A STUDY ON

INDIAN BANKING SYSTEM

Report Submitted to CMS Business School - Jain University in Partial Fulfillment of

The Requirements for the Degree of Masters in Business Administration

By

Vishak G

Enrolment No.: 15MBA14205

Under the Guidance of

Prof. Dr. Aishwarya Krishna

Bangalore

September 2016

Declaration

I, Vishak G, hereby declare that the project titled Indian Banking System, is prepared by

me during the Summer Internship Program in the year of 2016 in Partial Fulfillment of the

Requirement for the award of Masters of Business Administration under the Guidance of

Prof. Aishwarya Krishna.

The Matter embodied in this project has not been submitted to any other University or

Institution for the Award of the Degree. This project is my Original work and it has not been

Presented Earlier in this manner. This information is purely of academic Interest.

Name: Vishak g

Reg. No.: 15MBA14205

Place: Bangalore

Date:

Certificates

Acknowledgements

First and Foremost, I am deeply indebted to the management of CMS Business School and

Jain University, Bangalore, for having admitted me to undergo the MBA Program during the

academic year 2015 – 2017 in this temple of learning.

I take this Opportunity to express my gratitude and profound thanks to Prof. Dinesh Nilkant,

Centre Head, CMS Business School and Prof. NVH Krishnan, Registrar, Jain University for

being my Knowledge Mentors During my career at this Institute.

I Express my Sincere Gratitude to Mr. Vinay Kumar, Manager at Koteshwara Sahakari Bank

who was Directly or Indirectly linked with my project work.

I am extremely thankful to my Internal Guide Prof. Aishwarya Krishna who was a great

source of inspiration and Encouragement. Her Guidance and Suggestions are the Cardinal

Aspects that have led me to achieve this fruitful end.

Vishak G

Chapter 1

Introduction

A bank is a financial institution that provides banking and other financial services to their

customers. A bank is generally understood as an institution which provides fundamental

banking services such as accepting deposits and providing loans. There are also nonbanking

institutions that provide certain banking services without meeting the legal definition of a

bank. Banks are a subset of the financial services industry. A banking system also referred as

a system provided by the bank which offers cash management services for customers,

reporting the transactions of their accounts and portfolios, throughout the day. The banking

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. For the past

three decades, India’s banking system has several outstanding achievements to its credit. The

Banks are the main participants of the financial system in India. The Banking sector offers

several facilities and opportunities to their customers. All the banks safeguard the money and

valuables and provide loans, credit, and payment services, such as checking accounts, money

orders, and cashier’s cheques. The banks also offer investment and insurance products. As a

variety of models for cooperation and integration among finance industries have emerged,

some of the traditional distinctions between banks, insurance companies, and securities firms

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

primary role—accepting deposits and lending funds from these deposits.

1.1. Objective of the Study – in addition to the company

1.Learning the basic Banking and Financial terms.

2.process of various products of Banks.

3.To study the Indian banking sector and performance of Indian banks and its Problems.

4.To find out what are the policies that we have to be adopted to increase the goodwill of the

company.

5.This research aims at judging the perception and attitude of MBA students towards the

efficiency and effectiveness of Research Project in our learning and future prospects.

1.2.Reason for Choosing Banking Industry

Banks play an important role in the economic growth of a country. In the modern set up,

banks are not to be considered dealers in money but as the leaders of development. Banks by

playing attractive interest rate on deposits try to promote thrift and savings in an economy.

The investment of these savings in productive channel results in capital formation.

The scattered small savings in the country can be put to optimum use by commercial banks,

Banks utilize this amount by giving loans to industrial houses and the government, by

providing funds to the entrepreneurs, bank help in increasing productivity of capital.

Banks help in remitting money from one place to another. The cheque, bank draft,

letter of credit, bills, hundies enable traders to transfer large sums of money from one place to

another.

By their ability to create credit, the banks have placed at the disposal of the nation a

large amount of money. The bank can increase the supply of money through credit creation,

With the growth of banking activity, employment opportunity in the country has increased to

a considerable extent. the banks help in capital formation in the country. A high rate of saving

and investment promote capital formation. Money deposited in the bank and other precious

items are now absolutely safe. For keeping valuables, banks are providing locker facilities.

Now people are free from any type of risks.

1.3.Statement of the Problem

The Research Report Concentrates on macro and micro factors affecting Banking Industry,

Evolution of Banking Industry and its Current Status. Various Regulatory and Reform

Processes also affect Banking Industry. The Report also throws a Light on them. The report

finally ends with valuation of Major Players in Banking Industry and the major Challenges

faced by this Industry.

Chapter 2

Industry and Company Profile

2.1.History

2.1.1.Medieval era

The use of loan deeds continued into the Mughal era and were called dastawez. Two types of

loans deeds have been recorded. The dastawez-e-indultalab was payable on demand

and dastawez-e-miadi was payable after a stipulated time. The use of payment orders by royal

treasuries, called barattes, have been also recorded. There are also records of Indian bankers

using issuing bills of exchange on foreign countries. The evolution of hundis, a type of credit

instrument, also occurred during this period and remain in use.

2.1.2.Colonial era

During the period of British rule merchants established the Union Bank of Calcutta in

1829, first as a private joint stock association, then partnership. Its proprietors were the

owners of the earlier

Commercial Bank and the Calcutta Bank, who by mutual consent created Union Bank to

replace these two banks. In 1840 it established an agency at Singapore, and closed the one at

Mirzapore that it had opened in the previous year. Also in 1840 the Bank revealed that it had

been the subject of a fraud by the bank's accountant. Union Bank was incorporated in 1845

but failed in 1848, having been insolvent for some time and having used new money from

depositors to pay its dividends.

The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock

bank in India, it was not the first though. That honour belongs to the Bank of Upper India,

which was established in 1863 and survived until 1913, when it failed, with some of its assets

and liabilities being transferred to the Alliance Bank of Shimla.

Foreign banks too started to appear, particularly in Calcutta, in the 1860s. The Comptoir

d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;

branches followed in Madras and Pondicherry, then a French possession. HSBC established

itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the

trade of the British Empire, and so became a banking centre.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in

1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established

in Lahore in 1894, which has survived to the present and is now one of the largest banks in

India.

Around the turn of the 20th Century, the Indian economy was passing through a relative

period of stability. Around five decades had elapsed since the Indian rebellion, and the social,

industrial and another infrastructure had improved. Indians had established small banks, most

of which served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks

and a number of Indian joint stock banks. All these banks operated in different segments of

the economy. The exchange banks, mostly owned by Europeans, concentrated on financing

foreign trade. Indian joint stock banks were generally undercapitalised and lacked the

experience and maturity to compete with the presidency and exchange banks. This

segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the

times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into

separate and cumbersome compartments."

The period between 1906 and 1911 saw the establishment of banks inspired by

the Swadeshi movement. The Swadeshi movement inspired local businessmen and political

figures to found banks of and for the Indian community. A number of banks established then

have survived to the present such as The South Indian Bank, Bank of India, Corporation

Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.

The fervour of Swadeshi movement led to the establishment of many private banks

in Dakshina Kannada and Udupi district, which were unified earlier and known by the name

South Canara (South Kanara) district. Four nationalised banks started in this district and also

a leading private sector bank. Hence undivided Dakshina Kannada district is known as

"Cradle of Indian Banking".

During the First World War (1914–1918) through the end of the Second World War (1939–

1945), and two years thereafter until the independence of India were challenging for Indian

banking.

2.1.3.Post-Independence

The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal,

paralysing banking activities for months. India's independence marked the end of a regime of

the Laissez-faire for the Indian banking. The Government of India initiated measures to play

an active role in the economic life of the nation, and the Industrial Policy Resolution adopted

by the government in 1948 envisaged a mixed economy. This resulted in greater involvement

of the state in different segments of the economy including banking and finance. The major

steps to regulate banking included:

The Reserve Bank of India, India's central banking authority, was established in April 1935,

but was nationalised on 1 January 1949 under the terms of the Reserve Bank of India

(Transfer to Public Ownership) Act, 1948 (RBI, 2005b). 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.

2.1.4. Nationalisation in the 1960s

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India

except the State Bank of India (SBI), remain owned and operated by private persons. By the

1960s, the Indian banking industry had become an important tool to facilitate the

development of the Indian economy. At the same time, it had emerged as a large employer,

and a debate had ensued about the nationalisation of the banking industry. Indira Gandhi, the

then Prime Minister of India, expressed the intention of the Indian the annual conference of

the All India Congress Meeting in a paper entitled "Stray thoughts on Bank

Nationalization." The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an ordinance

('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969')

and nationalised the 14 largest commercial banks with effect from the midnight of 19 July

1969. These banks contained 85 percent of bank deposits in the country. Jayaprakash

Narayan, a national leader of India, described the step as a "masterstroke of political

sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking

Companies (Acquisition and Transfer of Undertaking) Bill, and it received

the presidential approval on 9 August 1969.

A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated

reason for the nationalisation was to give the government more control of credit delivery.

With the second dose of nationalisation, the Government of India controlled around 91% of

the banking business of India. Later on, in the year 1993, the government merged New Bank

of India with Punjab National Bank.[19] It was the only merger between nationalised banks

and resulted in the reduction of the number of nationalised banks from 20 to 19. Until the

1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate

of the Indian economy.

2.1.5.Liberalisation in the 1990s

In the early 1990s, the then government embarked on a policy of liberalisation, licensing a

small number of private banks. These came to be known as New Generation tech-savvy

banks, and included Global Trust Bank (the first of such new generation banks to be set up),

which later amalgamated with Oriental Bank of Commerce, UTI Bank (since renamed Axis

Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy

of India, revitalised the banking sector in India, which has seen rapid growth with strong

contribution from all the three sectors of banks, namely, government banks, private banks and

foreign banks.

The next stage for the Indian banking has been set up, with proposed relaxation of norms for

foreign direct investment. All foreign investors in banks may be given voting rights that

could exceed the present cap of 10% at present. It has gone up to 74% with some restrictions.

2.1.6.Current period

The Indian banking sector is broadly classified into scheduled banks and non-scheduled

banks. All banks included in the Second Schedule to the Reserve Bank of India Act, 1934 are

Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-

operative Banks. Scheduled Co-operative Banks consist of Scheduled State Co-operative

Banks and Scheduled Urban Cooperative Banks. Scheduled Commercial Banks in India are

categorised into five different groups according to their ownership and/or nature of operation

- State Bank of India and its Associates, Nationalised Banks, Private Sector Banks, Foreign

Banks, Regional Rural Banks.

By 2010, banking in India was generally fairly mature in terms of supply, product range and

reach-even though reach in rural India still remains a challenge for the private sector and

foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered

to have clean, strong and transparent balance sheets relative to other banks in comparable

economies in its region. The Reserve Bank of India is an autonomous body, with minimal

pressure from the government.

With the growth in the Indian economy expected to be strong for quite some time-especially

in its services sector-the demand for banking services, especially retail banking, mortgages

and investment services are expected to be strong. One may also expect M&As, takeovers,

and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake

in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has

been allowed to hold more than 5% in a private sector bank since the RBI announced norms

in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by

them.

In recent years’ critics have charged that the non-government owned banks are too aggressive

in their loan recovery efforts in connexion with housing, vehicle and personal loans. There

are press reports that the banks' loan recovery efforts have driven defaulting borrowers to

suicide.

By 2013 the Indian Banking Industry employed 1,175,149 employees and had a total of

109,811 branches in India and 171 branches abroad and manages an aggregate deposit

of  67,504.54 billion₹  (US$1.0 trillion or €910 billion) and bank credit of  52,604.59 billion₹

(US$780 billion or €710 billion). The net profit of the banks operating in India

was  1,027.51 billion₹  (US$15 billion or €14 billion) against a turnover of  9,148.59₹

billion (US$140 billion or €120 billion) for the financial year 2012-13.

Pradhan Mantri Jan Dhan Yojana is a scheme for comprehensive financial inclusion launched

by the Prime Minister of India, Narendra Modi, in 2014. Run by Department of Financial

Services, Ministry of Finance, on the inauguration day, 1.5 Crore (15 million) bank accounts

were opened under this scheme. By 15 July 2015, 16.92 crore accounts were opened, with

around Rs. 20,288.37 crores were deposited under the scheme, which also has an option for

opening new bank accounts with zero balance.

2.2. Challenges Faced by Banking Industry

Developing countries like India, has a huge number of people who don’t have access to

banking services due to scattered and fragmented locations. But if we talk about those people

who are availing banking services, their expectations are raising as the level of services are

increasing due to the emergence of Information Technology and immense competition

between the services & products provided by different banks. Since, foreign banks are

playing in Indian market, the number of services offered has increased and banks have laid

emphasis on meeting the customer expectations.

India's banking sector has made rapid strides in reforming and aligning itself to the new

competitive business environment. The major challenges faced by banks today are as to how

to cope with competitive forces and strengthen their balance sheet. Today, banks are groaning

with burden of NPA‟s. It is rightly felt that these contaminated debts, if not recovered, will

eat into the very vitals of the banks.

Increasing competition from financial technology companies: Financial technology

companies are usually start-up companies based on using software to provide financial

services. The increasing popularity of Financial Technology companies is disrupting the way

traditional banking has been done. This creates a big challenge for traditional banks because

they are not able to adjust quickly to the changes – not just in technology, but also in

operations, culture, and other facets of the industry.

High transaction costs: A major concern before the banking industry is the high transaction

cost of carrying non- performing assets in their books. The growth led to strains in the

operational efficiency of banks and the accumulation of non-performing assets (NPA‟s) in

their loan portfolios.

IT revolution: The Indian banks are subject to tremendous pressures to perform as otherwise

their very survival would be at stake. The application of IT and e-banking is becoming the

order of the day with the banking system heading towards virtual banking.

Timely technological up gradation: Already electronic transfers, clearings, settlements have

reduced translation times. To face competition, it is necessary for banks to absorb the

technology and upgrade their services.

Consumer expectations: These days it’s all about the customer experience, and many banks

are feeling pressure because they are not delivering the level of service that consumers are

demanding, especially in regards to technology.

Intense Competition: The RBI and Government of India kept banking industry open for the

participants of private sector banks and foreign banks. The foreign banks were also permitted

to set up shop on India either as branches or as subsidiaries. Due to this lowered entry barrier

many new players have entered the market such as private banks, foreign banks, non-banking

finance companies, etc. The foreign banks and new private sector banks have spearhead the

hi-tech revolution. For survival and growth in highly competitive environment banks have to

follow the prompt and efficient customer service, which calls for appropriate customer

centric policies and customer friendly procedures.

Not making enough money: Despite all of the headlines about banking profitability, banks

and financial institutions still are not making enough return on investment, or the return on

equity, that shareholders require.

Privacy and Safety: Among the most important aspects of savings, i.e., safety, liquidity and

profitability, safety is at the top most priority. The areas which might endanger security in e-

banking can be: Credit risk, Liquidity, interest rate risk, market risks, Legal risk

Global banking: The impact of globalization becomes challenges for the domestic

enterprises as they are bound to compete with global players. If we look at the Indian

Banking Industry, then we find that there are 36 foreign banks operating in India, which

becomes a major challenge for Nationalized and private sector banks.

Financial inclusion: Financial inclusion has become a necessity in today’s business

environment. Whatever is produced by business houses, that has to be under the check from

various perspectives like environmental concerns, corporate governance, social and ethical

issues. In India, RBI has initiated several measures to achieve greater financial inclusion,

such as facilitating no-frills accounts and GCCs for small deposits and credit.

Regulatory pressure: Regulatory requirements continue to increase, and banks need to

spend a large part of their discretionary budget on being compliant, and on building systems

and processes to keep up with the escalating requirements. These challenges continue to

escalate, so traditional banks need to constantly evaluate and improve their operations in

order to keep up with the fast pace of change in the banking and financial industry today.

2.3.Types of Banks

(A)Central Bank

A central bank functions as the apex controlling institution in the banking and financial

system of the country. It functions as the controller of credit, banker’s bank and also enjoys

the monopoly of issuing currency on behalf of the government. A central bank is usually

control and quite often owned, by the government of a country. The Reserve Bank of India

(RBI) is such a bank within an India.

(B)Commercial Banks

It operates for profit. It accepts deposits from the general public and extends loans to the

households, the firms and the government. The essential characteristics of commercial

banking are as follows:

Acceptance of deposits from public - For the purpose of lending or investment - Repayable

on demand or lending or investment. - Withdrawal by means of an instrument, whether a

cheque or otherwise.

Another distinguish feature of commercial bank is that a large part of their deposits are

demand deposits withdraw able and transferable by cheque.

(C)Development Banks

It is considered as a hybrid institution which combines in itself the functions of a finance

corporation and a development corporation. They also act as a catalytic agent in promoting

balanced and viable development by assuming promotional role of discovering project ideas,

undertaking feasibility studies and also provide technical, financial and managerial assistance

for the implementation of project. In India ‘Industrial Development Bank on India’ (IDBI) is

the unique example of development bank. It has been designated as the principal institution

of the country for co-coordinating the working of the institutions engaged in financing,

promoting or development of industry.

(D)Co-operative Banks

The main business of co-operative banks is to provide finance to agriculture. They aim at

developing a system of credit. Agriculture finance is a special field. The co-operative banks

play a useful role in providing cheap exit facilities to the farmers.

In India there are three wings of co-operative credit system namely Short term, Medium-

term, Long term credit.

(E)Specialized Banks

These banks are established and controlled under the special act of parliament. These banks

have got the special status. One of the major bank is ‘National Bank for Agricultural and

Rural development’ (NABARD) established in 1982, as an apex institution in the field of

agricultural and other economic activities in rural areas. In 1990 a special bank named small

industries development Bank of India (SIDBI) was established. It was the subsidiary of

Industrial Development Bank of India. This bank was established for providing loan

facilities, discounting and rediscounting of bills, direct assistance and leasing facility.

(F)Indigenous Bankers

That unorganized unit which provides productive, unproductive, long term, medium term and

short term loan at the higher interest rate are known as indigenous bankers. These banks can

be found everywhere in cities, towns, mandis and villages.

(G)Rural Banking

A set of financial institution engaged in financing of rural sector is termed as ‘Rural

Banking’. the policy of financing of these banks has been designed in such a way so that

these institutions can play catalyst role in the process of rural development.

(H)Saving Banks

These banks perform the useful services of collecting small savings commercial banks also

run “saving bank” to mobilize the savings of men of small means. Different countries have

different types of savings bank viz. Mutual savings bank, Post office saving, commercial

saving banks etc.

(I)Export - Import Bank

These banks have been established for the purpose of financing foreign trade. They

concentrate their working on medium and long-term financing. The Export-Import Bank of

India (EXIM Bank) was established on January 1, 1982 as a statutory corporation wholly

owned by the central government.

(J)Foreign Exchange Banks

These banks finance mostly to the foreign trade of a country. Their main function is to

discount, accept and collect foreign bulls of exchange. They also buy and self-foreign

currencies and help businessmen to convert their money into any foreign currency they need.

Over a dozen foreign exchange banks branches are working in India have their head offices

in foreign countries.

(K)International Banks

The basic list of those International Banks within India which help the banking sector of

India to develop in International market.

2.4.Types of banking

Banking is described as the business carried on by an individual at a bank. Today, several

forms of banking exist, giving consumers a choice in the way they manage their money most

people do a combination of at least two banking types. However, the type of banking a

consumer uses normally based on convenience. These are different types of banking through

which consumer can attach to it-

(A) Walk-in-Banking

It is still a popular type of banking. As, in the past, it still involves bank tellers and

specialized bank officers. Consumers must walk into a bank to use this service normally, in

order to withdraw money or deposit it; a person must fill out a slip of paper with the account

and specific monetary amount and show a form of identification to a bank letter. The

advantage of walk in Banking is the face to face connection between the banker and a letter.

Also unlike drive thru and ATM banking, a person can apply for a loan and invest money

during a walk in.

(B) Drive thru Banking

It is probably the least popular form of banking today, but is still used enough by consumers

to create a need for it. It allows consumers to stay in their while and drive up to a machine

equipped with container, chute and intercom. This machine is connected to a bank and is run

by one or two bank letters. A person can withdraw or deposit money at a drive thru. He must

fill out a slip with his account and specific monetary amount and put it in the container. The

container travels through the chute to the bank letter, which will complete the banker’s

request. This is where the intercom comes into play. The bank teller and banker use it to

communicate and discuss the specific banking request.

(C) ATM Banking

It is very popular because it gives a person 24-hour access to his bank account. Walk in and

drive thru banking does not offer this perk. In order to use an ATM, a person must have an

ATM card with personal identification number (PIN) and access to an ATM machine. Any

ATM machine can be used, but charges apply if the ATM machine is not affiliated with the

bank listed on the ATM card. By sliding an ATM card into an ATM machine, it is activated

and then through touching buttons on the machine, a consumer is able to withdraw or deposit

money.

(D)Online Banking

It allows a person to get on the internet and sign into their bank. This process is achieved with

the use of a PIN, different from the one used for the ATM card. By going website of a bank

and entering it, a consumer can get into his account, withdraw money, deposit money, pay

bills, request loans and invest money. Online banking is growing in popularity because of its

convenience.

These different types of banking give a consumer the power of choice and also give them a

comfortable banking system that gives them a convenient choice.

2.5.Functions of banks

(A)Accepting Deposits:

The most important function of commercial banks is to accept deposits from public. This is

the primary functions of a commercial bank. Banks receives the idle savings of people in the

form of deposits and finances the temporary needs of commercial and industrial firms.

A commercial bank accept deposit from public on various account, important deposit account

generally kept by bank are

a.Saving Bank Deposits – This type of deposits suit to those who just want to keep their small

savings in a bank and might need to withdraw them occasionally. One or two withdrawals up

to a certain limit of total deposits are allowed in a week. The rate of interest allowed on

saving bank deposits is less than that on fixed deposits. Depositor is given a pass book and a

cheque book. Withdrawals are allowed by cheques and withdrawal form.

b.Current Deposits – This type of account is generally kept by businessmen and industrialists

and those people who meet a large number of monetary transactions in their routine. These

deposits are known as short term deposits or demand deposits. They are payable demand

without notice. Usually no interest is paid on these deposits because the bank cannot utilize

these deposits and keep almost cent per cent reserve against them. Overdraft facilities are also

available on current account.

c.Fixed Deposits – These are also known as time deposits. In this account a fixed amount is

deposited for a fixed period of time. Deposits are payable after the expiry of the stipulated

period. Customers keep their money in fixed deposits with the bank in order of earn interest.

The banks pay higher interest on fixed deposits. The rates depend upon the length of the

period and state of money market.

Normally the withdrawals are not allowed from fixed deposits before the stipulated date. If it

happens, the depositor entails an interest penalty.

d.Other Deposits – Banks also provide deposit facilities to different type of customers by

opening different account. They also open. ‘Home Safe Account’ for housewife or very small

savers.

The other accounts are: ‘Indefinite Period Deposit a/c’, ‘Recurring Deposit’ a/c’, ‘Retirement

Scheme’ etc.

(B)Advancing of Loans:

The second main function of the commercial bank is to advance loans. Money is lent to

businessmen and trade for short period only. These banks cannot lend money for long period

because they must keep themselves ready to meet the short term deposits. The bank advances

money in any one of the following forms

a. Overdrafts: Customers of good standings are allowed to overdraw from their current

account. But they have to pay interest on the extra amount they have withdrawn. The banks

allow ‘overdrafts’ to their customers just to provide temporary accommodation save the extra

amount withdrawn is payable within a period. The amount allowed in ‘overdraft’ varies from

customer to customer depending on this financial condition.

b. Loans: Loans are granted by the banks on securities which can be easily disposed-off in the

market, e.g. Government securities or shares of approved concerns. When the bank has

satisfied itself regarding the soundness of the party, the loan is advanced. A borrower seldom

wants the whole amount of his loan in cash, so he opens the current account with the bank

(and the loan amount) and thus a ‘deposit is created’ in the books of the name in the bank.

c.cash Credit: It is an arrangement by which a bank allows his customers to borrow money up

to a certain limit against certain tangible securities as Government securities or shares of

approved concerns etc. In this case interest in charged on the actual amount withdrawn by the

customer and not on the limit allowed to him.

d.Discounting Bills: It is another important way of giving loans. The banks purchase bills and

immediately pay case for these bills after deducting the discount (interest). After the maturity

of the bills, the banks get back its full value. Thus these bills are good liquid assets and

moreover this investment is also very safe.

(C)Agency Services:

Modern Banks render service to the individual or to the business institutions as an agent.

Banks usually charge little commission for doing these services. These services are as

follows-

a.A bank collects cheques, bills and promissory notes and receives their payments.

b. A bank collects dividend or interest on stock and shares. It also collects subscriptions and

insurance premium.

c. A bank also buys and sells securities on behalf of its customers. It also not charges

anything from the customers for this but gets some commission from the stock broker.

d.A bank acts as trustee or an executor on behalf of its customers in the administration of a

will or of settlement.

e.Lastly a bank helps in the transfer of funds from one bank or branch to another.

(4)Other Services:

A modern bank now a day serves its customers in many other ways:

a.A bank issues personal and commercial letters of credit. Through these letters of credit

customers are able to benefit themselves out of the superior credit of the bank.

b. A bank also helps in the transaction of foreign exchange business.

c.A bank has ‘Safe Deposit Vaults’. It undertakes the safe custody of valuables and important

documents. The bank acts as bailey of these goods or documents.

2.6.Reserve Bank of India

The Reserve Bank of India (RBI) is India's central banking institution, which controls the

monetary policy of the Indian rupee. The Reserve Bank of India (RBI) was established in

April 1935 with a share capital of Rs. 5 Crore on the basis of the recommendations of the

Hilton Young Commission. The original share capital was divided into shares of 100 each

fully paid, which were initially owned entirely by private shareholders. Following India's

independence on 15 August 1947, the RBI was nationalised on 1 January 1949.

The RBI plays an important part in the Development Strategy of the Government of India. It

is a member bank of the Asian Clearing Union. The general superintendence and direction of

the RBI is entrusted with the 21-member Central Board of Directors: The Governor, 4

Deputy Governors, 2 Finance Ministry representatives, 10 government-nominated directors

to represent important elements from India's economy, and 4 directors to represent local

boards headquartered at Mumbai, Kolkata, Chennai and New Delhi. Each of these local

boards consists of 5 members who represent regional interests, and the interests of co-

operative and indigenous banks. The bank is also active in promoting financial inclusion

policy and is a leading member of the Alliance for Financial Inclusion (AFI).

2.6.1.Structure of Reserve Bank of India

The Central Board of Directors is the main committee of the Central Bank. The Government

of India appoints the directors for a 4-year term. The Board consists of a Governor, and not

more than 4 Deputy Governors, 4 Directors to represent the regional boards, 2 from the

Ministry of Finance and 10 other directors from various fields. RBI wants to create a post of

Chief Operating Officer (COO) and re-allocate work between the five of them (4 Deputy

Governor and COO).

The bank is headed by the Governor and the post is currently held by economist Raghuram

Rajan. There are 4 Deputy Governors, Dr Urjit Patel, R Gandhi, S S Mundra and N S

Vishwanathan. Two of the four Deputy Governors are traditionally from RBI ranks, and are

selected from the Bank's Executive Directors. One is nominated from among the

Chairpersons of public sector banks and the other is an economist. An Indian Administrative

Service officer can also be appointed as Deputy Governor of RBI and later as the Governor of

RBI as with the case of Y. Venugopal Reddy. Other persons forming part of the central board

of directors of the RBI are Dr. Nachiket Mor, Y C Deveshwar, Prof Damodar Acharya, Ajay

Tyagi and Anjuly Duggal.

2.6.2.Main Functions of RBI

Financial Supervision: The Reserve in November 1994 as a committee of the Central Board

of Directors of the Reserve Bank of India. Primary objective of BFS is to undertake

consolidated supervision of the financial sector comprising commercial banks, financial

institutions and non-banking finance companies.

Regulator and supervisor of the financial system: RBI also is the regulator and supervisor of

the financial system and prescribes broad parameters of banking operations within which the

country's banking and financial system functions. Its objectives are to maintain public

confidence in the system, protect depositors' interest and provide cost-effective banking

services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve

Bank of India (RBI) for effective addressing of complaints by bank customers. The RBI

controls the monetary supply, monitors economic indicators like the gross domestic product

and has to decide the design of the rupee banknotes as well as coins.

Managerial of exchange control: The central bank manages to reach different goals of the

Foreign Exchange Management Act, 1999. Its Objective is to facilitate external trade and

payment and promote orderly development and maintenance of foreign exchange market in

India.

Issue of currency: The objectives are to issue bank notes and giving public adequate supply

of the same, to maintain the currency and credit system of the country to utilize it in its best

advantage, and to maintain the reserves. RBI maintains the economic structure of the country

so that it can achieve the objective of price stability as well as economic development,

because both objectives are diverse in themselves. For printing of notes, the Security Printing

and Minting Corporation of India Limited (SPMCIL), a wholly owned company of the

Government of India, has set up printing presses at Nashik, Maharashtra and Dewas, Madhya

Pradesh. The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), a wholly

owned subsidiary of the Reserve Bank, also has set up printing presses at Mysuru in

Karnataka and Salboni in West Bengal. In all, there are four printing press. And for minting

of notes, SPMCIL has four mints at Mumbai, Noida (UP), Kolkata and Hyderabad for coin

production.

Banker's bank: RBI also works as a central bank where commercial banks are account holders

and can deposit money. RBI maintains banking accounts of all scheduled banks. Commercial

banks create credit. It is the duty of the RBI to control the credit through the CRR, bank rate

and open market operations. As banker's bank, the RBI facilitates the clearing of cheques

between the commercial banks and helps inter-bank transfer of funds. It can grant financial

accommodation to schedule banks. It acts as the lender of the last resort by providing

emergency advances to the banks. It supervises the functioning of the commercial banks and

take action against it if need arises.

Detection of Fake Currency: In order to curb the fake currency menace, RBI has launched a

website to raise awareness among masses about fake notes in the market. The Objective of

Reserve Bank is expected to unearth black money held in cash. As the new currency notes

have added security features, they would help in curbing the menace of fake currency.

Developmental role: The central bank has to perform a wide range of promotional functions

to support national objectives and industries. The RBI faces a lot of inter-sectoral and local

inflation-related problems. Some of these problems are results of the dominant part of the

public sector.

Related functions: The RBI is also a banker to the government and performs merchant

banking function for the central and the state governments. It also acts as their banker. The

National Housing Bank (NHB) was established in 1988 to promote private real estate

acquisition. The institution maintains banking accounts of all scheduled banks, too. RBI on 7

August 2012 said that Indian banking system is resilient enough to face the stress caused by

the drought like situation because of poor monsoon this year.

2.7.Central Bank of India

Central Bank of India is a government-owned bank, it is one of the oldest and largest

commercial banks in India. It is based in Mumbai which is the financial capital of India and

capital city of state of Maharashtra. The bank has 4700 branches, 5000 ATM's and 4

extension counters across 27 Indian states and three Union Territories. At present, Central

Bank of India has overseas office at Nairobi, Hong Kong and a joint venture with Bank of

India, Bank of Baroda, and the Zambian government. The Zambian government holds 40 per

cent stake and each of the banks has 20 per cent. Recently it has also opened a representative

office at Nairobi in Kenya.

Central bank of India is one of 19 Public Sector banks in India to get recapitalisation finance

from the government over the next 24 months. Central Bank of India has approached the

Reserve Bank of India (RBI) for permission to open representative offices in five more

locations - Singapore, Dubai, Doha and London. As on 31 March 2015, the bank's reserves

and surplus stood at Rs. 283030 million. Its total business at the end of the last fiscal

amounted to Rs. 45,05,390(approx.) million.

It was established on 21 December 1911 by Sir Sorabji Pochkhanawala with Sir Pherozeshah

Mehta as Chairman, and claims to have been the first commercial Indian bank completely

owned and managed by Indians. In 1923, it acquired the Tata Industrial Bank in the wake of

the failure of the Alliance Bank of Shimla. The Tata bank, established in 1917, had opened a

branch in Madras in 1920 that became the Central Bank of India, Madras. Central Bank of

India was instrumental in the creation of the first Indian exchange bank, the Central

Exchange Bank of India, which opened in London in 1936. However, Barclays Bank

acquired Central Exchange Bank of India in 1938.

Among the Public Sector Banks, Central Bank of India can be truly described as an All India

Bank, due to distribution of its large network in all 29 States as also in 6 out of 7 Union

Territories in India. Central Bank of India holds a very prominent place among the Public

Sector Banks on account of its network of 4728 Branches, 4 Extension counters, along with

29 Satellite Offices (as on April 2016) at various centres throughout the length and breadth of

the country.

2.8.Online banking

Online banking (or Internet banking) allows customers to conduct financial transactions on a

secure website operated by their retail or virtual bank, credit union or building society.

2.8.1.Evolution of online banking

The Rangarajan Committee report in early 1980s was the first step towards computerization

of banks. Banks started exploring the idea of 'Total Bank Automation (TBA)'. Although titled

'Total Bank Automation,' TBA was in most cases confined to branch automation. It was only

in the early 1990s that banks started thinking about tying- up disparate branches together to

facilitate information sharing. At the same time, private banks entered the banking arena with

radically different strategies. Given the huge IT budgets at their disposal and with almost no

legacy IT equipment to worry about; private banks hastened the adoption of technology. The

philosophy for private banks was very clear: to provide a whole new range of financial

products and services at minimal costs. And technology made this possible. Says K.N.C.

Nair, Head (IT), Federal Bank, “The new generation banks showed the way and others had no

option but to follow the tech infusion to retain and attract profitable customers." The

improved connectivity and falling costs offered by leased lines and VSATs provided a

booster to inter-branch automation. Confirms Naresh Wadhwa, Vice President-West, Cisco

Systems (India), "With the improved services and lowered costs of service providers such as

Dot and VSNL, it became more feasible for banks to network their branches. This gave banks

an impetus to network all the branches and set up centralized databases. With these

developments it became possible for operations such as MIS to be truly automated and

centralized." With centralized infrastructure and numerous connectivity options, banks started

exploring multiple delivery channels like ATM, Net-banking, mobile banking, and Tele-

banking thus driving down cost per transaction.

2.8.2.Features of Online Banking:

1. Bill Pay Service - One of the biggest reasons for going with an online bank is to get really

good bill payment services.

2. Electronic Bill Notification – With electronic bills, your merchant (Credit Card Company,

gas company, electric company, etc.) sends an electronic bill to your bank. we can set it up to

pay automatically or notify us for approval. This can be particularly good for people who are

on the road because it reduces the amount of physical mail you have to somehow get read or

forwarded to us.

3. Online Check Images – Most banks will show us an image of the check, which makes it

really easy to balance our account if we can’t remember what a particular payment was for.

(Ideally, you should minimize the number of physical checks you write to reduce fraud.)

4. Online Deposit Slip Images – Most banks just record the total with no image. It will let us

see an image of each deposit slip. Having the images available can be very helpful if we ever

have to prove something for tax purposes or need to remember where that $2581 deposit

came from.

5. Reporting Tools – Most banks offer basic reporting tools that will let us see how much we

have spent in each category you’ve created. This may not be an issue if we use desktop

money management software, but it still can be handy if we are traveling and want to see how

much we have paid on your mortgage over the past 12 months.

6. Convenient Deposit Methods - Since we may not be anywhere near the physical location of

your bank, make sure you understand how to deposit money. Payroll can be set up on direct

deposit, but there will be times when we need to deposit checks

7. Integration with Desktop Software – If we use Microsoft Money, Quicken or something

similar, we want to make sure your bank supports it. We should Make sure that we

understand if downloading transactions require you to login and manually download a file, or

if our money management software can directly connect and download new transactions. If

we are using Quicken on a Mac, make sure the bank is paying Quickens extortion fee so the

files will work with Mac users.

8. Many Account Types – Some banks only offer basic checking and savings accounts.

Ideally you want a bank that makes it easy to open money market accounts, IRAs, health

savings accounts, etc. If you have to go to another institution to open a different type of

account, it is more difficult to manage–especially if you are on the road.

9. Free Money Transfers – Be sure to consider how easy it is to move money in and out of the

account. You should be able to set up links with your accounts from other institutions to

transfer money back and forth as necessary. Make sure you understand what type of fees is

associated with these transfers. Good banks should allow a certain number of transfers per

month with no fee.

10. Security Balanced with Convenience- Some banks spend so much effort trying to keep

things secure that we will find our self automatically logged out of their website while we try

to balance your account. we want security but we don’t want it to get in the way of we doing

in our banking. Also check into what type of additional security features are available. For

example, some banks will offer us an RSA keychain with a number that changes every 60

seconds. In addition to our password, we will need the number from that key in order to get

access to our account.

2.8.3.Why Banks Encourage Online Banking?

Overview: Online banking has enjoyed increased popularity, and some banks actually require

it. From standard, brick-and-mortar institutions to cloud managed institutions, online banking

offers flexibility and convenience for all involved.

Bank Advantages:

Each visit to a bank costs the institution money, whether in bank teller wages and benefits to

security costs to maintenance costs. Online banking reduces those costs and increases the

bank’s profit margin.

Online banking reduces the need for the number of physical locations and services offered

within each. Because Customer Service Departments are united into fewer locations, asset

sharing within those locations further reduce bank costs.

Customer Advantages:

Online security of financial data has evolved tremendously since the early days of online

banking, and often transactions can be even more secure than those conducted in a drive thru

lane.

Online banking transactions require not only a secure login but also require secured password

entry. In-person transactions are based on account information and a photo ID, both of which

can be obtained “under the radar. “Online banking transactions also track the Internet

Protocol (IP) address of the computer used in the transaction. The IP can be traced to the

method or mode of Internet access, often through an Internet Service Provider who always

notes activity, computer, and actions performed under that IP address assigned to the ISP

account holder. Whether a dynamic or changing IP address or a static or unchanging IP

address is used, the ISP always records what IP address is assigned to what ISP account at

any time.

Comprehensive Help sections on banks’ websites often reduce on-location inquiries, further

reducing overhead costs for banking institutions. Additional service enrolment or dis-

enrolment, address updates, and account status and verification are all time saving activities

for both the bank and the banking customer.

Online Bill Pay processes reduce stolen or counterfeit checks which cost banks billions of

dollars every month. Each online bill pay transaction allows for a grace period from the

payment order date to the actual check delivery date, which also allows the account holder

additional time to preview activity and account status.

2.8.4.Security concerns in Online Banking

Security fears have served as deterrents to online growth. Of particular concern are threats of

pharming and phishing. Phishing is an internet fraud, through which innocent people are

enticed to divulge their personal information like user ID and passwords, which are later on

used by scammers in unauthorized ways.

The most common method of phishing is sending emails claiming to be from your bank or

other financial institutions which are dealing that already has your personal information and

you will be asked to confirm the details by clicking a particular link (URL) provided in this

fake email. This URL will take you to a fake website which will be similar to your genuine

website, and the information provided by the customer in the forms provided in the fake

website will be gathered and used for committing fraud in their accounts or withdraw funds

unauthorized from these accounts.

Pharming is another internet fraud, whereby as many as users as possible are redirected

before they reach the legitimate online banking websites they intend to visit and they are lead

to malicious ones. The bogus sites, to which victims are redirected without their knowledge

or consent, will likely look the same as genuine site. But when users enter their login name or

password, the information is captured by criminals.

2.8.5.Further Problems Relating to Online Banking in India

Given that India is the IT and tech services outsourcing hotspot of the world, it's surprising

that Internet banking has not really taken off. Despite the advent of a very tech-savvy and

vast consumer class in recent years, a mix of industry issues and unique challenges continue

to thwart the expansion of net banking in India. Technology challenges, IT practices, certain

cultural issues, industry lethargy, and workplace constraints have affected widespread

acceptance of Internet banking.

Low Broadband Internet Penetration: India has one of the lowest broadband connectivity

penetration rates in Asia as compared to Japan, Taiwan, Korea and Singapore. While the

bigger cities such as Mumbai, Delhi, Chennai, and Bangalore have relatively better

broadband penetration rates, PC users in smaller cities and towns still use dial-up options to

connect to the Internet. Slow connectivity speeds often dampen the online banking

experience for many customers eager to use such services.

Banks' Ambivalent Commitment Levels: Internet banking did take off in India at the turn of

the millennium but soon faltered due to lack of takers. In the middle of this decade,

multinational and domestic private banks started offering net banking services as a

competitive differentiator. Only recently, state-owned and public sector banks have started

doing likewise. However, banks' ambivalent commitment levels and their reluctance to

allocate huge budgets for net banking branding initiatives, as well as a lack of industry

advocacy efforts, have resulted in poor acceptance levels of Internet banking by customers.

Customers' Preference for Traditional Branches: There are thousands of highly active

traditional bank branches in India's crowded cities and major towns. Office workers take

longer lunch breaks to finish banking activities and transactions at these branches rather than

conduct them online. Most customers prefer the personal touch and customized service

offered by staff in brick-and-mortar bank branches. Many Indians are also averse to calling

call centres and banks' customer contact lines to address issues related to online bank

accounts.

Fear of Online Threats/Scams: Ubiquitous and prevalent online threats about hackers, identity

theft, stolen passwords, viruses, worms and spyware tend to make customers wary just like in

any other country. Conservative Indian bank customers used to years of saving in an

erstwhile mixed-socialist economy are always fearful of losing hard-earned savings in online

scams. These customers are also not sure about the efficacy of banks' websites and their

commitment to allocate funds for reliable encryption mechanisms and robust back-end

technologies and systems.

Other Problems: Workplace constraints and corporate policies about using external websites

or pursing personal activities such as online banking have affected its expected fast-paced

acceptance among the growing affluent class in India. Cultural issues, such as parents giving

priority use of the home PC to their children rather than using it themselves, stifle the

potential growth of home access to Internet banking services. Public sector banks with vast

customer bases also don't tend to invest money in training personnel for e-banking initiatives,

resulting in poor customer service levels.

2.8.6.Internet Banking in India

Guidelines - Reserve Bank of India had set up a ‘Working Group on Internet Banking’ to

examine different aspects of Internet Banking (I-banking). The Group had focused on three

major areas of I-banking, i.e. (i) technology and security issues, (ii) legal issues and (iii)

regulatory and supervisory issues. RBI has accepted the recommendations of the Group to be

implemented in a phased manner. Accordingly, the following guidelines are issued for

implementation by banks. Banks are also advised that they may be guided by the original

report, for a detailed guidance on different issues.

I. Technology and Security Standards:

Banks should designate a network and database administrator with clearly defined roles as

indicated in the Group’s report. Banks should have a security policy duly approved by the

Board of Directors. There should be a segregation of duty of Security Officer / Group dealing

exclusively with information systems security and Information Technology Division which

actually implements the computer systems. Further, Information Systems Auditor will audit

the information systems.

Banks should introduce logical access controls to data, systems, application software,

utilities, telecommunication lines, libraries, system software, etc. Logical access control

techniques may include user-ids, passwords, smart cards or other biometric technologies.

At the minimum, banks should use the proxy server type of firewall so that there is no direct

connection between the Internet and the bank’s system. It facilitates a high level of control

and in-depth monitoring using logging and auditing tools. For sensitive systems, a state full

inspection firewall is recommended which thoroughly inspects all packets of information, and

past and present transactions are compared. These generally include a real time security alert.

All the systems supporting dial up services through modem on the same LAN as the

application server should be isolated to prevent intrusions into the network as this may bypass

the proxy server.

PKI (Public Key Infrastructure) is the most favoured technology for secure Internet banking

services. However, as it is not yet commonly available, banks should use the following

alternative system during the transition, until the PKI is put in place:

a.usage of SSL (Secured Socket Layer), which ensures server authentication and use of client

side certificates issued by the banks themselves using a Certificate Server.

b.The use of at least 128-bit SSL for securing browser to web server communications and, in

addition, encryption of sensitive data like passwords in transit within the enterprise itself.

It is also recommended that all unnecessary services on the application server such as FTP

(File Transfer Protocol), telnet should be disabled. The application server should be isolated

from the e-mail server.

All computer accesses, including messages received, should be logged. Security violations

(suspected or attempted) should be reported and follow up action taken should be kept in

mind while framing future policy. Banks should acquire tools for monitoring systems and the

networks against intrusions and attacks. These tools should be used regularly to avoid

security breaches. The banks should review their security infrastructure and security policies

regularly and optimize them in the light of their own experiences and changing technologies.

They should educate their security personnel and also the end-users on a continuous basis.

The information security officer and the information system auditor should undertake

periodic penetration tests of the system, which should include:

a.Attempting to guess passwords using password-cracking tools.

b.Search for back door traps in the programs.

c.Attempt to overload the system using DDoS (Distributed Denial of Service) & DoS (Denial

of Service) attacks.

d.Check if commonly known holes in the software, especially the browser and the e-mail

software exist.

The penetration testing may also be carried out by engaging outside experts (often called

‘Ethical Hackers’). Physical access controls should be strictly enforced. Physical security

should cover all the information systems and sites where they are housed, both against

internal and external threats.

Banks should have proper infrastructure and schedules for backing up data. The backed-up

data should be periodically tested to ensure recovery without loss of transactions in a time

frame as given out in the bank’s security policy. Business continuity should be ensured by

setting up disaster recovery sites. These facilities should also be tested periodically. All

applications of banks should have proper record keeping facilities for legal purposes. It may

be necessary to keep all received and sent messages both in encrypted and decrypted form.

Security infrastructure should be properly tested before using the systems and applications for

normal operations. Banks should upgrade the systems by installing patches released by

developers to remove bugs and loopholes, and upgrade to newer versions which give better

security and control.

II. Legal Issues

Considering the legal position prevalent, there is an obligation on the part of banks not only

to establish the identity but also to make enquiries about integrity and reputation of the

prospective customer. Therefore, even though request for opening account can be accepted

over Internet, accounts should be opened only after proper introduction and physical

verification of the identity of the customer.

From a legal perspective, security procedure adopted by banks for authenticating users’ needs

to be recognized by law as a substitute for signature. In India, the Information Technology

Act, 2000, in Section 3(2) provides for a particular technology (viz., the asymmetric crypto

system and hash function) as a means of authenticating electronic record. Any other method

used by banks for authentication should be recognized as a source of legal risk.

Under the present regime there is an obligation on banks to maintain secrecy and

confidentiality of customers ‘accounts. In the Internet banking scenario, the risk of banks not

meeting the above obligation is high on account of several factors. Despite all reasonable

precautions, banks may be exposed to enhanced risk of liability to customers on account of

breach of secrecy, denial of service etc., because of hacking/ other technological failures. The

banks should, therefore, institute adequate risk control measures to manage such risks.

In Internet banking scenario there is very little scope for the banks to act on stop-payment

instructions from the customers. Hence, banks should clearly notify to the customers the

timeframe and the circumstances in which any stop-payment instructions could be accepted.

The Consumer Protection Act, 1986 defines the rights of consumers in India and is applicable

to banking services as well. Currently, the rights and liabilities of customers availing of

Internet banking services are being determined by bilateral agreements between the banks

and customers. Considering the banking practice and rights enjoyed by customers in

traditional banking, banks’ liability to the customers on account of unauthorized transfer

through hacking, denial of service on account of technological failure etc. needs to be

assessed and banks providing Internet banking should insure themselves against such risks.

III. Regulatory and Supervisory Issues:

As recommended by the Group, the existing regulatory framework over banks will be

extended to Internet banking also. In this regard, it is advised that:

Only such banks which are licensed and supervised in India and have a physical presence in

India will be permitted to offer Internet banking products to residents of India. Thus, both

banks and virtual banks incorporated outside the country and having no physical presence in

India will not, for the present, be permitted to offer Internet banking services to Indian

residents.

The products should be restricted to account holders only and should not be offered in other

jurisdictions. The services should only include local currency products. The ‘in-out’ scenario

where customers in cross border jurisdictions are offered banking services by Indian banks

(or branches of foreign banks in India) and the ‘out-in’ scenario where Indian residents are

offered banking services by banks operating in cross-border jurisdictions are generally not

permitted and this approach will apply to Internet banking also. The existing exceptions for

limited purposes under FEMA i.e. where resident Indians have been permitted to continue to

maintain their accounts with overseas banks etc. will, however, are permitted.

Overseas branches of Indian banks will be permitted to offer Internet banking services to

their overseas customers subject to their satisfying, in addition to the host supervisor, the

home supervisor. Given the regulatory approach as above, banks are advised to follow the

following instructions:

a.All banks, who propose to offer transactional services on the Internet, should obtain prior

approval from RBI. Bank’s application for such permission should indicate its business plan,

analysis of cost and benefit, operational arrangements like technology adopted, business

partners, third party service providers and systems and control procedures the bank proposes

to adopt for managing risks. The bank should also submit a security policy covering

recommendations made in this circular and a certificate from an independent auditor that the

minimum requirements prescribed have been met. After the initial approval the banks will be

obliged to inform RBI any material changes in the services / products offered by them.

b.Banks will report to RBI every breach or failure of security systems and procedure and the

latter, at its discretion, may decide to commission special audit / inspection of such banks.

c.The guidelines issued by RBI on ‘Risks and Controls in Computers and

Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th

February 1998 will equally apply to Internet banking. The RBI as supervisor will cover the

entire risks associated with electronic banking as a part of its regular inspections of banks.

d.Banks should develop outsourcing guidelines to manage risks arising out of third party

service providers, such as, disruption in service, defective services and personnel of service

providers gaining intimate knowledge of banks’ systems and mutualizing the same, etc.,

effectively.

e.With the increasing popularity of e-commerce, it has become necessary to set up ‘Inter-

bank Payment Gateways’ for settlement of such transactions. The protocol for transactions

between the customer, the bank and the portal and the framework for setting up of payment

gateways as recommended by the Group should be adopted.

f.Only institutions who are members of the cheque clearing system in the country will be

permitted to participate in Inter-bank payment gateways for Internet payment. Each gateway

must nominate a bank as the clearing bank to settle all transactions. Payments affected using

credit cards, payments arising out of cross border e-commerce transactions and all intra-bank

payments (i.e., transactions involving only one bank) should be excluded for settlement

through an inter-bank payment gateway.

g.Inter-bank payment gateways must have capabilities for both net and gross settlement. All

settlement should be intra-day and as far as possible, in real time.

h.Connectivity between the gateway and the computer system of the member bank should be

achieved using a leased line network (not through Internet) with appropriate data encryption

standard. All transactions must be authenticated. Once, the regulatory framework is in place,

the transactions should be digitally certified by any licensed certifying agency. SSL / 128-bit

encryption must be used as minimum level of security. Reserve Bank may get the security of

the entire infrastructure both at the payment gateway’s end and the participating institutions’

end certified prior to making the facility available for customers use.

i.Bilateral contracts between the payee and payee’s bank, the participating banks and service

provider and the banks themselves will form the legal basis for such transactions. The rights

and obligations of each party must be clearly defined and should be valid in a court of law.

j.Banks must make mandatory disclosures of risks, responsibilities and liabilities of the

customers in doing business through Internet through a disclosure template. The banks should

also provide their latest published financial results over the net.

k.Hyperlinks from banks’ websites often raise the issue of reputational risk. Such links

should not mislead the customers into believing that banks sponsor any particular product or

any business unrelated to banking. Hyperlinks from banks’ websites should be confined to

only those portals with which they have a payment arrangement or sites of their subsidiaries

or principals. Hyperlinks to banks’ websites from other portals are normally meant for

passing on information relating to purchases made by banks’ customers in the portal. Banks

must follow the minimum recommended security precautions while dealing with request

received from other websites, relating to customers’ purchases.

The Reserve Bank of India has decided that the Group’s recommendations as detailed in

these circulars should be adopted by all banks offering Internet banking services, with

immediate effect. Even though the recommendations have been made in the context of

Internet banking, these are applicable, in general, to all forms of electronic banking and banks

offering any form of electronic banking should adopt the same to the extent relevant.

All banks offering Internet banking are advised to make a review of their systems in the light

of this circular and report to Reserve Bank the types of services offered, extent of their

compliance with the recommendations, deviations and their proposal indicating a time frame

for compliance. The first such report must reach us within one month from the date of this

circular. Banks not offering any kind of I-banking may submit a ‘nil’ report

2.8.7.Solutions:

Here are some simple tips to prevent you from falling into the trap of cyber criminals.

Remember, a simple ignorance or oversight can make a huge dent in your hard- earned

savings.

Securing your account: Avoid online banking on unsecured wife systems and operate only

from PCs at home. Never reveal password to anyone. Do not even write it on a piece of paper

on diary. Just memories it. It should be alphanumeric and change it frequently. Never reply to

queries from bank online about account or personal details. The personal information should

not be kept in a public computer or in emails.

Phishing: A person's personal details are obtained by fraudsters posing as bankers, who float

a site similar to that of the person's bank. They are asked to provide all personal information

about themselves and their account to the bank on the pretext of database up gradation. The

number and password are then used to carry out transactions on their behalf without their

knowledge. Phishing involves using a form of spam to fraudulently gain access to people's

online banking details. As well as targeting online banking customers, phishing emails may

target online auction sites or other online payment facilities. Typically, a phishing email will

ask an online banking customer to follow a link in order to update personal bank account

details. If the link is followed, the victim downloads a program which captures his or her

banking login details and sends them to a third party.

Spam: Spam is an electronic 'junk mail' or unwanted messages sent to your email account or

mobile phone. These messages vary, but are essentially commercial and often annoying in

their sheer volume. They may try to persuade you to buy a product or service, or visit a

website where you can make purchases; or they may attempt to trick you into divulging your

bank account or credit card details.

Nigerian Scam: Nigerian or Frauds 409 or 419 are basically the lottery scam in which some

overseas persons are involved to cheat innocent persons or organizations by promising to

give a good amount of money at nominal fee charges. Their intention is to steal money in the

form of fee against the lottery prize.

Spyware: Spyware such as Trojan horse is generally considered to be software that is

secretly installed on a computer and takes things from it without the permission or knowledge

of the user. Spyware may take personal information, business information, bandwidth; or

processing capacity and secretly gives it to someone else. "Trojan Horse" scheme unfolds

when malicious software (malware) embeds to a consumer's computer without the consumer

being aware of it. Trojans often come in links or as attachments from unknown email senders.

After installation the software detects when a person accesses online banking sites and

records the username and password to transmit to the offender. People using public

computers, in places like Internet cafes, are often susceptible to Trojans like malware or

spyware.

Check sites URL: Always check the URL of your bank's web site. Fraudsters can lure you to

enter your user ID and password at a fake website that resembles your bank. If you see

anything other than the bank's genuine URL, it has to be fake. Never enter your user ID or

password or such sensitive information without ascertaining that you are on the right website.

Always type the Web address of your bank into the browser address space. Never click on the

link in the email.

Fool-proof password: Change your online banking password at regular intervals. Also, avoid

easy-to-guess passwords, like first names, birthdays, kid's or spouse's name and telephone

numbers. Try to have an alpha-numeric password, one that combines alphabets and numbers.

If you have several bank accounts, never use the same online banking password for all. Never

select the option on browser that stores or retains user name and password. As it can easily be

cracked by cyber criminals. Also, never paste your password, always type it in. This little

amount of `finger exercise' will go a long way in safety.

Always check 'last logged': Most banks have a 'last logged in' panel on their websites. If your

bank has it, check the panel whenever you log in. If you notice irregularities (like you are

logging in after two days, but the panel says you logged in that morning!), report the matter

immediately to your bank and change your password right away.

Always log out when you exit the online banking portal. Close the browser to ensure that

your secure session is terminated. Never exit simply by closing the browser.

Keep your system up to date: Regularly check for security updates for your computer

operating system. Most security updates are aimed at reducing risks to your computer; these

may be data-related or otherwise. Make sure that your operating system and browser have the

latest security patches installed. And, always install these only from trusted websites.

Install a personal firewall to prevent hackers from gaining unauthorized access to your

computer, especially if you connect to the Internet through a cable or a DSL modem.

Public access can be injurious: Don't leave the PC unattended after keying in information

while transacting on the website. Avoid accessing your bank online at cyber cafes or on a

share or public computer. Also, avoid locations that offer online connections through wireless

networks (Wi-Fi), where privacy and security are minimal.

Follow Bank instructions: Banks say that appropriate up gradations are carried out from time

to time by their IT departments for risk mitigation. They issue instructions to the customers to

manage their accounts through virtual keyboards by way of which the characters typed by

them are not identified by hackers. SMS alerts are also an important tool since any

transaction carried out on account is reported to the account holder through an SMS.

Protection: Learn the ways to protect yourself from online banking fraud schemes. Detect

Trojans that appear on your PC in the form of viruses, spyware or malware through Antivirus

Software, anti-Spyware, and Adware. Also, learn to keep your cards, documents and

passwords safe, and monitor your accounts to safeguard yourself from bank fraud committed

through identity theft.

Introduction of the Internship Company: Koteshwara Sahakari Bank Niyamitha is a Co-

operative Bank Situated in Bangalore Operating Three Branches with Head Office in

Sheshadripuram, the objective was to promote banking habits, thrift and entrepreneurship

among the community of Dakshina Kannada district in Karnataka State. It offers a wide

range of banking products and financial services for its customers.

Industry or Business the Company is in: Koteshwara Sahakari Bank Operates in Banking

and Financing activities, it provides Loan Facilities, Locker Facilities, Fixed Deposit

Facilities, Banking Facilities, etc. to its Customers.

2.9.ICICI Bank

1.9.1.About the Company

ICICI Bank (Industrial Credit and Investment Corporation of India) is an Indian multinational

banking and financial services company, it has headquarters in Mumbai, Maharashtra, India,

with its registered office in Vadodara. In 2014, it was the second largest bank in India which

was in terms of assets and third in term of market capitalisation. ICICI offers a wide range of

banking products and financial services for corporate and retail customers through a variety

of delivery channels and specialised subsidiaries in the areas of investment banking, life

Insurance, non-life insurance, venture capital and asset management. The bank has a network

of 4,450 branches and 13,995 ATMs in India, and has a presence in 19 countries including

India.

ICICI Bank Ranks in one of the Big Four banks of India, along with State Bank of

India, Bank of Baroda and Punjab National Bank. The bank has its subsidiaries in the United

Kingdom and Canada and its branches in United States, Singapore, Bahrain, Hong Kong, Sri

Lanka, Qatar, Oman, Dubai International Finance Centre, China and South Africa and

representative offices in United Arab Emirates, Bangladesh, Malaysia and Indonesia. The

company's UK subsidiary has also established branches in Belgium and Germany.

2.9.2.History of ICICI Bank

ICICI Bank was established by the Industrial Credit and Investment Corporation of India

(ICICI), it is an Indian financial institution, as a wholly owned subsidiary in 1994. The parent

company was formed in 1955 as a joint-venture of the World Bank, India's public-sector

banks and public-sector insurance companies to provide project financing to Indian industry.

The bank was founded as the Industrial Credit and Investment Corporation of India Bank,

before it changed its name to the abbreviated ICICI Bank. The parent company was later

merged with the bank. ICICI Bank launched internet banking operations in 1998.

In the 1990s, ICICI transformed its business from a development financial institution offering

only project finance to a diversified financial services group, offering a wide variety of

products and services, both directly and through a number of subsidiaries and affiliates like

ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial

institution from non-Japan Asia to be listed on the New York Stock Exchange.

ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public offering of

shares in India in 1998, followed by an equity offering in the form of American Depositary

Receipts on the New York Stock Exchange in 2000. ICICI Bank acquired the Bank of

Madura Limited in an all-stock deal in 2001 and sold additional stakes to institutional

investors during 2001-02.

In 2000, ICICI Bank became the first Indian bank to list on the NYSE with its five million

American depository shares issue generating a demand book 13 times the offer size.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of

ICICI and two of its wholly owned retail finance subsidiaries, ICICI Personal Financial

Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was

approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of

Gujarat at Ahmedabad in March 2002 and by the High Court of Judicature at Mumbai and the

Reserve Bank of India in April 2002.

In 2008, following the 2008 financial crisis, customers rushed to ICICI ATMs and branches

in some locations due to rumours of adverse financial position of ICICI Bank. The Reserve

Bank of India issued a clarification on the financial strength of ICICI Bank to dispel the

rumours.

2.9.3.Profile of Chairman

Mr. M. K. Sharma, Chairman, ICICI Bank Limited

Mr. Mahendra Kumar Sharma, aged 68, was retired in May 07 as the Vice-Chairman of

Hindustan Unilever Limited. As Vice Chairman he had responsibility for Human Resource,

Legal & Secretarial, Corporate Affairs, Corporate Communications, Corporate Real Estate

functions and New Ventures, Plantations & Export businesses of the Company.

He holds Bachelor’s Degree in Arts and Bachelors of Law Degree from Canning College

University of Lucknow. He completed Post Graduate Diploma in Personnel Management

from Department of Business Management, University of Delhi and Diploma in Labour Laws

from Indian Law Institute, Delhi. In 1999 he was nominated to attend Advance Management

Programme at Harvard Business School.

 After a six-year stint in DCM Limited, he joined Hindustan Lever Limited in 1974 as Legal

Manager and handled Legal & Secretarial work in diverse areas. He joined the Management

Committee of HUL in April 1990 as Vice President, Legal & Secretarial and was inducted

into the Board of Hindustan Unilever Limited in August 1995 as a Whole-time Director and

served as the Vice Chairman from April 2000 till his retirement in May’07. He also served as

a non-executive Chairman of Unilever Nepal Limited and was a director of ICICI Bank

Limited between 2003 to 2011.

 

Mr. Sharma is currently Non-Executive Chairman of ICICI Bank Limited, an Independent

Director of Wipro Limited, Asian Paints Limited and Blue Star Limited. Mr. Sharma served

on the seven members Committee constituted by the Government of India for redrafting the

Companies Act and was also a member of the Naresh Chandra Committee which formulated

norms for Corporate Governance.

2.9.4.The List of Board of Directors ICICI Bank: Mr. M. K. Sharma; Chairman, Mr.

Dileep Choksi, Mr. Homi R. Khusrokhan, Mr. M.S. Ramachandran, Dr. Tushaar Shah, Mr.

V. K. Sharma, Mr. V. Sridar, Mr. Alok Tandon, Ms. Chanda Kochhar; Managing Director &

CEO, Mr. N. S. Kannan; Executive Director, Mr. Rajiv Sabharwal; Executive Director, Ms.

Vishakha Mulye; Executive Director, Mr. Vijay Chandok; Executive Director

2.9.5.Recent News on ICICI Bank

(1)ICICI Bank introduces ‘Software Robotics’ to power banking operations.

First bank in the country and among few, globally, to roll-out ‘Software Robotics’.

Over 200 software robots are performing over 10 lakh banking transactions every working

day.

Pares response time to customers by up to 60%; sharply raises productivity.

(2)ICICI Bank launches ‘Unified Payments Interface’ (UPI) for its mobile banking

applications

Offers UPI in ‘Pockets’ for use by anyone including non-ICICI Bank customers.

Also available on ‘iMobile’ for its mobile banking customers.

One can instantly transfer funds to anyone round-the-clock on all days.

(3)ICICI Bank introduces ‘iMobile SmartKeys’, Asia’s first payment service using a

smartphone keyboard

First financial institution in Asia to enable payments and banking from a smartphone

keyboard.

Customers can transfer money, pay bills & recharge from within any application or browser

using the smartphone keyboard.

There is no requirement to switch between chat, messenger or other applications.

Reduces transaction time for payment transactions, Ensures quick and secure transactions.

(4)ICICI Bank launches ‘Swachh Society Awards’

A unique contest for residential societies to recognise clean and green initiatives.

Reward prizes of 30 lakhs to be won.₹

(5) ICICI Bank launches next generation features on iMobile

Customers can now instantly pay taxes, book rail tickets and send image of their cheque for

Positive Pay on iMobile.

2.10.HDFC Bank

2.10.1.About the Company

The Housing Development Financial Corporation Bank is an Indian banking and financial

services company headquartered in Mumbai, Maharashtra. HDFC Bank is the second largest

private bank in India as measured by assets. It is the largest bank in India by market

capitalization as of February 2016. It was ranked 58th among India’s most trusted brands

according to Brand Trust Report, 2015. It has about 76,286 employees and has its presence in

Bahrain, Hong Kong and Dubai.

The equity shares of HDFC Bank are listed on Bombay Stock Exchange and the National

Stock Exchange of India. Its American Depository Shares are listed on New York Stock

Exchange and the Global depository receipt are listed on the Luxembourg Stock Exchange

where two Global Depositary Receipts represent one equity share of HDFC Bank.

HDFC Bank provides a large number of products and services which includes Wholesale

banking, Retail banking, Treasury, car Loans, Two Wheeler Loans, Personal loans, Loan

Against Property and Credit Cards. HDFC Bank merged with Times Bank in February, 2000.

This was the first merger of two private banks in the New Generation Private Sector Banks

category. In 2008, Centurion Bank was acquired by HDFC Bank. HDFC Bank Board

approved the acquisition of Centurion Bank of Punjab for Rs. 9,510 Crores in one of the

largest mergers in the financial sector in India.

Over the last ten years, HDFC Bank has grown at a compounded annual growth rate of

29.55% and has emerged as a market leader across multiple products.

For FY 2016, HDFC Bank’s net interest margins stood at a healthy 4.3 %. 30% of its

operating revenue came from non-funded segments such as fees and commissions for

services. For the same period, net NPA’s stood at 0.30 % far below the industry average for

private banks. 43.0% of total deposits were in the form of low cost CASA deposits as on

March 31, 2015.

2.10.2.History of the Bank

HDFC Bank was incorporated in August 1994, with its registered office in Mumbai, India. Its

first corporate office and a full service branch at Sandoz House, Worli was inaugurated by the

then Union Finance Minister, Dr. Manmohan Singh. As of June 30, 2016, the Bank had a

nationwide distribution network of 4,541 branches and 12,013 ATM's in 2,587 cities and

towns.

The Housing Development Finance Corporation Limited was amongst the first to receive an

'in principle' approval from the Reserve Bank of India to set up a bank in the private sector, as

part of RBI's liberalisation of the Indian Banking Industry in 1994. HDFC Bank commenced

operations as a Scheduled Commercial Bank in January 1995.

2.10.3.Profile of Chairmen

Mr. Deepak Parekh Chairman - HDFC Ltd.

Mr. Deepak Parekh was Born in 1944 and he was a Chartered Accountant from the Institute

of Chartered Accountants in England & Wales (ICAEW), Mr. Deepak Parekh is at the

financial helm of India Inc. In 1978 Mr. Parekh joined India’s premier housing finance

company HDFC Ltd. as Deputy General Manager and then went on to become its Chairman

in 1993. In 1970, Mr. Parekh began his career with Ernst & Ernst Management Consultancy

Services in New York. Thereafter he worked with Grind Lays Bank and Chase Manhattan

Bank for about three years each prior to joining HDFC in 1978. Besides HDFC Group

Companies, Mr. Parekh is on the board of several leading corporations across diverse sectors.

He is the Nonexecutive Chairman in India of BAE Systems India (Services) Pvt Ltd, Glaxo

Smith Kline Pharmaceuticals and Siemens. He is also on the boards of Fairfax India Holdings

Corporation, Indian Hotels Company Ltd, Mahindra & Mahindra Ltd, Network18 Media and

Investments ltd and international boards of DP World – UAE and Vedanta Resources Plc. He

is also on the Advisory Board of several Indian corporate and MNC’s.

His association with international organizations include; Indo US CEO Forum, City of

London and Indo – German Chamber of Commerce. Industry, Government and Media,

impressed by Mr. Parekh’s performance and sobriety, have honored him with several awards,

the Padma Bhushan (2006) being one of them.

2.10.4.List of Board of Directors of HDFC Bank: Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr.

Bobby Parikh, Mr. A. N. Roy, Mr. Malay Patel, Mr. Keki Mistry, Mrs. Renu Karnad, Mr. Aditya Puri,

Mr. Paresh Sukthankar, Mr. Kaizad Bharucha, Mr. Umesh Chandra Sarangi.

2.10.5.Recent News on HDFC Bank

(1)HDFC Bank launches its skills training initiative in Madhya Pradesh

• To benefit over 7,000 people in 10 villages of Khargone District.

(2)HDFC Bank Launches Secure Banking programme in Amritsar

• To roll out the programme across branches in Punjab.

(3)Times Internet in association with HDFC Bank launches ‘Times Points HDFC Bank Debit

Card’

•Unique loyalty proposition enables shoppers to club points earned from online shopping

with the points earned from consuming, creating, and sharing digital content on Times

Internet (TIL) sites.

•Minimum 10% discount on online purchases across retail, groceries, and dining spaces.

•Offers and rewards on over 350 e-commerce, dining, wellness, and offline shopping

destinations.

•Customers can explore all the deals and offers available on Times Points HDFC Bank Debit

Card on www.timespoints.com/debit.

•Customers get Personal Accidental Death Cover up to Rs 10 Lakh, International Air

Accidental Death Cover of Rs 50 lakh, and Zero liability cover up to Rs 1 lakh on fraudulent

and skimming transactions.

•Young and tech-savvy online shoppers will be able to use Times Points Debit Card in India

as well as outside India.

(4) HDFC Bank launches India’s 1st Bank

• 24x7 access to bank anywhere, anytime

Chapter 3

Research Methodology, Sampling Design, Data Analysis, Plan of Analysis

3.1.Data Collection Method

The process of data collection begins after a research problem has been defined and research

design has been chalked out. There are two types of data

Primary Data: It is first hand data, which is collected by researcher itself. Primary data is

collected by various approaches so as to get a precise, accurate, realistic and relevant data.

The main tool is gathering primary data was investigation and observation. It will be

achieved by a direct approach and observation from the officials of the Bank and Interacting

with the respondents about the questionnaire.

Secondary Data: It is the data which is already collected by someone else. Researcher has to

analyse the data and interprets the results. It has always been important for the completion of

any report. It provides reliable, suitable, adequate and specific knowledge. Researcher

collected the secondary data by using banks annual reports and authorized websites of banks.

3.2.Type of Data Used in the Study

INTERNET –In which includes required financial data collected from Indian Bank's official

websites i.e. www.axis.com, www.sbi.co.in etc. and some other websites on the internet for

the purpose of getting all the required financial data of the banks.

The valuable cooperation extended by staff members and the branch manager of different

banks, contributed a lot to fulfil the requirements in the collection of data in order to

complete this research.

Chapter 4

Analysis and Interpretation

4.1.HDFC Bank - Fundamental Analysis

Table 1: Key Financial Figures

Consolidated (Rs. Cr)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Interest

earned

27,605.56 35,861.02 42,555.02 50,666.49 63,161.57

Interest

expended

15,106.12 19,695.45 23,445.45 27,288.46 34,069.57

Net Interest

Income

12,499.44 16,165.57 19,109.57 23,378.03 29,092.00

Other income 5,452.39 7,132.97 8,297.50 9,545.69 11,211.65

Operating

expenses

8,807.12 11,551.90 12,469.65 14,577.52 17,831.89

Operating

Profit

9,144.71 11,746.64 14,937.42 18,346.20 22,471.76

Provisions

(other than

provisions

for tax) and

contingencies

1,477.21 1,742.63 1,726.75 2,266.75 2,960.77

PBT 7,667.50 10,004.01 13,210.67 16,079.45 19,510.99

Tax 2,394.10 3,103.73 4,446.16 5,379.40 6,693.66

PAT (before

Minority

Interest and

share of

Associates)

5,273.40 6,900.28 8,764.51 10,700.05 12,817.33

Profit/ (loss)

attributable

to Minority

Interest

– – 24.65 14.41 19.72

Share of

profit / (loss)

of Associates

– – (3.63) (3.25) (3.72)

Consolidated

Profit /

5,247.02 6,869.64 8,743.49 10,688.89 12,801.33

(Loss) for the

year

Comments: The company has a good profit over 5 years and it has an increasing profit over 5

years from 2012 to 2016, this is good for the company and its shareholders if the profit is

increased every year to the company.

Table 2: Profitability Analysis

Consolidated (%)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Net Profit

Margin

Ratio

15.95 15.98 17.24 17.77 17.23

Cost to Net

Income

Ratio

49.06 49.58 45.50 44.28 44.24

Other

Income to

Net Income

Ratio

30.37 30.62 30.28 28.99 27.82

Comments: Net profit margin of the company has its good increasing and well balanced

percentage over 5 years from 2012 to 2015 and it has increased from 15.95% to 17.23%. it is

a percentage of revenue remaining after all operating expenses, interest, taxes and preferred

stock dividends that have been deducted from a company’s total revenue.

Table 3: Key Balance Sheet Figures

Sources of Funds / Liabilities (Rs. Cr)

Particulars FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Share Capital 465.23 469.34 475.88 479.81 501.30

Money

received

against

warrants

– – – – –

Reserves &

Surplus

25,117.91 29,741.10 36,166.84 43,686.82 62,652.77

Employee

stock options

grants

2.91 0.30 – – –

Net worth

(shareholders

’ funds)

25,586.05 30,210.74 36,642.73 44,166.63 63,154.07

Minority

Interest

121.66 183.66 221.34 151.74 161.63

Deposits 2,08,287.21 2,46,539.58 2,96,091.77 3,67,080.33 4,50,283.65

Borrowings 14,650.44 26,334.15 39,496.61 49,596.72 59,478.25

Other

liabilities and

provisions

29,317.57 37,786.88 35,270.54 42,624.55 34,018.93

Total

Liabilities

2,77,962.93 3,41,055.01 4,07,722.99 5,03,619.96 6,07,096.52

Comments: When debt levels are falling, that's a good sign for the company. if a company

has more assets than liabilities, then it is in decent condition. Having too much debt relative

to cash flows required to pay for interest and debt repayments is one way a company can go

bankrupt. Here the liabilities of the company have increased over years from 2,77,962.93

crores to 6,07,076.52 crores. It is not good for the company.

Table 4: Application of Funds / Assets (Rs. Cr)

Particulars FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Fixed Assets 2,200.94 2,377.91 2,773.32 3,026.28 3,224.94

Cash and

balance with

RBI

25,100.89 14,991.63 14,630.88 25,357.22 27,522.29

Balances

with banks

and money

at call and

short notice

4,737.39 6,183.53 12,900.28 14,556.21 9,004.13

Advances 1,60,831.42 1,98,837.53 2,47,245.12 3,15,418.86 383,407.97

Investments 70,276.67 96,795.11 1,10,960.41 1,19,571.06 1,64,272.61

Other Assets 14,815.63 21,869.30 19,212.98 25,690.33 19,664.57

Total assets 2,77,962.93 3,41,055.01 4,07,722.99 5,03,619.96 6,07,096.52

Comments: Cash and total assets are increased over 5 years from 2011 to 2015 and its good

for company because When a large amount of cash is recorded on the balance sheet, it's

generally a good sign as it offers protection during business slow-downs and provides options

for future growth. Growing cash reserves often signal strong company performance,

dwindling cash can indicate potential difficulties in paying its debt (liabilities).

Table 5: Efficiency Analysis

Particulars FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Advances /

Loan Funds

Ratio

72.14 72.87 73.68 75.70 75.21

ROE /

RONW

15.60 17.37 18.75 19.80 16.93

Comments: The ROE of the company has gradually increased over 4 years from 2011 to

2014. In 2015 it has decreased from 19.80 in 2014 to 16.93 in 2015. This is not good for the

company because Return on equity measures a corporation's profitability by revealing how

much profit a company generates with the money shareholders have invested. For high

growth companies you should expect a higher ROE.

Table 6: Valuation Analysis

Consolidated

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Net Interest

Income Rs.

27,605.56 16,165.57 19,109.57 23,378.03 29,092.00

Growth (%) 37.73 % (41.44 %) 18.21 % 22.34 % 24.44 %

PAT (Rs.

Cr.)

5,273.40 6,900.28 8,764.51 10,700.05 12,817.33

Growth (%) 31.25 % 30.85 % 27.02 % 22.08 % 19.79 %

Earnings Per

Share –

Basic (EPS)

(Rs. )

22.50 29.10 36.60 44.10 50.90

Earnings Per

Share –

Diluted

(EPS) (Rs. )

22.20 28.80 36.30 43.60 50.20

Price to

Earnings

23.63 21.67 20.35 22.95 21.34

Comments: Earnings Per Share serves as an indicator of a company’s profitability, in 2012

the EPS is 23.63 but in 2013 and 14 it has gradually decreased and it has increased in 2015 to

22.95 and again in 2016 it has decreased to 21.34 this is a bad result for the company and its

shareholders, because increase in Earnings generally leads to a higher stock price.

4.1.1.Dividend History

The Company has maintained an average dividend yield of 1.64 % over the last 5 financial

years.

Table 7: Liquidity and Credit Analysis

Consolidated (%)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Net Interest

Margin

Ratio

(“NIM”)

4.44 4.50 4.40 4.40 4.30

Capital

Adequacy

Ratio

16.52 16.80 16.10 16.80 15.50

Net NPAs 0.18 0.20 0.30 0.20 0.30

Comments: The assets of the banks which don’t perform are called Non Performing Assets

(NPA) or bad loans. Bank’s assets are the loans and advances given to customers. If

customers don’t pay either interest or part of principal or both, the loan turns into bad loan. If

a bank has Net NPA in negative, then that is a good sign.

4.2.ICICI Bank - Fundamental Analysis

Table 8: Key Financial Figures

Consolidated (Rs. Cr)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Interest

earned

37,994.86 44,884.59 49,479.24 54,964.00 59,293.71

Interest

expended

25,013.25 28,285.41 29,710.61 32,318.15 33,996.47

Net Interest

Income

12,981.61 16,599.18 19,768.63 22,645.85 25,297.24

Other income 28,663.42 29,319.81 30,084.61 35,252.23 42,102.14

Operating

expenses

29,552.04 30,207.06 30,666.35 35,022.71 40,789.56

Operating

Profit

12,092.99 15,711.93 19,186.89 22,875.37 26,609.82

Provisions

(other than

provisions

for tax) and

contingencies

1,406.34 2,095.17 2,900.26 4,536.34 8,705.41

Exceptional

Items

– – – – 3,600.00

PBT 10,686.65 13,616.76 16,286.63 18,339.03 14,304.41

Tax 2,749.01 3,486.88 4,609.51 5,396.73 3,377.52

PAT (before

Minority

Interest and

share of

Associates)

7,937.64 10,129.88 11,677.12 12,942.30 10,926.89

Profit/ (loss)

attributable

to Minority

Interest

– – – – 746.93

Share of

profit / (loss)

of Associates

– 526.27 635.75 695.43 –

Consolidated

Profit /

(Loss) for the

year

7,642.94 9,603.61 11,041.37 12,246.87 10,179.96

Comments: The company has a good profit over 4 years and it has an increasing profit over

years from 2012 to 2015, but in 2016 it has decreased to 10,179.96 crores from 12,246.87

crores which was in 2015, this is not good for the company and its shareholders if the profit is

decreased, the company should see to it that it has an increasing profit every year.

Table 9: Profitability Analysis

Consolidated (%)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Net Profit

Margin

Ratio

19.06 13.65 14.68 14.35 10.78

Cost to Net

Income

Ratio

70.96 65.78 61.51 60.49 60.52

Other

Income to

Net Income

Ratio

68.83 63.85 60.35 60.89 46.70

Comments: Net profit margin of the company has been decreasing and not well balanced

percentage over 5 years from 2012 to 2015 and it has decreased from 19.06% to 10.78%. it is

not good for company. it is a percentage of revenue remaining after all operating expenses,

interest, taxes and preferred stock dividends that have been deducted from a company’s total

revenue.

Table 10: Key Balance Sheet Figures

Sources of Funds / Liabilities (Rs. Cr)

Particulars FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Share Capital 1,151.82 1,152.77 1,153.64 1,155.04 1,159.66

Reserves &

Surplus

54,150.38 60,121.34 67,604.29 75,268.23 83,537.44

Employee

stock options

grants

0.29 2.39 4.48 6.57 7.44

Net worth

(shareholders

’ funds)

55,302.49 61,276.50 68,762.41 76,429.85 84,704.54

Minority

Interest

1,358.22 1,427.72 1,705.76 2,010.76 2,505.81

Deposits 2,59,106.01 2,81,950.47 3,14,770.54 3,59,512.68 385,955.25

Borrowings 1,25,838.86 1,61,296.62 1,72,888.22 1,83,542.07 211,252.00

Other

liabilities and

provisions

92,162.28 98,240.10 1,16,694.79 1,26,030.31 141,661.56

Total

Liabilities

5,33,767.86 6,04,191.41 6,74,821.71 7,47,525.68 8,26,079.17

Comments: When debt levels are falling, that's a good sign for the company. if a company

has more assets than liabilities, then it is in decent condition. Having too much debt relative

to cash flows required to pay for interest and debt repayments is one way a company can go

bankrupt. Here the liabilities of the company have increased over years from 5,33,767.86

crores to 8,26,079.17 crores. It is not good for the company.

Table 11: Application of Funds / Assets (Rs. Cr)

Particulars FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Fixed Assets 5,489.55 5,431.98 5,473.46 5,506.83 5,871.21

Cash and

balance with

RBI

21,234.01 20,728.18 19,306.20 22,096.93 25,837.67

Balances

with banks

and money

at call and

short notice

18,151.25 20,428.11 30,064.66 26,161.30 21,799.50

Advances 2,56,019.31 2,92,125.42 3,29,974.13 3,87,341.78 438,490.10

Investments 2,09,652.78 2,39,864.09 2,55,666.68 2,67,609.44 302,761.63

Other Assets 23,220.96 25,613.63 34,336.59 38,809.40 31,319.07

Total assets 5,33,767.86 6,04,191.41 6,74,821.71 7,47,525.68 8,26,079.17

Comments: Cash and total assets are increased over 5 years from 2011 to 2015 and its good

for company because When a large amount of cash is recorded on the balance sheet, it's

generally a good sign as it offers protection during business slow-downs and provides options

for future growth. Growing cash reserves often signal strong company performance,

dwindling cash can indicate potential difficulties in paying its debt (liabilities).

Table 12: Efficiency Analysis

Particulars FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Advances /

Loan Funds

Ratio

66.51 65.91 67.66 71.33 73.42

ROE /

RONW

11.02 12.47 13.97 14.45 14.04

Comments: The ROE of the company has gradually increased over 5 years from 2011 to

2015. This is good for the company because Return on equity measures a corporation's

profitability by revealing how much profit a company generates with the money shareholders

have invested. For high growth companies you should expect a higher ROE.

Table 13: Valuation Analysis

Consolidated

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Net Interest

Income Rs.

12,981.61 16,599.18 19,768.63 22,645.85 25,297.24

Growth (%) 20.88 % 27.87 % 19.09 % 14.55 % 11.71 %

PAT (Rs.

Cr.)

7,937.64 10,129.88 11,677.12 12,942.30 10,179.96

Growth (%) 25.63 % 27.62 % 15.27 % 10.83 % (15.57 %)

Earnings Per

Share– Basic

(EPS) (Rs. )

13.27 16.66 19.13 21.17 17.53

Earnings Per

Share-

Diluted

(EPS) (Rs. )

13.27 16.66 19.13 20.94 17.41

Price to

Earnings

13.21 16.57 14.26 22.05 17.41

Comments: Earnings Per Share serves as an indicator of a company’s profitability, in 2012

the EPS is 13.21 but in 2013 it has increased to 16.57 and again in 2014 it has decreased to

14.26 and in 2015 it has a greater EPS of 22.05 and in 2016 it has decreased to 17.41 there is

so much of volatility in EPS of the company this is not a good condition for the company and

its shareholders, because increase in Earnings generally leads to a higher stock price.

4.2.1.Dividend History

The Company has maintained an average dividend yield of 2.11 % over the last 5 financial

years.

Table 14: Liquidity and Credit Analysis

Consolidated (%)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Net Interest

Margin

Ratio

(“NIM”)

2.73 3.11 3.33 3.48 3.25

Capital

Adequacy

Ratio

18.50 18.74 17.70 17.02 16.64

Net NPAs 0.62 0.64 0.82 1.40 2.67

Comments: The assets of the banks which don’t perform are called Non Performing Assets

(NPA) or bad loans. Bank’s assets are the loans and advances given to customers. If

customers don’t pay either interest or part of principal or both, the loan turns into bad loan. If

a bank has Net NPA in negative, then that is a good sign.

4.3.Efficiency Analysis – Ratios

Chart No. 1: Return on Equity

2011 2012 2013 2014 20150

5

10

15

20

25

Return on Equity(ROE)

HDFC ICICI

Chart No. 2: Advances / Loan Funds Ratios

2011 2012 2013 2014 201560

62

64

66

68

70

72

74

76

78

Advances / Loan Funds Ratios

HDFC ICICI

4.4.Liquidity and Credit Analysis

Chart No. 3: Net Interest Margin Ratio

2012 2013 2014 2015 20160

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Net Interest Margin Ratio (NIM)

HDFC ICICI

Chart No. 4: Capital Adequecy Ratio

2012 2013 2014 2015 20160

2

4

6

8

10

12

14

16

18

20

Capital Adequacy Ratio

HDFC ICICI

Chart No. 5: Net Non Performing Asset

2012 2013 2014 2015 20160

0.5

1

1.5

2

2.5

3

Net Non Performing Asset (NPA)

HDFC ICICI

4.5.Profitability Analysis

Chart No. 6: Net Profit Margin Ratio

2012 2013 2014 2015 20160

5

10

15

20

25

Net Profit Margin Ratio(%)

HDFC ICICI

Chart No. 7: Cost to Net Income Ratio

2012 2013 2014 2015 20160

10

20

30

40

50

60

70

80

Cost to Net Income Ratio (%)

HDFC ICICI

4.6.Questionnaire:

A survey was conducted on online banking in India for the primary data among 100 people.

The analysis of this survey or data is as follows: -

The age of people which the survey was taken is between 20 to 60.

There are 77 male and 23 Females included in this Survey.

Everyone are Working some are own business and some in Corporate jobs.

Q1. What kind of banking do you prefer?

Chart No. 8: Poll Result 1

25%

60%

15%

Poll Result

traditionalonlineboth

POLL out of 100: – traditional – 15; Online – 60; both – 25

Comments: This shows us the preference of the people towards the type of banking. They

prefer to use the services of both the online and traditional banking rather than a particular

type.

Q2. Do you think online banking is better than traditional banking?

Chart No. 9: Poll Result 2

55%18%

27%

Poll Result

YESNOCAN'T SAY

POLL out of 100: Yes - 69; No - 22; Can’t Say – 9

Comments: The people understand that online banking is better than the traditional banking

because of its nature. While a few of the people are still not fully convinced.

Q3. Do you feel your account is secured in online banking?

Chart No. 10: Poll Result 3

YES NO CANT SAY

44

28 28

Poll Result

Poll out of 100: Yes - 44; No - 28; Can’t Say – 28

Comments: Majority of the people think that their Account is secured, but not all. Their

security concern should be eradicated. This will attract customers.

Q4. How frequently do you use banking services?

Chart No. 11: Poll Result 4

20

44

8

28

Poll Result

WEEKLY MONTHLY REGULARLY RARELY

POLL out of 100: Weekly - 20; Monthly - 44; regularly - 10; rarely – 28

Comments: Most of the people do not need the services of banks regularly or maybe there is

no need. They may transact with the bank on monthly basis for most of the time.

Q5. How happy are you with services of online banking provided by your bank?

Chart No. 12: Poll Result 5

19%

35%

35%

12%

Poll Result

COMPLETELYPARTIALLYFAIRLYNOT AT ALL

POLL out of 100: Completely - 20; partially - 36; fairly - 36; Not at all - 12

Comments: The satisfaction level of people with the online banking services of their banks

has a mixed review. This may be due to multiple reasons.

Q6. What type of transaction do you make in online banking?

Chart No. 13: Poll Result 6

44%

28%

8%

20%

Poll Result

CHECK BALANCESPAYMENTSTRANSFER OF FUNDSOTHER

POLL out of 100: Check balances - 44; Payments - 28; Transfer of fund - 8; other -20

Comments: The utility of the online banking is service is not used to the extent is should be

and it is being majorly used for the purpose of checking the balance in the account. The

reason for this is the low volume of transaction among the people.

4.7.Letter from ICICI Ltd Chairman

It is a pleasure to be addressing my first message to the shareholders of ICICI Bank as the

Chairman of the Board of Directors. I have had a long prior association with the Banka’s an

independent Director on the Board and I am honored by the confidence the Board and

shareholders have reposed in me in appointing me as the Chairman. On behalf of the Board

would like to express our appreciation of Mr. K. V Kamath who made an invaluable

contribution to the ICICI Group first as the CEO from 1996 to 2009 and then as the Chairman

of the Board for six years.

The ICICI Group is a financial conglomerate with a long and rich history of leadership of

service to the nation and of partnership in its growth. Founded as a development finance

institution in 1955 the Group has been on a continuous journey of transformation

diversification and expansion to become a truly universal bank. The Group seeks to address

every aspect of the financial service’s needs - savings investments credit protection and

payments - of each and every customer segment - large corporations small & medium

enterprises urban customers farming and non-farming rural communities and thunder-

privileged who have thus far been excluded from access to financial services. ICICI Bank has

helped millions of individuals and families achieve their aspirations as well as played a key

role in the creation of infrastructure and industrial capacity in the country.

The Indian banking sector is passing through a phase that is both challenging and exciting.

The growth slowdown that the economy experienced from 2012 onwards has led to stress on

the corporate sector resulting in both pressure on asset quality as well as limited new growth

opportunities in the corporate segment for the banking sector. At the same time there are

robust growth opportunities in the retail segment and in rural areas; and in the continuing

opportunities for transformation led by technology. The policy measures put in place over the

last two years have also led to a substantial improvement in macro-economic parameters and

are laying the foundation for new opportunities for the corporate sector.

Over the last few years ICICI Bank has substantially strengthened its retail and rural business

as evidenced both by its strong deposit franchise and funding profile the robust growth in its

retail loan portfolio and healthy and stable asset quality in this segment. It has continued to

innovate using technology to enhance the customer proposition. The Bank has calibrated

growth and reoriented the strategy of its international operations in line with the new global

environment. The corporate segment where the Bank had in earlier years supported industrial

and infrastructure investment critical to India's growth has experienced challenges. The Bank

has calibrated growth in its corporate loan portfolio as the economic pressures emerged. It is

addressing the risks in this segment in a focused manner by working closely with clients to

ensure deleveraging by ensuring that the Bank's interests are protected and by reformulating

its risk appetite and risk management framework to rebalance the portfolio mix towards a

lower risk profile. Underpinning the Bank's strategy and approach are its operating earnings

and very strong capital base which enable it to absorb risks while capitalizing on growth

opportunities. During fiscal 2016 given the elevated risks in certain sectors the Bank on a

prudent basis made a collective contingency and related reserve towards its exposure to these

sectors thereby further strengthening the balance sheet.

The ICICI Group franchise is unique in that it extends beyond banking to outstanding

franchises in every segment of financial services. It is a matter of great satisfaction that the

value created by the insurance businesses of the Group was demonstrated during the year

through investments in each of the subsidiaries. This further adds to the Group’s financial

strength and its platform for capitalizing on the vast growth potential for financial services in

India.

The Board of Directors is fully committed to maintaining the highest standards of corporate

governance with a view to ensuring that the Bank is well-placed to address risks as well as

capitalize on growth opportunities within a framework of regulatory compliance and

adherence to the highest ethical standards. The executive management team led by the

Managing Director & CEO has set out a growth path based on the defined risk appetite and

risk management and capital allocation framework while focusing on addressing stress in the

portfolio and maintaining a strong balance sheet. The ICICI Group has substantial depth of

leadership talent and is well-placed to execute its strategy. Aim confident that the coming

years will see the Group maintain and enhance its strength and capitalize on the diverse

growth opportunities that our country presents.

M. K. Sharma

Comments: M K Sharma has been appointed as new Chairman of ICICI Bank from 2009 that

is after Mr. K V Kamath, M K Sharma also empowers about the Company’s growth and its

business in several areas that how it is managing its businesses in retail and rural business and

talks about the support of bank towards the industrial and infrastructure investment towards

India’s growth. And to lower the risk in bank it is using the risk appetite and risk

management framework.

4.8.Letter from HDFC Ltd Chairman

On behalf of the entire Board, I would also like to express grief and deep sorrow at the sad

demise of Dr. Ram Tarneja, Director of the Corporation, who expired on August 7, 2015.

Your Corporation has gained immensely due to Dr. Tarneja’s philosophy of adopting a

practical, professional and a socially responsible approach of doing business. On behalf of the

Corporation, I would like to condole the demise of Dr. Ram Tarneja and we remain grateful

for the guidance, advise, and valuable services rendered by him during his association with

the Corporation.

“I have been informed that the Corporation has received proxies from 9 shareholders in

respect of 6,94,15,703 equity shares of Rs. 2 each, representing 4.39% of the total issued and

paid-up share capital of the Corporation.

“The proxy register is open for inspection by the members. As required under the Companies

Act, 2013, as also the Secretarial Standards and SEBI Regulations, the register and other

documents are placed before the meeting.”

“Since there are no qualifications, observations or comments on financial transactions or

matters which have any adverse effect on the functioning of the Corporation in the Auditors’

Report and Secretarial Auditors’ Report, with your permission, may I take the same as read.”

Review of Standalone performance during FY 2016

The demand for home loans continued to remain healthy, with growth largely coming from

the outskirts of big cities as well as Tier 2 and Tier 3 cities. The improved affordability is on

account of rising incomes and continued fiscal benefits available on home loans.

The average size of individual loans stood at Rs. 25 lacs as against Rs. 23.3 lacs in the

previous year.

As at March 31, 2016, the loan book stood at Rs. 2,59,224 crores as against Rs. 2,28,181

crores in the previous year. Loans sold during the preceding twelve months amounted to Rs.

12,773 crores as compared to Rs. 8,249 crores in the previous year.

The growth in the individual loan book, after adding back loans sold was 24%; while it was

16% net of loans sold. The growth in the total loan book after adding back loans sold was

19%.

Recoveries

The recovery performance of your Corporation continued to be good. Gross non-performing

loans, as at March 31, 2016 stood at Rs. 1,833 crores. This is equivalent to 0.70% of the loan

portfolio as compared to 0.67% in the previous year.

As per the prudential norms prescribed by the National Housing Bank, the Corporation is

required to carry a provision of Rs. 1,959 crores.

The actual balance in the Provision for Contingencies Account as at March 31, 2016 stood at

Rs. 2,695 crores, of which Rs. 566 crores are on account of non-performing loans and Rs.

2,129 crores are in respect of standard assets. The balance in the provision for contingencies

is equivalent to 1.03% of the loan portfolio. The Corporation also made a special provision of

Rs. 450 crores over and above the regulatory requirements with the objective of further

strengthening its Balance Sheet.

Financials

For the year ended March 31, 2016, the Profit before Tax stood at Rs. 10,108 crores as

against Rs. 8,624 crores in the previous year – an increase of 17%.

After providing Rs. 2,636 crores for taxes and Rs. 379 crores for Deferred Tax Liability on

Special Reserve, the Profit After Tax for the year ended March 31, 2016 stood at Rs. 7,093

crores, representing a growth of 18%.

The spread on loans over the cost of borrowings for the year ended March 31, 2016, stood at -

2.29% per annum.

Your Corporation’s cost income ratio stood at 7.6% for the year ended March 31, 2016. This

was the same as in the previous year and it continues to be amongst the lowest in the financial

sector in Asia.

The Board of Directors of your Corporation has recommended a final dividend of Rs. 14 per

equity share of face value of Rs. 2 each in addition to an interim dividend of Rs. 3 per equity

share that was paid in April 2016.

The total dividend for the year is Rs. 17 per equity share as against Rs. 15 per equity share in

the previous year. The payment of final dividend will commence tomorrow, subject to the

passing of the resolution today.

Current year’s performance: Standalone and Consolidated

The standalone and consolidated financial results of your Corporation for the quarter ended

June 30, 2016, which have been subjected to a limited review by the Auditors, were approved

by the Board at its Meeting held earlier today.

On a standalone basis, the Profit After Tax for the quarter ended June 30, 2016, stood at Rs.

1,871 crores as compared to Rs. 1,361 crores, representing an increase of 37%.

For the quarter ended June 30, 2016, the Consolidated Profit after Tax stood at Rs. 2,797

crores as compared to Rs. 2,204 crores in the corresponding quarter last year.

During the quarter, your Corporation became the first Indian public company to issue rupee

denominated bonds in the overseas market. The Corporation raised Rs. 3,000 crores through

issue of bonds earlier during this month. The bonds are listed on the London Stock Exchange.

Annual Report

The cost of printing the annual report for FY 2016 was Rs. 44 per copy as against Rs. 46 per

copy in the previous year.

In terms of the Companies Act, 2013 and rules made thereunder, the Corporation has sent the

Annual Report for FY 2016 and the Notice convening this AGM by e-mail to those

shareholders who had registered their e-mail addresses either with their respective depository

participants or with the Corporation. This has resulted in considerable savings towards

printing and postage charges. Physical copies have been sent to those shareholders whose e-

mail address was not available or who have specifically asked for the report.

Mr. Deepak Parekh

Comments: Here Mr. Deepak Parekh Explains about the company’s growth over the years,

the demand for home loans are good with growth from outskirts of cities, because of rising

incomes and fiscal benefits available on home loans to customers and also explains about the

growth in the amount of home loans over years and also tells about the recoveries of the bank

that it has its good performance in it.

Chapter 5

Findings, Recommendations and Conclusions

5.1.Initial Outcomes or Recommendations:

The face of banking is changing rapidly. Competition is going to be tough and with financial

liberalization under the WTO, banks in India will have to benchmark themselves against the

best in the world.

For a strong and resilient banking and financial system, therefore, banks need to go beyond

peripheral issues and tackle significant issues like improvements in profitability, efficiency

and technology, while achieving economies of scale through consolidation and exploring

available cost-effective solutions. These are some of the issues that need to be addressed if

banks are to succeed, not just survive, in the changing Scenario.

Over the last three decades the role of banking in the process of financial intermediation has

been undergoing a profound transformation, owing to changes in the global financial system.

It is now clear that a thriving and vibrant banking system requires a well-developed financial

structure with multiple intermediaries operating in markets with different risk profiles.

Taking the banking industry to the heights of international excellence will require a

combination of new technologies, better processes of credit and risk appraisal, treasury

management, product diversification, internal control and external regulations and not the

least, human resources. Fortunately, we have a comparative advantage in almost all these

areas. Our professionals are at the forefront of technological change and financial

developments all over the world. It is time to harness these resources for development of

Indian banking in the new century.

5.2.Conclusion

Banks are at the core of any economic system whether developed or developing. Essentially,

a technologically advanced, transparent and efficient banking system is the need of the hour

for the growing economy like India.

In our country, need for qualitative banking surpasses the conservative economic or financial

logic as the financial inclusion is still a distant dream. In addition to the provision of

traditional services, many social functions are attached to the banking system financial

inclusion and inclusive growth.

In order to achieve the goal of faster and inclusive growth, it is high time the government and

banking industry undertake a comprehensive relook into the existing policies and structures.

Bibliography

Shahi, Ujjwala, (2013). Banking in India: Past, Present and Future

Indian Institute of Banking and Finance, (2008) Principles and Practices of Banking, 3rd

Edition.

ICICI Company Reports and HDFC Company Reports, (2011 – 2016).

Report of the Committee on Banking Sector Reforms, (1998), Government of India.

Report of the Committee on the Financial System, (1991), Government of India

Indian Banks Association, Various years, Performance Highlights of Banks(Mumbai).

Annual Policy Statement for the Year 2007-2008, (2008) Reserve Bank of India,

(Mumbai).

www.moneycontrol.com

www.ibef.org/industry/banking-india.aspx

https://www.rbi.org.in/