. Thus, this mix is assembled eeping in mind theneeds of target customers, and it varies from one organisation to another depending upon its

available resources and mareting objectives. -et us now have a brief idea about the four components of mareting mix.

Pro$uct

4roduct refers to the goods and services offered by the organisation. + pair of shoes, a plate of dahi&vada, a lipstic, all are products. +ll these are purchased because they satisfy one or more of

our needs. @e are paying not for the tangible product but for the benefit it will provide. %o, insimple words, product can be described as a bundle of benefits which a mareteer offers to theconsumer for a price. @hile buying a pair of shoes, we are actually buying comfort for our feet,while buying a lipstic we are actually paying for beauty because lipstic is liely to mae us

loo good. 4roduct can also tae the form of a service lie an air travel, telecommunication, etc.Thus, the term product refers to goods and services offered by the organisation for sale.

Price

4rice is the amount charged for a product or service. It is the second most important element inthe mareting mix. 0ixing the price of the product is a tricy job. ;any factors lie demand for a

product, cost involved, consumerFs ability to pay, prices charged by competitors for similar products, government restrictions etc. have to be ept in mind while fixing the price. In fact,

pricing is a very crucial decision area as it has its effect on demand for the product and also onthe profitability of the firm.

P'!ce

(oods are produced to be sold to the consumers. They must be made available tothe consumers at a place where they can conveniently mae purchase. @oollens are

manufactured on a large scale in -udhiana and you purchase them at a store from the nearbymaret in your town. %o, it is necessary that the product is available at shops in your town. Thisinvolves a chain of individuals and institutions lie distributors, wholesalers and retailers who

constitute firmFs distribution networ 'also called a channel of distribution).The organisation has to decide whether to sell directly to the retailer or through the

distributorswholesaler etc. It can even plan to sell it directly to consumers. The choice is guided by a host of factors about which you will learn later in this chapter.

Promotion

If the product is manufactured eeping the consumer needs in mind, is rightly priced and made available at outlets convenient to them but the consumer is not made awareabout its price, features, availability etc, its mareting effort may not be successful. Therefore promotion is an important ingredient of mareting mix as it refers to a process of informing,


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persuading and influencing a consumer to mae choice of the product to be bought. 4romotion isdone through means of personal selling, advertising, publicity and sales promotion. It is donemainly with a view to provide information to prospective consumers about the availability,characteristics and uses of a product. It arouses potential consumerFs interest in the product,

compare it with competitorsF product and mae his choice. The proliferation of print and

electronic media has immensely helped the process of promotion.

CONCEPT OF PRODUCT AND ITS CLASSIFICATION

+s stated earlier, product refers to the goods and services offered by the organisation for sale.>ere the mareters have to recognise that consumers are not simply interested in the physicalfeatures of a product but a set of tangible and intangible attributes that satisfy their wants. 0or example, when a consumer buys a washing machine he is not buying simply a machine but a

gadget that helps him in washing clothes. It also needs to be noted that the term product refers toanything that can be offered to a maret for attention, acquisition, or use. Thus, the term product

is defined as "anything that can be offered to a maret to satisfy a want#. It normally includes

physical objects and services. In a broader sense, however, it not only includes physical objectsand services but also the supporting services lie brand name, pacaging accessories,installation, after sales service etc. -oo at the definitions by %tanton and ;c1arthy as given in

the box.

Product

William J. Stanton

“4roduct is a set of tangible and intangible attributes including pacaging, colour price,manufacturerFs prestige, retailerFs prestige and manufacturerFs and retailerFs services which

buyer may accept as offering satisfaction of wants and services#.

Jerome McCarthy

“+ product is more than just a physical product with its related functional and aesthetic features.It includes accessories, installation, instructions on use, the pacage, perhaps a brand name,

which fulfills some psychological needs and the assurances that service facilities will beavailable to meet the customer needs after the purchase#.

PRODUCT CLASSIFICATION

4roduct can be broadly classified on the basis of '3) use, '5) durability, and '6) tangibility. -et ushave a brief idea about the various categories and their exact nature under each head, noting atthe same time that in mareting the terms productF and goodsF are often used interchangeably.

Marketing


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Based on use

(1) the product can be classied as:

(a) Consumer Goods and

(b) !ndustrial Goods"

Consumer goods

(oods meant for personal consumption by the households or ultimate consumers are called consumer goods. This includes items lie toiletries,groceries, clothes etc. ased on consumersF buying behaviour the consumer goods

can be further classified as B'i) 1onvenience (oodsN

'ii) %hopping (oodsN and'iii) %peciality (oods.

Convenience Goods

#o you remember, the last time when did you buy a pac$et of butter or asoft drin$ or a grocery item% &erhaps you don't remember, or you will saylast wee$ or yesterday" eason is, these goods belong to the categories of conenience goods which are bought fre*uently without much planning orshopping e+ort and are also consumed *uic$ly" uying decision in case of

these goods does not inole much pre-planning" .uch goods are usuallysoldat conenient retail outlets"

Shoing Goods

/hese are goods which are purchased less fre*uently and are used eryslowly li$e clothes, shoes, household appliances" !n case of these goods,

consumers ma$e choice of a product considering its suitability, price, style,*uality and products of competitors and substitutes, if any" !n other words,the consumers usually spend a considerable amount of time and e+ort tonalise their purchase decision as they lac$ complete information prior to

their shopping trip" !t may be noted that shopping goods inole much moree0penses than conenience goods"

Seciality Goods

ecause of some special characteristics of certain categories of goods peoplegenerally put special e+orts to buy them" /hey are ready to buy these goods

at prices at which they are o+ered and also put in e0tra time to locate theseller to ma$e the purchase" /he nearest car dealer may be ten $ilometresaway but the buyer will go there to inspect and purchase it" !n fact, prior toma$ing a trip to buy the product heshe will collect complete information


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about the arious brands" 20amples of speciality goods are cameras, /3 sets,new automobiles etc"

!ndustrial Goods

Goods meant for consumption or use as inputs in production of otherproducts or proision of some serice are termed as 4industrial goods'" /heseare meant for non-personal and commercial use and include (i) raw

materials, (ii) machinery, (iii) components, and (i) operating supplies (suchas lubricants stationery etc)" /he buyers of industrial goods are supposed to

be $nowledgeable, cost conscious and rational in their purchase andtherefore, the mar$eteers follow di+erent pricing, distribution and

promotional strategies for their sale"

Marketing

It may be noted that the same product may be classified as consumer goods as well as industrialgoods depending upon its end use. Tae for example the case of coconut oil. @hen it is used ashair oil or cooing oil, it is treated as consumer goods and when used for manufacturing a bath

soap it is termed as industrial goods. >owever, the way these products are mareted to these twogroups are very different because purchase by industrial buyer is usually large in quantity and

bought either directly from the manufacturer or the local distributor.

". Based on #ura$ility the products can be classied as :

(a) #urable Goods and

(b) 5on-durable Goods"

%a& #ura$le Goods

*urable goods are products which are used for a long period i.e., for months or years together.xamples of such goods are refrigerator, car, washing machine etc. %uch goods generally require

more of personal selling efforts and have high profit margins. In case of these goods, sellerFsreputation and presale and after&sale service are important determinants of purchase decision.

(b) 'on(dura$le Goods

2on&durable goods are products that are normally consumed in one go or last for a few uses.xamples of such products are soap, salt, picles, sauce etc. These items are consumed quicly

and we purchase these goods more often. %uch items are generally made available by the producer through large number of convenient retail outlets. 4rofit margins on such items areusually ept low and heavy advertising is done to attract people towards their trial and use.

3. Based on tangi$ility) the products can be classied as:


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'a) Tangible (oodsN'b) Intangible (oods.

%a& *angi$le Goods +

;ost goods, whether these are consumer goods or industrial goods and whether these are durableor non&durable, fall in this category as they have a physical form, that can be touched and seen.Thus, all items lie groceries, cars, raw&materials, machinery etc. fall in the category of tangible

goods.

%$& !ntangi$le Goods +

Intangible goods refer to services provided to the individual consumers or to the organisational buyers 'industrial, commercial, institutional, government etc.). %ervices are essentially intangible

activities which provide want or need satisfaction. ;edical treatment, postal, baning andinsurance services etc., all fall in this category.

Marketing Productsased on Use ased on *urability ased on Tangibility *urable 2on&*urable

Tangible'(oods)

Intangible'%ervices)1onsumer

(oodsIndustrial(oods

71onvenience(oods

%hopping(oods

%peciality(oods$aw

materials;achinery 1omponents /perating%upplies

PRICING AND FACTORS AFFECTING PRICING DECISIONS

+s stated earlier price is the consideration in terms of money paid by consumers for the bundleof benefits heshe derives by using the product service. In simple terms, it is the exchange value


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of goods and services in terms of money. 4ricing 'determination of price to be charged) isanother important element of mareting mix and it plays a crucial role in the success of a productin the maret. If the price fixed is high, it is liely to have an adverse effect on the sales volume.

If, on the other hand, it is too low, it will adversely affect the profitability. >ence, it has to befixed after taing various aspects into consideration. The factors usually taen into account while

determining the price of a product can be broadly described as followsB

%a& Cost

2o business can survive unless it covers its cost of production and distribution.In large number of products, the retail prices are determined by adding a reasonable profit

margin to the cost. >igher the cost, higher is liely to be the price, lower the cost lower the price.

%$& #emand

*emand also affects the price in a big way. @hen there is limited supply of

a product and the demand is high, people buy even if high prices are charged by the producer.ut how high the price would be is dependent upon prospective buyersF capacity and willingnessto pay and their preference for the product. In this context, price elasticity, i.e. responsiveness of

demand to changes in price should also be ept in view.

%c& Cometition

The price charged by the competitor for similar product is an important determinant of price. +mareteer would not lie to charge a price higher than the

competitor for fear of losing customers. +lso, he may avoid charging a price lower than the competitor. ecause it may result in price war which we have recently seen in the case

of soft drins, washing powder, mobile phone etc.

%d& Marketing ,$-ectives

+ firm may have different mareting objectives such as maximisation of profit, maximisation of sales, bigger maret share, survival in the maret and so on. The prices have to be determinedaccordingly. 0or example, if the objectiveis to maximise sales or have a bigger maret share, a

low price will be fixed. $ecently one brand of washing powder slashed its prices to half, to graba bigger share of the maret.

%e& Government egulation

4rices of some essential products are regulated by the government under the ssential1ommodities +ct. 0or example, prior to liberalization of the economy, cement and steel priceswere decided by the government. >ence, it is essential that the existing statutory limits, if any,

are also ept in view while determining the prices of products by the producers.

METHODS OF PRICE FI>ATION


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;ethods of fixing the price can be broadly divided into the following categories.3. 1ost based pricing

5. 1ompetition based pricing6. *emand based pricing

7. /bjective based pricing

/. Cost Based Pricing

Under this method, price of the product is fixed by adding the amount of desired profit margin tothe cost of the product. If a particular soap costs the mareteer $s. < and he desires a profit of 58M, the price of the soap is fixed at $s < V '


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Cou are aware that while a manufacturer of a product is located at one place, its consumers arelocated at innumerable places spread all over the country or the world. The manufacturer has toensure the availability of his goods to the consumers at convenient points for their purchase. >e

may do so directly or, as stated earlier, through a chain of middlemen lie distributors,wholesalers and retailers.

The path or route adopted by him for the purpose is nown as channel of distribution. + channelof distribution thus, refers to the pathway used by the manufacturer for transfer of the ownershipof goods and its physical transfer to

the consumers and the userbuyers 'industrial buyers).

%tanton has also defined it as "+ distribution channel consists of the set of people and firmsinvolved in the transfer of title to a product as the product moves from producer to ultimate

consumer or business user#. asically it refers to the vital lins connecting the manufacturersand producers and the ultimate consumersusers.

It includes both the producer and the end user and also the middlemenagents engaged in the process of transfer of title of goods.

Prim!ri'y ! c#!nne' o+ $istri,ution er+orms t#e +o''o.in( +unctions)

'a) It helps in establishing a regular contact with the customers and provides them the necessaryinformation relating to the goods.

'b) It provides the facility for inspection of goods by the consumers at convenient points to maetheir choice.

'c) It facilitates the transfer of ownership as well as the delivery of goods.'d) It helps in financing by giving credit facility.

'e) It assists the provision of after sales services, if necessary.'f) It assumes all riss connected with the carrying out the distribution function.

*1PES ,2 CA''E4S ,2 #!S*!B5*!,'

Generally we do not buy goods directly from the producers" /heproducersmanufacturers usually use serices of one or more middlemen to

supply their goods to the consumers"

ut sometimes, they do hae direct contact with the customers with no

middlemen inbetween them" /his is true more for industrial goods where the customersare highly

$nowledgeable and their indiidual purchases are large" /he ariouschannels used for

distribution of consumer goods can be described as follows:

%a& 6ero stage channel o7 distri$ution


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6anufacturer Consumers"

7ero stage distribution channel e0ists where there is direct sale of goods bythe producer to the consumer" /his direct contact with the consumer can be

made through door-to door salesmen, own retail outlets or een through

direct mail" Also in case of perishable products and certain technicalhousehold products, door-to-door sale is an easierway of conincingconsumer to ma$e a purchase" 2ure$a 8orbes, for e0ample, sells"

its water puriers directly through their own sales sta+"

%$& ,ne stage channel o7 distri$ution

!n this case, there is one middleman i"e", the retailer" /he manufacturers selltheir goods

to retailers who in turn sell it to the consumers" /his type of distributionchannel is

preferred by manufacturers of consumer durables li$e refrigerator, airconditioner,

washing machine, etc" where indiidual purchase inoles large amount" !t isalso used

for distribution through large scale retailers such as departmental stores (iga9aar,

.pensors) and super mar$ets"

%c& *8o stage channel o7 distri$ution

/his is the most commonly used channel of distribution for the sale of consumer goods"

!n this case, there are two middlemen used, namely, wholesaler and retailer" /his is

applicable to products where mar$ets are spread oer a large area, alue of indiidual

purchase is small and the fre*uency of purchase is high"

%d& *hree stage channel o7 distri$ution

hen the number of wholesalers used is large and they are scatteredthroughout the

country, the manufacturers often use the serices of mercantile agents whoact as a


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lin$ between the producer and the wholesaler" /hey are also $nown asdistributors"

"

FACTORS AFFECTING THE CHOICE OF DISTRI3UTION CHANNEL

Choice of an appropriate distribution channel is ery important as the pricingas well as

promotion strategy are dependent upon the distribution channel selected"5ot only that,

the route which the product follows in its ;ourney from the manufacturer tothe consumer

also inoles certain costs" /his in turn, a+ects not only the price of theproduct but also

the prots" Choice of inappropriate channels of distribution may result inlesser prots forthe manufacturer and higher price from the consumer"


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pre-sale and after sale serices, the sale is generally done through retailerswithout

inoling the wholesalers" ut in most of the consumer goods haing smallalue,

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