Professional Documents
Culture Documents
Bachelor of commerce
(Banking & Insurance)
Semester V
(2008-09)
Submitted
In partial fulfillment of the requirements for the Award of Degree of Bachelor
of Commerce Banking & Insurance
By
(GURAV PRASAD VILAS)
DOMBIVLI (E)
CERTIFICATE
(2014 - 2015)
This is to certify that Mr. Prasad Vilas Gurav, Seat No:
of B.com
(Dr. A. P. Mahajan)
Principle
External Examiner
DECLARATION
(Signature)
PRASAD VILAS GURAV
ACKNOWLEDGEMENT
I feel deeply indebted for the people who have guided me in this project. It
would have not been possible to make such an extensive report without help,
guidance and inputs from them. This was all the more significant, since the changes
in the banking sector, were of recent origin and relatively less material was available
in the form of books or articles. Most of my information source has been form
professionals & newspapers.
INDEX
SR
CONTENT
NO.
1
EXECUTIVE SUMMARY
2
OBJECTIVE
RESEARCH METHODOLOGY
ABBRIVATION
CHAPTER 1.
1.1 INTRODUCTION TO BANKING
1.2 GENERAL INFORMATION OF BANKING
1.3 HISTORY OF BANK
1.4 DEFINITION OF BANK
1.5 BASIC FUNCTION OF BANKING
PAGE
NO.
LIMITATION
SUGGESTION
10
CONCLUSION
APPENDIX
11
ANNEXURE
12
Executive Summary
The Indian banking industry remained largely dynamic with various developments
including introduction of base rate and continuous monetary tightening measures
implemented during FY10 and FY11. Recovering from the period of moderate
growth in FY10, the sector made significant progress in terms of growth in
profitability and improvement in asset quality with lower NPA ratio during FY11.
Overall growth in total business as well as net interest income (NII) of banks, which
witnessed moderation during FY10, revived in FY11 on the back of improved credit
demand. The industrys resilience towards numerous macro-economic and regulatory
challenges helped the domestic economy to resume a healthy growth trajectory in
FY11.
Thriving and vibrant banking system requires a well developed financial structure
with multiple intermediaries operating in markets with different risk profiles. There
will a segregation of financial intermediation among banks, resulting in competitive
efficiency, depth and resilience to the financial system.
Other types of financial intermediaries will complement banks and act as counterparties, in syndications and co-financing strategies, as also in the sharing of risk.
Markets will acquire greater depth and liquidity, especially in the money and debt
segments. Rigidities in the market microstructure will be removed so that prices of
financial instruments will respond flexibly to different phases of the business cycle.
.
OBJECTIVES
RESEARCH METHODOLOGY:
The methodology for the research study is descriptive and is as follows:RESEARCH APPROACH: - Quantitative Research.
Data Collection Method:Secondary Data:Various websites, articles from Magazines and News-Papers, Books were
used for collecting Secondary Data.
Primary Data:The Primary Data has been collected by the researchers by designing
structured open ended questionnaire with the relevant question to the project Study
and Research.
ABBREVATIONS
BOI
ATM
Bank Of India
Automated Teller Machine
CASA
RBI
E-BANKING
SSME
NRI
CC
OD
FD
financial institutions that provide banking services. Banks are the subset of the
financial service industry. The banking sector offers several facilities and
opportunities to their customer. All the banks provide services such as checking
accounts, money order and cashier cheques. The banks also offer investment and
insurance product such as mutual fund, life insurance, general insurance and so on.
Banker is a person who accepts deposits, money on current accounts issued and pays
cheques and collects cheques for his customer. The bank acts as an agent of the
customer. Banks also dealing with other activities like factoring, housing finance,
giving credit cards, debit cards, making portfolio management, facilities of ATMs ,
mobile banking, internet banking etc.
1.2 GENERAL INFORMATION OF BANKING:
The banking in India was originated in the last decades of 18th century. The first
banks such as Bank of Hindustan and General Bank of India were established in the
year 1786.
In 1806, the Bank of Calcutta which become Bank of Bengal as well as Bank of
Bombay and Bank of Madras all three banks were established under the act of
British East India Company and theses three banks were merged in 1921 to form the
Imperial Bank of India. After independence it became State Bank of India in 1955.
For regulation of such banks, the Reserve Bank of India was established in 1935. In
1969, the government has declared nationalized for all major banks which have
remained under government ownership. Their operations are under a structure
known as Profit Making-Public Sector Undertakings (PSU) which can be operated as
commercial banks.
Banking sector has also making their presence in rural area. The government has
developed through State Bank of India having large network and through National
Bank for Agriculture and Rural Development by providing micro finance. The Indian
banking sector has made up of four types of banks, public sector banks as well as all
state banks. Banking company is a company which transacts the business of banking
in India. All banks which are included in the second schedule of Reserve Bank of
India Act, 1934 are scheduled banks. This bank includes scheduled commercial
banks and scheduled co-operative banks.
1.3HISTORY OF BANK:
The word bank is derived from the German words banc us which means bench.
Banking is an old concept in India. It was present in ancient times during the third
century; the great Hindu Jurist devoted a section of his work to deposits and
advances. He had led down certain rules regarding to the rates of interest to be paid
or change. During the moughal period the banks plays a very important role in
lending money and financing trade and commerce. In that period, the first bank was
probably the religious temple of the ancient world where the gold was stored in the
form of easy to carry in compressed plates. Banking in India was originated in the
last decades of 18th century. Every town or village was involving in transferring
funds from place to place. They were collecting money through hundies. Greek
temples as well as private and civic entities conducted financial transactions such as
loans, deposits, and currency exchange and so on. Throughout the mouryan period,
the desi banks played a vital role in economic development of the country.
discounts notes, makes loans, and invests in securities; collects checks, drafts, and
notes; certifies depositor's checks; and issues drafts and cashier's che
A. Primary functions:
The primary functions of banks are also known as banking functions.
They are main functions of banks. These functions are explained below:
1 Accepting deposits: Commercial banks collect deposits from public. It
is compulsory to repay the money either in the partly or fully as legal
tender money. The bank accepts following deposits:
a) Saving deposits: Saving deposits are those deposits on which the
bank pays certain rate of interest to the depositors subject to certain
conditions. A person can open the account with a small amount. The
customers are expected to maintain a minimum balance in their
account. There are certain restrictions on withdrawals. Withdrawals
can be made either by cheques or slips. This account is suitable to
salary and wage earners.
b) Fixed Deposits: Lump sum amount is deposited at one time for a
specific period. Higher rate of interest is paid, which varies with the
period of deposit. Withdrawals are not allowed before the expiry of
the period. Those who have surplus funds go for fixed deposit. It may
be six months, two years, three years or five years. In India, the
interest rate on such deposits should be 8% to 10%. For the bank,
fixed deposit is desirable for making long period investment which is
profitable.
c) Current Deposits:
assets and / or guarantees. The advance is given for a longer period and a
larger amount of loan is sanctioned than that of overdraft.
c. Loans:
commercial bank. RRBs have a unique structure, in the sense that their
equity holding is jointly held by the central government, the concerned
state government and the sponsor bank (in the ratio 50:15:35), which is
responsible for assisting the RRB by providing financial, managerial and
training aid and also subscribing to its share capital.
4. Non Scheduled Bank: These are those banks which paid up capital is
less than Rs. 5 lakhs. These banks are not included in the second
scheduled of the Reserve Bank. The Reserve Bank should not have any
control on these banks. But they have the details of their business to the
Reserve Bank every month.
5. Retail Bank: It includes exposures to individuals or small businesses.
Retail banking activities are identified based on four criteria of
orientation, granularity, product criterion and low value of individual
exposures. Most banks have a significant portion of their business
contributed by retail banking activities. The largest players in retail
banking in India are ICICI Bank, SBI, PNB, BOI, HDFC and Canara
Bank. Among the large banks, ICICI bank is a major player in the retail
banking sector. It has a strong focus on movement towards cheaper
channels of distribution, which is vital for the transaction intensive retail
business.
6. Investment Banks: Investment banks are those banks which provide
funds on long term for industries. These banks are also called as
industrial banks. These banks obtain funds through share capital,
debentures, and long term deposits from the public. These banks also
issue new shares and debentures of industrial companies.
The first board of directors of the bank consisted of Sir Sassoon David,
Sir Cowasjee Jehangir, J. Cowasjee Jahangir, Sir Frederick Leigh Croft,
Ratanjee Dadabhoy Tata, Gordhandas Khattau, Lalubhai Samaldas,
Khetsety Khiasey, Ramnarain Hurnundrai, Jenarrayen Hindoomull Dani,
Noordin Ebrahim Noordin.
1906: BOI founded with Head Office in Bombay.
1921: BOI entered into an agreement with the Bombay Stock
Exchange to manage its clearing house.
1946: BOI opened a branch in London, the first Indian bank to do
so. This was also the first post-WWII overseas branch of any
Indian bank.
1950: BOI opened branches in Tokyo and Osaka.
1951: BOI opened a branch in Singapore.
1953: BoI opened a branch in Kenya and another in Uganda.
1955: BoI opened a branch in Tanganyika.
1960: BoI opened a branch in Hong Kong.
1962: BoI opened a branch in Nigeria.
1967: The Government of Tanzania nationalized BoI's operations
in Tanzania and folded them into the government-owned National
Commercial Bank, together with those of Bank of Baroda and
several other foreign banks.
raised/feedback received by the various stake holders all over the country.
In this report, the same are presented under the following eight major
groups:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
Deposit Accounts
Loans and Advances
Remittances and other Facilities
Special Customers
Institutional Arrangements
Customer Education
Comprehensive Banking Regulation
Other Aspects
Some customers had also complained that the passbook printing was
not appropriate as the contents were not readable with inappropriate
font size and undefined acronyms used.
The name of the payee as well as instrument number in case of debit
entries and the name of payee bank / drawer of instrument as well as
instrument number in case of credit entries were also not provided by
the banks in the pass books / statement of accounts.
Instead of recording separately gross interest credited and TDS
debited thereon, some banks record only one figure of net interest
credited.
Inoperative Accounts
Interactions with customers revealed that the customers have to face a lot
of difficulties due to accounts being frozen by banks unilaterally as
inoperative without prior intimation or attempts to contact the account
holder. The extant guidelines of RBI in this regard are quite clear and
banks need to ensure strict compliance to these. Before marking the
account as inoperative, banks must intimate the account holder by SMS
and send a mail. If the account holder is not traceable, banks must make
efforts to trace the whereabouts of the account holder or his nominees in
case the account holder is deceased.
Minimum Balance
permits a minimum number of transactions without penalty for nonmaintenance of a minimum balance. Such a penalty is seen by a number
of customers as a very broad punishment imposed by a bank. A customer
would then have a choice of maintaining a higher balance or paying
transaction charges, if the number of transactions exceeds the permissible
level.
Uniform Account Opening Forms Customer relocation is a situation very common these days and this
necessitates opening of accounts with multiple banks at different
locations. The procedure followed by the banks and the formats for
opening of accounts differ from bank to bank. Absence of a common
format / document would cause avoidable inconvenience to the customer.
Uniform Know Your Customer (KYC) Norms The customers complained that KYC compliance norms were not
uniform across all banks and the customers had also highlighted that for
an existing customer also, KYC documents were sought when opening
fresh Term Deposit accounts. Customers also felt the need for common
KYC documentation that would serve them across banks.
No Frills Accounts The present guidelines for opening of No Frills accounts need to be
further simplified to enable rapid financial inclusion. The poorer sections
of people, migrants etc., with whom the Committee interacted in different
places in the country desired a simple account which can be opened with
a self attested photograph and address proof. This account may be
upgraded to a basic account if the customer fulfills KYC requirements.
Wherever UID is introduced, it should be possible to open a No Frills
account purely on the basis of UID with necessary validation from UID
System.
Linking Terms and Conditions of various Products to CBS The Committee had come across several cases of Senior Citizen Deposits
or HUF/PPF accounts being opened and interest not being paid after the
closure of the scheme. The Committee felt that without timely prior
intimation of discontinuance of the existing Scheme, the customer cannot
be denied interest in such cases. The Committee opined that such
instances would be possible only if the terms and conditions of the
special products like Senior Citizens Deposits and HUF/PPF accounts or
any future products introduced for specific segments were not properly
integrated into the CBS (Core Banking Solution).
Term Deposits A perusal of maturities offered by the various banks revealed a confusing
trend with some banks offering deposits for maturities of 390, 499, 510
and various numbers of days, making it difficult for the customers to
compare rationally the actual rates of interest offered and also understand
the logic of such offerings. As financial product offerings are based on
cost of funds, asset and liability management, risk etc., the offerings need
to be objective and transparent. And, the customers should have the
confidence created by a close regulatory oversight on such issues. All
deposit rates should indicate the annualized rate of the offering,
Service Charges The Committee had observed the following on the issue of service
charges: Charges for Basic Service Reserve Bank of India had identified 27 basic banking services and
advised banks to ensure that these are made available to the users at
reasonable prices/charges. However, the aspect of defining what was
reasonable was not defined and was left to banks discretion or
interpretation. As a result, the Committee had observed there was not
only no uniformity but also wide unjustifiable disparity in these charges
across the banks. Under these circumstances, the Committee was of the
view that the regulation had not achieved its purpose and pricing of these
Charges on Non-Home Branch Transactions The Committee has observed a general discontent among all the strata of
customers about charges levied by banks for getting certain services at
non-home branches like pass-book updation, cash deposits etc.
Customers feel that under CBS environment, these charges are not
justified.
Ledger Folio Charges It was a normal practice in a ledger based environment to charge ledger
folio charges as manual work was involved in transcribing information
from one ledger folio to another. It is common knowledge that in CBS
environment, ledgers and their folios are not present and hence, the
customers find levy of this charge in a CBS environment as illogical.
TDS Certificates The customer complaints also revealed that the certificates issued towards
tax deducted at source were not complete in all respects. TDS remittance
details such as BSR Code, Acknowledgement Number, Challan Number
and date were not available in the certificate. Similarly, aspects such as
interest details in respect of Sweep In / Sweep out Accounts, Term
Deposit Account number for which interest was paid were also not
available. Committee was of the opinion that all the above information
The Committee has observed that the delay in getting small loans from
banks was diverting poor people to non-banking / micro finance
institutions and / or private money lenders, especially in rural areas.
Price and Non-price terms for Loans Customers have mentioned that banks were not following the RBI
Guidelines on pricing and non-pricing terms of loans. The customers
opined that supervision has not effectively complemented regulation to
ensure compliance with guidelines on issues which have been
deregulated. The Committee reviewed the various guidelines including
those on risk management systems in banks, guidance note on credit risk
management, guidelines on reasonableness of bank charges etc. and felt
that while Regulation has prescribed several checks and balances, the
compliance of the same has not been ensured through Supervision,
resulting in several anomalies in the market place giving rise to customer
grievances. The risk rating system should be a critical input for setting
pricing and non-pricing terms of loans and where the risk for any class of
customers is the same, the interest rates for fixed rate loans should not
vary at the same point of time and for floating rate loans vary differently
for different sets of customers at different points of time. Regulation
should ensure that customers clearly understand the pricing policies of
banks, as the Committee in its interactions all over the country has seen
that variances in these issues give rise to customer dissatisfaction.
Reporting to Credit Information Bureau The Committee came across a number of complaints of wrong reporting
by banks to Credit Information Bureau. The Committee observed that this
been discussed with the various stakeholders, but the Committee sees
merit in the feeling of the customers that the point of entry should not
matter when retail loans are taken on a floating rate basis and when
the entire class of customers for a particular loan are of the same
characteristic and are treated at the same risk level. Regulation is also
silent on issues such as teaser rate loans, festival loans and several
such promotion schemes. The existing customers of banks who are
disadvantaged have questioned the logical basis for giving such
concessions to a few new customers and how banking risk becomes
more favourable suddenly for such class of customers etc. The trend of
such loans was noticed in all liquidity situations. The Committee
feels that regulation should plug such anomalies which create doubts
about fairness regarding pricing which should be transparent, nondiscriminatory and also objective. The Committee feels that there
should be explicit regulatory prescriptions and a closer regulatory
oversight of such actions by banks which raise customer issues
clogging the grievance redressal mechanisms.
Several cases have been brought to the notice of the Committee where
the title deeds of the loan property are not returned immediately after
the loan is repaid. Further, there have been cases of loss of title deeds
resulting in creation of duplicate title deeds which is a form of
permanent defect in title to property.
Most Important Terms and Conditions (MITC) - The experience
gained by the banks and RBI in the matter of credit card operations of
banks resulted in the introduction of the concept of Most Important
Terms and Conditions (MITC). This particular improvisation seems
to be working satisfactorily but consumers still have a lot of
grievances in this area. It may be prudent for every bank to ask the
question if this situation was mainly of their own making or otherwise,
institutions coming within the purview of RTI do not collect the required
fees online and the same applies to the educational institutions as well as
various bodies conducting competitive examinations. While it would be
in order for RBI, IBA and banks to undertake the exercise of persuading
the various institutions collecting drafts to accept online payments, till
such time it would be in order to have tear away draft of predetermined
values of say 10, 50, 100, 500 etc. at nominal prices.
Prepaid Instruments
The Committees interaction with various stakeholders across the board
has revealed that the present ceiling on withdrawals permitted against the
stored value of the prepaid instruments issued by banks is proving to be
an obstacle in spreading usage of these instruments. Availability of
prepaid instruments of higher value would find favour with frequent
travellers / tourists. The banks may be permitted to issue all purpose
stored value prepaid cards with a maximum withdrawal limit of 50,000/per day. This would also go a long way in encouraging electronic
payments which have a verifiable audit trail and bring it on par with cash
payments which are allowed upto a value of 50,000/-.
Travel Visa fee payable at Banks
The guidelines and documents required for securing drafts for getting visa
of major countries like US, UK, Australia etc. was not clearly spelt by
banks on their websites. The Committee feels that the same would be an
impediment since the customers are made to travel long distances for
want of documents and also only very select branches issue the travel
visa.
Branch Timings The observation was that branches in these areas were not functioning at
a time convenient to the customers i.e., morning hours and late evening
hours and work only on the mandatory timings applicable for all banks.
The same may not benefit such customers as they would be away at
work.
strategies adopted by the banks in the region should prove to be gamechangers for the banks as also for the region.
The SHGs could go a long way in furthering the cause of financial
inclusion in the region. It was felt that the commercial banks were not
too keen to open accounts of SHGs and do the hand-holding in the
initial phase which is so essential for financial inclusion to turn into
banking inclusion. Education and awareness initiatives by banks were
not of the desired level and frequency. As regards opening of accounts
of SHGs, the common complaint was that most of the banks took
shelter under the plea that the particular SHG was operational in an
area outside the scope of the service area approach defined for the
bank concerned.
The bank customers in the region availing RTGS / NEFT facility had
to wait for at least 2 - 3 days to trace the funds and get credit for the
same in respect of failed / unsuccessful transactions. It was reported
that the banks were holding such amounts in sundry deposit account.
As per the business rules framed for the RTGS, this state of affairs is
not at all desirable.
While considering major / medium projects, the banks tend to be
guided by the sectoral caps placed on industry level exposure to
different sectors. This may be harming the interest of the region that
has very limited employment potential. These industries may be
definitely viable on a stand-alone basis. The case in point was that of
cement, coal and iron industries. Banks must recognize the socioeconomic importance of funding these projects, while playing by the
rules and not harshly interpret and implement the sectoral exposure
caps.
Customers have indicated that banks usually apply their internal All
India norms deciding on the permissible bank finance which may not
be relevant to the North East which requires special dispensation
owing to its location and other infrastructural constraints.
Meetings with stake holders in the North-East reflected a strong desire
of the people to have a presence of Reserve Bank of India in each of
the states. Currency management in these areas being a major
problem, these offices should ensure adequate supply of good quality
notes and coins in the region. As fresh remittances in the region are
few and far in between, it was felt that some of the currency chests in
the area could undertake some tasks of currency processing so that the
need of soiled note remittance in the area to a far away RBI Guwahati
is avoided.
Standardization of Product Packages for Defence Personnel
Banks have designed different packages for serving and retired defence
personnel.
However, the Committee has observed that there is a need to have
uniformity in these packages across the banks.
One of the key commitments in the Code is that the banks will train
and familiarize all the staff in following and implementing the Codes.
This has not been achieved. The Committee felt that commitment and
close monitoring by the CEOs as well as the Board of Directors of all
banks is needed to ensure implementation of provisions of Codes in
letter and spirit at the grass root level.
Another aspect that has been brought into the attention is the
requirement from RBI on examining the reasonableness of the banks
stand / products / pricing in the areas that have been deregulated or left
to the discretion of the bank. The banks should demonstrate and justify
their position to RBI regarding the reasonableness/ fairness in their
products/processes, etc.
Fair Treatment to Customers
Every citizen of this country has a right to fair and equal treatment in law
as well as in the market place. The pricing freedom and deregulation of
interest rates conferred on the banks was not in the nature of unbridled
freedom given to them. It was with the explicit conditions that the banks
will be treating their customers fairly, in a transparent and nondiscriminatory manner while pricing their products / services. Further, the
expectation of fair treatment to customers was tempered with the Board
level approval of reasonableness of charges. Notwithstanding this
dispensation, the banks Head Offices and the Offices of the Banking
Ombudsman continue to be flooded with complaints arising out of unfair
treatment / unreasonableness of service charges etc. The role of the Board
of Directors is very significant in this area. The complaints / grievances
must be used as a feedback mechanism to make corrections in the policy /
Every bank Board should evolve a policy which ensures fair treatment to
customers in all their dealings with the banks.
Bank Customers Charter
In the present context, the relevance of a public disclosure document like
the Citizens Charter cannot be under-estimated. Every citizen of this
country has a right to demand quality banking services from all the banks
and hence it is suggested that the Citizens Charter is resurrected and
reintroduced by suitably blending in the changing nature of banking
transactions and delivery of services in a non face-to-face environment.
The indicative time schedule, in a Citizens Charter, can put a customer at
comfort in terms of expectations and also give proper time for the frontline staff to render satisfactory customer service. The adherence to the
time norms could be monitored through on-site and off-site surveillance
by individual banks.
day
technology
driven
banking
certainly
warrants
NRI SERVICES
Non-Resident Indian (NRI)
A. Non-Resident Indian Means:a. A person resident outside India who is a citizen of India i.e.
i.
ii.
Government Agencies
or
International/
ii.
iii.
be
opened:-
on
reverse
The
rules
regarding
pre-mature
payments
ii.
NRO Deposits:
Is
any
interest
payable
on
overdue
deposits
is
permitted.
is
lower.
When renewal instructions are received after 14 days from the due date,
renewal with retrospective effect (i.e. from the due date) is not permitted.
However, simple interest for the overdue period is payable at 4 % p.a. or
at minimum rate of interest for the currency prevailing on the date of
renewal, whichever is lower.
NRO-Deposits
Overdue deposits can be renewed with retrospective effect
(i.e. from the due date), provided they are renewed for a
minimum period of 15 days from the date of renewal.
CHAPTER 5
OBSERVATION & FINDINGS
LIMITATION
The topic being vast, the study has been limited to one
banking institution namely, Central Bank of India.
The major limitation encountered during the study was the
time frame within which the project had to be completed.
SUGGESTIONS
CONCLUSION
Banks are among the main participants of the financial system in India.
Banking offers several facilities and opportunities. Banking in India
originated in the last decades of the 18th Century. The oldest bank in
existence in India is the Bank of India, a government owned bank that
traces its origin in June 1806. It is the largest commercial bank in the
country today.
The current scenario in India is that banking industry is highly developed.
Yet, Indian banking is still way down from achieving world standards in
size as well as products and services. As the economic growth continues,
the demands on the banking sector to cater to the needs of the economy
are also growing consistently. The growth in economic activities has
increased whole sale as well as retail banking in the country.
Indian banks have also realized that with organic growth there is a need
to grow inorganically as well, to be competitive with other players in the
market. For example, the State Bank of India, Indias largest bank, has
acquired 76% stake in the Kenyan Bank, Giro Commercial Banks. ICICI
Bank, Bank of India, Bank of Baroda has also followed the same route.
ANNEXURES
1. What are the different banking services your bank offered to your
customer?
Ans:________________________________________________________
Yes
No
Ans:________________________________________________________