CHAPTER 1

ORIGIN OF BANKS IN INDIA Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. 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 center. 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 1895, 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 Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities.
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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 under capitalized 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 Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing 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 (19141918) through the end of the Second World War (1939 1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities.

BANKING REGULATIONS ACT 1949 1. The Banking Regulation Act was passed as the Banking Companies Act 1949 and came into force wef 16.3.49. Subsequently it was changed to Banking Regulations Act 1949 wef 01.03.66. Summary of some important sections is provided hereunder. The section no. is given at the end of each item. For details, kindly refer the bare Act. 2. Banking means accepting for the purpose of lending or investment of deposits of money from public repayable on demand or otherwise and withdrawable by cheque, drafts order or otherwise (5 (i) (b)). 3. Banking company means any company which transacts the business of banking (5(i)(c) 4. Transact banking business in India (5 (i) (e). 5. Demand liabilities are the liabilities which must be met on demand and time liabilities means liabilities which are not demand liabilities (5(i)(f) 6. Secured loan or advances means a loan or advance made on the security of asset the market value of which is not at any time less than the amount of such loan or advances and unsecured loan or advances means a loan or advance not secured (5(i)(h). 7. Defines business a banking company may be engaged in like borrowing, lockers, letter of credit, traveller cheques, mortgages etc (6(1). 8. States that no company shall engage in any form of business other than those referred in Section 6(1) (6(2). 9. For banking companies carrying on banking business in India to use at least one word bank, banking, banking company in its name (7). 10. Restrictions on business of certain kinds such as trading of goods etc. (8) 11. Prohibits banks from holding any immovable property howsoever acquired except as acquired for its own use for a period exceeding 7 years from acquisition of the property. RBI may extend this period by five years (9) 12. Prohibitions on employments like Chairman, Directors etc (10) 13. Paid up capital, reserves and rules relating to these (11 & 12) 14. Banks not to pay any commission, brokerage, discount etc. more than 2.5% of paid up value of one share (13) 15. Prohibits a banking company from creating a charge upon any unpaid capital of the company. (14) Section 14(A) prohibits a banking company from creating a floating charge on the undertaking or any property of the company without the RBI permission. 16. Prohibits payment of dividend by any bank until all of its capitalised expenses have been completely written off (15) 17. To create reserve fund and 20% of the profits should be transferred to this fund before any dividend is declared (17 (1)) 18. Cash reserve - Non-scheduled banks to maintain 3% of the demand and time liabilities by way of cash reserves with itself or by way of balance in a current account with RBI (18) 19. Permits banks to form subsidiary company for certain purposes (19)
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20. No banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owners of any amount exceeding 30% of its own paid up share capital + reserves or 30% of the paid up share capital of that company whichever is less. (19(2). 21. Restrictions on banks to grant loan to person interested in management of the bank (20) 22. Power to Reserve Bank to issue directive to banks to determine policy for advances (21) 23. Every bank to maintain a percentage of its demand and time liabilities by way of cash, gold, unencumbered securities 25%-40% as on last Friday of 2nd preceding fortnight (24). 24. Return of unclaimed deposits (10 years and above) (26) 25. Every bank has to publish its balance sheet as on March 31st (29). 26. Balance sheet is to be got audited from qualified auditors (30 (i)) 27. Publish balance sheet and auditors report within 3 months from the end of period to which they refer. RBI may extend the period by further three month (31) 28. Prevents banks from producing any confidential information to any authority under Indl Disputes Act. (34A) 29. RBI authorised to undertake inspection of banks (35). 30. Amendment carried in the Act during 1983 empowers Central Govt to frame rules specifying the period for which a bank shall preserve its books (45-y), nomination facilities (45ZA to ZF) and return a paid instrument to a customer by keeping a true copy (45Z). 31. Certain returns are also required to be sent to RBI by banks such as monthly return of liquid assets and liabilities (24-3), quarterly return of assets and liabilities in India (25), return of unclaimed deposits i.e. 10 years and above (26) and monthly return of assets and liabilities (27-1).

THE RBI ACT The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the beginning. The Government held shares of nominal value of Rs. 2,20,000. Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to
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represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following: 1. To regulate the issue of banknotes 2. To maintain reserves with a view to securing monetary stability and 3. To operate the credit and currency system of the country to its advantage.

Functions of Reserve Bank of India The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the Reserve Bank of India.

Bank of Issue Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The assets and liabilities of the Issue Department are kept separate from those of the Banking Department. Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold coin, gold bullion or sterling securities provided the amount of gold was not less than Rs. 40 crores in value. The remaining three-fifths of the assets might be held in rupee coins, Government of India rupee securities, eligible bills of exchange and promissory notes payable in India. Due to the exigencies of the Second World War and the post-was period, these provisions were considerably modified. Since 1957, the Reserve Bank of India is required to maintain gold and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores should be in gold. The system as it exists today is known as the minimum reserve system.

Banker to Government The second important function of the Reserve Bank of India is to act as Government banker, agent and adviser. The Reserve Bank is agent of Central Government and of all State Governments in India excepting that of Jammu and Kashmir. The Reserve Bank has the obligation to transact Government business, via. to keep the cash balances as deposits free of
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interest, to receive and to make payments on behalf of the Government and to carry out their exchange remittances and other banking operations. The Reserve Bank of India helps the Government - both the Union and the States to float new loans and to manage public debt. The Bank makes ways and means advances to the Governments for 90 days. It makes loans and advances to the States and local authorities. It acts as adviser to the Government on all monetary and banking matters.

Bankers' Bank and Lender of the Last Resort The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a cash balance equivalent to 5% of its demand liabilities and 2 per cent of its time liabilities in India. By an amendment of 1962, the distinction between demand and time liabilities was abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit liabilities. The minimum cash requirements can be changed by the Reserve Bank of India. The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial accommodation in times of need or stringency by rediscounting bills of exchange. Since commercial banks can always expect the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort.

Controller of Credit The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India. It can do so through changing the Bank rate or through open market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular groups or persons on the basis of certain types of securities. Since 1956, selective controls of credit are increasingly being used by the Reserve Bank. The Reserve Bank of India is armed with many more powers to control the Indian money market. Every bank has to get a license from the Reserve Bank of India to do banking business within India, the license can be cancelled by the Reserve Bank of certain stipulated conditions are not fulfilled. Every bank will have to get the permission of the Reserve Bank before it can open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank showing, in detail, its assets and liabilities. This power of the Bank to call for information is also intended to give it effective control of the credit system. The Reserve Bank has also the power to inspect the accounts of any commercial bank. As supreme banking authority in the country, the Reserve Bank of India, therefore, has the following powers:
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(a) It holds the cash reserves of all the scheduled banks. (b) It controls the credit operations of banks through quantitative and qualitative controls. (c) It controls the banking system through the system of licensing, inspection and calling for information. (d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

Custodian of Foreign Reserves The Reserve Bank of India has the responsibility to maintain the official rate of exchange. According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at fixed rates any amount of sterling in lots of not less than Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate fixed at lsh.6d. though there were periods of extreme pressure in favour of or against the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve Bank has the responsibility of maintaining fixed exchange rates with all other member countries of the I.M.F. Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of India's reserve of international currencies. The vast sterling balances were acquired and managed by the Bank. Further, the RBI has the responsibility of administering the exchange controls of the country.

Supervisory functions In addition to its traditional central banking functions, the Reserve bank has certain nonmonetary functions of the nature of supervision of banks and promotion of sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks, relating to licensing and establishments, branch expansion, liquidity of their assets, management and methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorised to carry out periodical inspections of the banks and to call for returns and necessary information from them. The nationalisation of 14 major Indian scheduled banks in July 1969 has imposed new responsibilities on the RBI for directing the growth of banking and credit policies towards more rapid development of the economy and realisation of certain desired social objectives. The supervisory functions of the RBI have helped a great deal in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation.

Promotional functions With economic growth assuming a new urgency since Independence, the range of the Reserve Bank's functions has steadily widened. The Bank now performs a varietyof developmental and promotional functions, which, at one time, were regarded as outside the normal scope of central banking. The Reserve Bank was asked to promote banking habit, extend banking facilities to rural and semi-urban areas, and establish and promote new specialised financing agencies. Accordingly, the Reserve Bank has helped in the setting up of the IFCI and the SFC; it set up the Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964, the Industrial Development Bank of India also in 1964, the Agricultural Refinance Corporation of India in 1963 and the Industrial Reconstruction Corporation of India in 1972. These institutions were set up directly or indirectly by the Reserve Bank to promote saving habit and to mobilise savings, and to provide industrial finance as well as agricultural finance. As far back as 1935, the Reserve Bank of India set up the Agricultural Credit Department to provide agricultural credit. But only since 1951 the Bank's role in this field has become extremely important. The Bank has developed the co-operative credit movement to encourage saving, to eliminate moneylenders from the villages and to route its short term credit to agriculture. The RBI has set up the Agricultural Refinance and Development Corporation to provide long-term finance to farmers.

Classification of RBIs functions The monetary functions also known as the central banking functions of the RBI are related to control and regulation of money and credit, i.e., issue of currency, control of bank credit, control of foreign exchange operations, banker to the Government and to the money market. Monetary functions of the RBI are significant as they control and regulate the volume of money and credit in the country.

Equally important, however, are the non-monetary functions of the RBI in the context of India's economic backwardness. The supervisory function of the RBI may be regarded as a non-monetary function (though many consider this a monetary function). The promotion of sound banking in India is an important goal of the RBI, the RBI has been given wide and drastic powers, under the Banking Regulation Act of 1949 - these powers relate to licencing of banks, branch expansion, liquidity of their assets, management and methods of working, inspection, amalgamation, reconstruction and liquidation. Under the RBI's supervision and inspection, the working of banks has greatly improved. Commercial banks have developed into financially and operationally sound and viable units. The RBI's powers of supervision have now been extended to non-banking financial intermediaries. Since independence, particularly after its nationalisation 1949, the RBI has followed the promotional functions vigorously and has been responsible for strong financial support to industrial and agricultural development in the country.

CHAPTER 2

ABOUT SYNDICATE BANK Syndicate Bank was established in 1925 in Udupi, the abode of Lord Krishna in coastal Karnataka with a capital of Rs.8000/- by three visionaries - Sri Upendra Ananth Pai, a businessman, Sri Vaman Kudva, an engineer and Dr.T M A Pai, a physician - who shared a strong commitment to social welfare. Their objective was primarily to extend financial assistance to the local weavers who were crippled by a crisis in the handloom industry through mobilising small savings from the community. The bank collected as low as 2 annas daily at the doorsteps of the depositors through its Agents under its Pigmy Deposit Scheme started in 1928. This scheme is the Bank's brand equity today and the Bank collects around Rs. 2 crore per day under the scheme. The progress of Syndicate Bank has been synonymous with the phase of progressive banking in India. Spanning over 80 years of pioneering expertise, the Bank has created for itself a solid customer base comprising customers of two or three generations. Being firmly rooted in rural India and understanding the grassroot realities, the Bank's perception had vision of future India. It has been propagating innovations in Banking and also has been receptive to new ideas, without however getting uprooted from its distinctive socio-economic and cultural ethos. Its philosophy of growth by mutual sustenance of both the Bank and the people has paid rich dividends. The Bank has been operating as a catalyst of development across the country with particular reference to the common man at the individual level and in rural/semi urban centres at the area level. The Bank is well equipped to meet the challenges of the 21st century in the areas of information technology, knowledge and competition. A comprehensive IT plan is being put in place and the skills and knowledge of the Bank's personnel are being upgraded through a variety of training programmes to promote customer delight in every sphere of its activity. The Bank has launched an ambitious technology plan called Centralised Banking Solution (CBS) whereby 500 of our strategic branches with their ATMs are being networked nationwide over a 4 year period. The Bank is pioneer among Public Sector Banks on launching CBS. Our bank has already achieved CBS implementation among all its branches. Thus, the bank is 100% CBS enabled.

CHAPTER 3

SERVICES Syndicate Bank has always recognized that Information Technology is an essential part of Banking. The Bank has been in the forefront amongst Public Sector Banks in deploying the latest available technology, in a way that technology acts as an enabler in the development of business and ensures that customers are benefited and delighted.

CORE BANKING SOLUTION (Syndicate-e-banking) The Bank is the first among the Public Sector Banks to implement Core Banking Solution (CBS), way back in 2001. During the financial year 2007-2008, CBS was further consolidated and the overall CBS network of the Bank increased to 1829 branches/offices spread across 1033 centres and accounted for about 96% of the Bank's business. As on 17.03.2009, all the Branches are in the CBS fold The CBS Project has enabled the Bank to deliver banking products and services over multiple delivery channels like networked ATMs, Telebanking, Internet Banking and Mobile Banking, so as to provide Anywhere Anytime Anyhow (AAA) banking service to customers. With the introduction of CBS, the Bank has transformed the Branch customers to Bank customers thereby achieving significant shift in customer preference from brick-and-mortar channel to 24x7 delivery channels.

ATM NETWORK The Bank has rapidly expanded the ATM network considering the fact that ATMs have become the most acceptable delivery channels. As at 25.06.2009 the Bank has got a network of 1119 ATMs, spread across 519 centres. The Bank is a member of VISA International, which extends the usage reach of our ATM/Debit Card holders to over 28700 ATMs in the country and over 1.2 million ATMs across the globe. Our cardholders can also transact at Member Establishments (MEs) numbering over 3.5 lakhs in the country and over 2.84 crores across the globe.

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The Bank is also a founder member of the "CashTree" consortium with 5 other banks since 2003 formed with a view to extend the reach of the cardholders and to enhance customer convenience. Presently, 13 Banks are members of the network thereby increasing the total number of ATMs under the "CashTree" network to over 4300. Click to know more about CASHTREE

INTERNET BANKING SERVICES Internet Banking, which is emerging as an all-pervasive channel, is gaining acceptance amongst our clientele. The number of users has increased considerably. In addition to the basic services of account details, statement of accounts etc., the following services are provided to enhance customer service e-ticketing for Railway ticket reservation Utility Bill payment through Internet banking Payment of Direct & Indirect Taxes - for both individuals and Corporates

ANY BRANCH BANKING SERVICES: [ ABB ] Any Branch Banking transactions at attractive rates are available to all CBS customers Free encashment of self cheques upcountry ( limits apply). Payment of "A/c Payee" crossed third party cheques upcountry Free acceptance of cash upcountry for credit of home branch account (limits apply) Issue of DD/TT/MT from any CBS Branch by debit to home branch account at no additional cost (minimum charges apply) Funds transfer between any two CBS Branches Deposit of cheques for collection upcountry for credit to home branch account Stop Payment instructions/ Statement of Account/ standing instructions etc., from any CBS Branch.

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MOBILE BANKING SERVICES General Business Rules Governing Mobile Banking Services : The following Business rules will apply on MBS being offered by the Bank i) The facility will be available to customers having a satisfactory running Savings/ Current/Overdraft account with the Bank. ii) The daily upper ceiling per customer shall be Rs.50,000/- for fund transfer, bill payment and merchant payment when the service is used over the application/ WAP ( TO BE INTRODUCED LATER) iii) The daily upper ceiling per customer shall be Rs.5,000/- for fund transfer, bill payment and merchant payment when the service is used over the SMS/IVR . iv) Entering the wrong MPIN thrice will block the MBS to the account for the day and two such consecutive blockages will de- activate the customer and the customer should re register for the services as per the procedure laid down for the same. v) Any change in the business rules of any of the processes will be notified on Banks website www.syndicatebank.in which will be construed as sufficient notice to the customer. vi) In the case of a joint account where mode of operation is Either or Survivor authorized person can use the facility. The transactions in such accounts shall be binding on all the joint account holders, jointly and severally. Accounts where mode of operation is joint as also accounts in the name of minor or where minor is a joint account holder are not eligible for MBS. vii) The Bank reserves the right to reject a Customers application for MBS without assigning any reasons. viii) The Bank shall suspend the registration of any Customer if the facility has not been accessed by the Customer for three months or more. If the facility has not been accessed for six months or more, the registration of the Customer will be cancelled. ix) The Customer can request for termination of the Facility by visiting the branch and giving a written request. The Customer shall remain accountable for all the transactions on the designated account made request prior to confirmation of any such cancellation request. x) It shall be the Banks endeavor to give a reasonable notice for withdrawal or termination of the facility, but the Bank may at its discretion withdraw temporarily or terminate the facility, either wholly or partially, anytime without giving prior notice to the customer. The facility may be suspended for any maintenance or repair work for any breakdown in the Hardware/ Software for MBS, any emergency or security reasons without prior notice and the bank shall not be responsible if such an action has to be taken for reasons of security or emergency.

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xi) The Bank may also terminate or suspend the services under the Facility without prior notice if the customer has violated the terms and conditions laid down by the Bank or on the death of the Customer when brought to the notice of the Bank.

REAL TIME GROSS SETTLEMENT (RTGS System) For instant transfer of funds Real Time Gross Settlement (RTGS) is a technology based initiative for improvement of Payment & Settlement System linked to the funds management. RTGS is a gross settlement in which both processing and final settlement of funds transfer instructions take place continuously i.e. in real time and transfers are settled individually against the present clearing system. RTGS settles payments on a transaction basis instead of on net settlement basis adopted presently at clearing houses. The funds transfer through RTGS is instant, final and irrevocable. It is a remittance solution to both corporate customers and individual customers for transfer of funds from their accounts with us to other customers of other bank branches, which are RTGS, enabled. 1. The product is operative only in RTGS enabled CBS branches. At present our 2524 branches are RTGS enabled. Click here to get a list of our RTGS branches. 2. At present customer transaction of Rs. 2.00 lakh and above are allowed under RTGS. Revised charges for RTGS fund transfer w.e.f. 15.11.2010 are as follows: Outward : Range Transaction Charge

Rs. 2 lakh to Rs.5 lakh Rs. 5 lakh and above

Rs. 25/- per transaction + 'applicable taxes' Rs. 50/- per transaction + 'applicable taxes'

ELECTRONIC FUNDS TRANSFER (EFT) System The Electronic Funds Transfer (EFT) System was introduced by the Reserve Bank of India in 1995 for quick movement of funds between different Banks for the Bank Customers. The scheme is available for transfer of funds across the Banks. At present Reserve Bank of India manages the Clearing Houses in 15 centres namely Ahmedabad, Bangalore, Bhubaneshwar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Thiruvananthapuram and Patna.
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The EFT system works on the principle of "NEXT DAY AVAILABILITY OF FUNDS" i.e. the beneficiary gets the funds credited to his account on the very next day, within 24 hours. This is a big boon to customer service since under the paper - based cheque payment system, a customer depositing an outstation cheque for collection receives credit to his account after 1-2 weeks time, depending upon the destination. It is hoped that the enhancement in the limit of amount of individual transactions under the EFT Scheme would be beneficial for the banks' customers and will go a long way in improving customer service in the banks. Salient Features: 1. 2. 3. 4. 5. Fast remittance facility - Credit is afforded within 24 hours. Any number of remittances per day is permitted. Amount is directly credited to beneficiary account. Scope for frauds involving processing of paper instruments is absent. Built in security.

NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT) System National Electronic Funds Transfer is a nation wide transfer of funds from any bank branch to any other bank branch. The beneficiary gets the credit on the same day or the next day depending on the time of settlement. The essential information that the remitting customer has to furnish is:
1. 2. 3.

Beneficiary details such as beneficiary name and account number. Name and IFSC of the beneficiary bank branch. Remitters mobile number or e-mail address.

All the banks print IFSC on cheque leaves issued to their customers. Remitter may also contact the branch and get the IFS Code of that branch. Primarily, NEFT is an account to account funds transfer system. Even customers not maintaining an account with an NEFT bank, can remit funds upto Rs. 50,000/- to credit of another bank account. The system can be used only for remitting Indian Rupee among the participating banks within the country. NEFT between NRI accounts is subject to applicability of provisions of FEMA. There is no value limit for individual transactions.

Outward charges : Range Transaction Charge

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Upto Rs.1 lakh Rs. 1 lakh to Rs 2 lakh above Rs 2 lakh

Rs. 5/- per transaction + 'applicable taxes' Rs. 15 /- per transaction + 'applicable taxes' Rs. 25/- per transaction + 'applicable taxes'

Upto Rs.1 Inward* : Transaction Charge No Charges

* subject to change from time to time Customers can effect NEFT transactions through Branch window upto the branch timings and can make use of other delivery channels like net banking up 6.30 pm. The product is operative only in NEFT enabled CBS branches. At present available in 2611 of our branches for a list of NEFT Branches.

NATIONAL ELECTRONIC CLEARING SERVICE (NECS): National Electronic Clearing Service is centralised processing of repetitive and bulk payment instructions. NECS facilitates sponsor banks to submit ECS files centrally at Mumbai. As of now, NECS operates on a T+1 cycle ('T' refers to the date on which ECS files are processed by ECS centre. Credit or Debit to beneficiary accounts at destination banks is on the next working day)

SYNDEMAT (Depository Participant Services) Our Bank launched SyndDemat (Depository Participant Services) w.e.f. 16.01.2008. As on date 81 branches across the country are enabled for providing DP Services. List of the branches enabled for DP Services 1. 2. 3. 4. 5. 6. Dematerialisation Rematerialisation. Holding of securities in eletronic form Settlement of trades by delivery - On market ; Off market ; Inter-depository Pledge/Unpledge of securities Freezing/unfreezing of Demat Accounts.
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CHAPTER 4

RISK IN BANKING SECTOR Developing economies all over the globe are looking for new modes and means to contain poverty and include every citizen in the economic growth so that no one is deprived of his / her right to live decently. However, the task has been daunting and with limited resources at their disposal, the mission has been an uphill task for these nations. The Indian Government has a long history of working to expand financial reach to the poor and downtrodden, particularly in rural India to engulf them in building a strong India and be a part and partner in a new Economic World Order. The effort has been there for everybody to see. India has emerged a strong economy today. Nationalization of the major private sector banks in 1969 was the first step in this direction. Setting up of separate Banks viz. Regional Rural Banks which would cater to a limited service area to have a focused approach was another mile stone. Yet the growing population put stress on this initiative. In order to sustain this service, the Govt put special emphasis on expansion of commercial bank branches in rural areas. Credit needs of poor especially in rural sector was categorized as priority sector and commercial Banks were mandated to lend atleast 40% of their credit to this sector. Setting of Co-operative Banks was to encourage co-operative venture and expand the reach of easy credit to more and more population. Though all these initiatives did give encouraging results, yet a vast population was still left behind. The recent innovative scheme of micro financing by setting up of Self Help Groups was a giant leap to reach these deprived millions. Encouraged by this, we are now looking at covering entire population in inclusive growth by bringing them under the umbrella of banking. The new concept is Financial Inclusion.Recent developments in Information technology has transformed banking from the traditional brick-and-mortar model to sleek, easy and Anytime, Anyhow, Anywhere banking supported by a number of innovative systems such as Automated Teller Machines (ATM), cashless banking through plastic money, Internet Banking, mobile banking, online money transfers, etc. But technology is expensive and, therefore, is till now restricted to urban population who can afford its cost. Whatever has so far reached to rural population is meager, to say the least. In the new millennium, India has witnessed tremendous growth in communication technology. Not withstanding the global meltdown in the last couple of years, this sector has grown tremendously with the result that now communication has made inroad in urban and semi urban areas and is set to cover more and more new areas. With such expansion, it has also become affordable. With this growth, a new channel of reaching the masses has opened up. Financial inclusion initiatives, driven by a combination of technology and communication, has proved tremendous success in the pilot implementation. Instead of a person reaching the Bank branch, now Bank shall reach the doorstep of customer in this Govt. initiated branchless banking. Certain categories of organisations / people like non-government organizations, micro-finance bodies, co-operative societies, grocery shops, Public Telephone Booth
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operators and individuals are appointed as business correspondent/facilitator of a commercial Bank and are authorized to collect small deposits, disburse and recover certain loans, and also sell other financial products, like insurance, pension and mutual funds, and to handle small remittances and payments through smart card based bio-metric enabled transactions either online or through offline. This is a cost effective scheme with low investment and, therefore, it is planned to cover entire population in the years to come. Extending banking channel to entire population is good step. However, there is a need to sit and review in retrospect whether we are really catering to the needs of the deprived class, whether the services and products that we offer to urban population also suits them, whether the present rules and regulations, including statutory ones adequately address their needs also. Not everybody can start his own business and earn a sustainable income. Just extending a credit facility of even a small amount for such people may not be fruitful. Still we should extend credit to such persons for inclusive growth. We need to innovate different products or a package of products that meet saving, credit and insurance needs of the people. In fact, savings products must meet the specific requirements of the poor. Where is the question of savings when the poor hardly earns enough to sustain a day's meal? They live by a day. Therefore, we must tap small savings in return for some incentives, other than some percentage of interest, with suitable back-end technology support. Remember, traditionally, savings has always been associated with surplus income, which the poor is not generating! We need to have a fresh thinking on savings in the context of poor when we have to include all of them in our fold. Time has come to come up with new ways and means of offering new savings product to poor and deprived class. Similarly, for meeting credit needs, a savings-linked financing model can be adopted for these segments. The approach must be kept simple and should guarantee the beneficiaries a credit limit, subject to adherence to simple terms and conditions. Also, suitable micro-insurance products need to be developed for the financially excluded. Poor population, especially the rural population has high percentage of illiteracy. This makes them depend upon a few literates who can guide them. Therefore, while literacy rate should be increased, we also need to educate them through financial literacy and counseling centres, if we have to empower them we need to educate them. Let us teach them fishing, not feed them fish! Reaching vast millions cannot be sustained either by banks or by govt agencies alone. The underlying fact is that such efforts should be driven by the Govt with the active participation of Banks and support from the Industry. The industry should come out with new technological products such as very low cost hand held machines and affordable smart cards and invest more in setting up communications in the un-wired villages. The Banks should play a very active roll in brining rural population under their fold by sending their correspondents to unbanked areas. The Govt, on their part should extend incentives and relax norms to the Banks and industry in this endevour. Syndicate Bank being the convenor of the State Level Bankers Committee (SLBC), Karnataka, a forum representing all the Banks in State of Karnataka, has been a flag bearer in this new endeavor. With active support from the State Government and Reserve Bank of India, we are working closely to see that EBT (Electronic Benefit Transfer) payments of SSP (Social Security Pension) and wages under
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MGREGS (Mahatma Gandhi Rural Employment Gurantee Scheme) are paid through smart cards in six districts of Karnataka. We have already covered two districts and we will be extending the services to four more districts in a months time. It is planned to cover the entire State within a year. It is said that a step in right direction is like half task done. Yet we have a long way to go and many a hurdles to cross before we realize the dream of achieving 100 percent financial inclusion by 2013 in India. The country has taken it at top of its agenda. To set the right momentum and accelerate the coverage, there have been regulatory relaxations and initiatives such as using mobile phones for making payments and third party business correspondents and relaxing the Know Your Customer norms. The concept of branchless banking will be instrumental in speeding up financial inclusion. With increased coverage we shall definitely innovate and improve so that we achieve the desired goals in the time frame set for the same. There are lots of different types of risks in banking. These include a credit risk, market risk, liquidity risk, operational risk, reputational risk, volatility risk, settlement risk, profit risk and systemic risk. Each of these types has other risk types included in their category. Firstly we have a credit risk, which is the risk of an investor, who has lent money to the borrower, who does not make the return payments as originally agreed. There are a number of circumstances where a credit risk may arise such as a consumer or a business missing payments on a mortgage or any other type of loan, a business or consumer who does not pay an invoice when it is due, a business who does pay an employee's wages when they are due and many others. Secondly we have a market risk, which is the risk that an investment or trading portfolio will decrease in value due to change in the market. This risk can also be related to a volatility risk which is the risk of a portfolio price change due to changes in the volatility of any risk factor. Thirdly, a liquidity risk is the risk that an asset or security cannot be traded quickly enough after receiving it so that the value drops. The two types of liquidity risk include asset liquidity and funding liquidity. An operational risk is the risk that comes from the execution of a company's business functions. This category can also include fraud risks, physical risks, legal risks and environmental risks. A reputational risk is, as suggested by the name, a risk which endangers the reputation of a well respected company.

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CHAPTER 5

FINDINGS AND CONCLUSION

TECHNOLOGY INITIATIVES TAKEN BY THE BANK 1965 Installed first Data Processing machine at the Head Office. 1985 ALPMs introduced 1987 In House Computer at H.O. upgraded to ICIM 6000/40 1991 Established connectivity to SWIFT 1993 First totally computerised branch made operational at Nehru Place Delhi 1995 E-Mail facility introduced at 26 branches 1996 First Telebanking facility introduced at South Block Branch New Delhi 1996 First ATM installed at Gandhi Nagar, Bangalore. 1997 Bank's website launched 1998 Joined Indian Financial Network (INFINET) and VSAT Network 2001 Centralised Banking Solution (CBS) under the brand name "Syndicate-e-banking" launched 2004 Internet Banking launched as one more Delivery Channel for CBS customers 2005 Syndicat-e-banking extended to 245 Branches/Offices as at 31.03.2005 covering 105 Centres SyndBillPay Scheme & Excise and Service Tax payments scheme launched through Internet Banking

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CORPORATE SOCIAL RESPONSIBILITY 1. Social lending is the Banks strong point since inception. 2. Priority sector Advances as at March 2010 were Rs.32712.78 crore accounting for45.88 % of the Banks adjusted net credit as against the mandatory level of 40 %. 19.38 Lakh borrowers assisted under priority sector. 3. SC/ST advances under priority sector are Rs. 1407.81 crore. The total SC/ST advances of the bank are Rs. 1983.07 crore covering 3.18 Lakh customers. 4. The Bank has taken various measures through Regional Offices and Lead District Offices for publicizing among minority community about various credit products available for their benefits. The advances to minorities as at 31.03.2010 were Rs.4399.14 crore.

5. Bank has adopted 13,736 Service Area /Operational Area Villages for extending timely credit to meet all genuine credit needs. Credit to the extent of Rs. 13409.21 crore was disbursed to priority sector activities under Annual Action Plan in these villages. The agricultural credit disbursed during the financial year 2008-09 was Rs. 8013.72 crore. 6. 1,47,352 new farmers were brought into Banks fold through 1179 rural and semi urban branches up to March 2010 registering an average of 125 New farmers per branch and surpassed the Govt. stipulation of 100 new farmers.

7. Agricultural credit stood at Rs.13135.16 crore constituting 18.42% of ANBC. 12.78 Lakh farmers were assisted under agriculture out of which 45.15 % were Small and Marginal Farmers. 8. Bank has cumulatively issued 18.51 Lakh Kisan Credit Cards to the farmers with credit limits of over Rs. 7147.61 crore of which 5.63 Lakh cards with credit limits of Rs.2770.32 crore were outstanding as on 31.03.2010.

9. 31,121 new SHGs were credit linked with credit support of Rs.444.43 crore during 200910 benefitting 4.67 Lakh families. The Bank has so far credit linked 1,76,913 SHGs with credit exposure of Rs. 1601.04 crore benefiting about 24.63 Lakh families of which, 89,974 accounts amounting to Rs. 873.45 crore were outstanding as at 31.03.2010. 10. Extended education loan to 94,771 students to pursue higher1 students to pursue higher education amounting to Rs.1459.70 crore.

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11. Assisted 1.55 Lakh customers under priority sector housing amounting to Rs.7770.72 crore. 12. Advances to weaker section were Rs. 7497.08 crore constituting 10.52 % of ANBC as against the mandatory target of 10 %. 13. Bank is actively involved in implementing the schemes for financing Solar Water Heating and Lighting Systems. Bank has financed 3578 Solar Water Heating Systems amounting to Rs. 12.46 crore and 734 Solar lighting systems amounting to Rs.2.22 crore during 2009-10. The cumulative number of Solar Water Heating and Lighting Systems financed by the Bank is 32736 units with a credit component of Rs. 88.25 crore and 9829 units with a credit component of Rs.17.49 crore respectively. 14. As a result of Solar Water Heating and Lighting Systems financed by the Bank, there is grid power saving to the extent of 7.84 crore units p.a. contributing to a peak load saving of 54.30 MW. 15. Bank has launched an innovative scheme Synd Small Credit during June 2007 to extend need based credit to the entrepreneurs of small means within built advantageous features viz. door step banking, ballooning repayment and limit for consumption and repayment of high cost private debt. The Bank has disbursed Rs.191.97 crore to 13,977 entrepreneurs under the scheme 2009-10. The cumulative disbursement under the scheme up to 31.03.2010 was Rs. 338.71 crore to 30,239 entrepreneurs. 16. Lending to Small and Medium Enterprises stood at Rs. 11006.27 crore as against Rs.6865.18 crore as at 31.03.2009 registering a growth of 60.32 % during 2009-10. Advances to Small and Micro Enterprises stood at Rs. 9740.82 crore as at 31.03.2009 constituting 88.50 % of SME advances. 17. The disbursement under Special Plan for Agricultural Credit during the year 2009-10 amounted to Rs. 8013.72 crore recording a growth of 34.08 % over previous year. Disbursement under investment credit was Rs. 1267.06 crore during the year 2009-10. 18. The Bank has entered into a tie-up with Tobacco Board, Sugar Mills for extending need based credit to farmers. 19. Bank has achieved 100% financial inclusion in 25 lead districts in 5 states and 1 UT for extending all types of banking services. 20. Bank has also achieved 100% financial inclusion in 6695 service area villages through rural and semi-urban branches. 21. 38.71 Lakh no-frill accounts were opened and 11,855 Syndicate General Credit Cards (SGCCS) issued with credit outlay of Rs. 25.73 crore as on 31.03.2010.
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22. Action Plan for implementation of 2nd and 3rd phases of financial inclusion, what is now called Financial Deepening has been prepared and is launched in Lead district of Bagalkot. 23. Action Plan for development of UT of Lakshadweep through credit deployment has been prepared. 24. Bank and the sponsored RRBs have set up Financial Literacy-cum-Counseling Centres in 8 centres viz. Bijapur and Chikodi in Karnataka, Kadapa in Andhra Pradesh, Rewari in Haryana, JP Nagar, Moradabad & Rampur in UP and Kannur in Kerala State.

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FINANCIAL PERFORMANCE Syndicate Bank has recorded an increase of 23% in its Operating Profit for the nine months period ended 31st December, 2011. The Operating Profit was 2,556 crores for the period ended 31st December, 2011 as against 2,078 crores recorded during the corresponding period of the previous year. Net Interest Income increased from 3,222 crores for the nine months period ended 31st December, 2010 to 3,748 crores as on 31st December, 2011 registering a growth of 16%. Other income increased by 17% from 660 crores to 776 crores Y-o-Y mainly due to the increase in fee based income. The Net Profit for the nine months period ended 31st December, 2011 was 1,004 crores as against ` 759 crores as on 31st December, 2010 recording 32% growth over the corresponding period in the previous year. The Global Business of the Bank was 259,626 crores as on 31.12.2011 as against 225,910 crores as on 31.12.2010 registering a Y-o-Y growth of 15%. The Deposits stood at 143,128 crores registering a Y-o-Y growth of 15% and Advances at 116,498 crores, registering a Y-o-Y growth of 15% as on 31st December, 2011. The Return on Assets has increased from 0.75% as on 31.12.2010 to 0.85% as on 31.12.2011. The Net Interest Margin for the nine months period ended 31.12.2011 is at 3.33%. The increase in overall interest rates has resulted in increase of cost of deposits from 5.28% as on 31.12.2010 to 6.66% as on 31.12.2011. The yield on advances has also increased from 9.35% as on 31.12.2010 to 10.75% as on 31.12.2011. Cost to income ratio of the bank improved from 46.48% as on 31.12.2010 to 43.50% as on 31.12.2011. KEY PARAMETERS Quarter ended Dec. 2011 Operating Profit 923 Net Profit 338 Net Interest Income 1325 Net Interest Margin 3.45% (NIM) Capital Adequacy Ratio 11.48% Gross NPA 2.29% Net NPA 0.86% Earning Per Share 23.35% (Annualised) (Rs) Business 259626 Deposits 143128 Advances 116498 Cost of Deposits (%) 6.91% Yield on Advances (%) 11.11% Cost to Income Ratio (%) 41.05% Quarter ended Dec. 2010 712 256 1150 3.58% 11.74% 2.32% 0.95% 19.37 225910 124603 101307 5.44% 9.57% 47.79% Growth (%) 30% 32% 15%

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