History of Indian Banking Industry

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 the Bank of Hindustan, both of which 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 1925 to form the Imperial Bank of India, which, upon India's
independence, became the State Bank of India. 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. 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 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. The presidency banks dominated banking in India

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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
undercapitalized 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."

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 History of banking divided in 3 Phases:
Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay

(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was
established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894
with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India,
Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of
India came in 1935. During the first phase the growth was very slow and banks also experienced
periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of India came
up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act
1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with

Extensive powers for the supervision of banking in India as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal department
was comparatively safer. Moreover, funds were largely given to traders.

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Phase II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially
in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI
and to handle banking transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July,
1969, major process of nationalization was carried out. It was the effort of the then Prime
Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was
nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in
1980 with seven more banks. This step brought 80% of the banking segment in India under
Government ownership. The following are the steps taken by the Government of India to
Regulate Banking Institutions in the Country:

 1949: Enactment of Banking Regulation Act.

 1955: Nationalization of State Bank of India.
 1959: Nationalization of SBI subsidiaries.
 1961: Insurance cover extended to deposits.
 1969 : Nationalisation of 14 major banks
 1971 : Creation of credit guarantee corporation.
 1975 : Creation of regional rural banks.
 1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and immense
confidence about the sustainability of these institutions.

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Phase III
This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his
name which worked for the liberalisation of banking practices.The country is flooded with
foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to
customers. Phone banking and net banking is introduced. The entire system became more
convenient and swift. Time is given more importance than money. The financial system of India
has shown a great deal of resilience. It is sheltered from any crisis triggered by any external
macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible
exchange rate regime, the foreign reserves are high, the capital account is not yet fully
convertible, and banks and their customers have limited foreign exchange exposure.

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 Different Banks in India

1. Reserve Bank of India

The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of
the Reserve Bank of India Act, 1934. Though initially RBI was privately owned, it was
nationalized in 1949. Its central office is in Mumbai where the Governor of RBI sits. RBI has 22
regional offices and most of them are located in state capitals. The Reserve Bank of India also
has three fully owned subsidiaries:
National Housing Bank (NHB), Deposit Insurance and Credit Guarantee Corporation of India
(DICGC), Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL). The functions of
Reserve Bank are governed by central board of directors. The board is appointed by the
Government of India. The directors are nominated / appointed for a period of four years. As per
the Reserve Bank of India Act there are Official Directors and Non-Official Directors. The
Official Directors are appointed by the government and include Governor and Deputy Governors
of RBI. There cannot be more than four Deputy Governors. Non-Official Directors are
nominated by the government. These include ten Directors from various fields and one
government official. Apart from these, there are four other Non-Official Directors, one each from
four local boards in Mumbai, Kolkata, Chennai and New Delhi.

Main Functions of RBI

 Reserve Bank of India is the main monetary authority of the country. It formulates,
implements and monitors the monetary policy and thereby plays a key role in maintaining
price stability and ensuring adequate flow of credit to productive sectors.
 RBI is the regulator and supervisor of the financial system in the country. It prescribes
broad parameters of banking operations within which the country's banking and financial
system functions.
 It manages the foreign exchange of the country.
 Performs merchant banking function for the central and the state governments; also acts
as their banker.
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  Maintains banking accounts of all scheduled banks.
 Issues and exchanges or destroys currency and coins not fit for circulation

2. Nationalised Banks in India

Nationalised banks dominate the banking system in India. The history of nationalised banks in
India dates back to mid-20th century, when Imperial Bank of India was nationalised (under the
SBI Act of 1955) and re-christened as State Bank of India (SBI) in July 1955. Then on 19th July
1960, its seven subsidiaries were also nationalised with deposits over 200 crores. These
subsidiaries of SBI were State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad
(SBH), State Bank of Indore (SBIR), State Bank of Mysore (SBM), State Bank of Patiala (SBP),
State Bank of Saurashtra (SBS), and State Bank of Travancore (SBT). However, the major
nationalisation of banks happened in 1969 by the then-Prime Minister Indira Gandhi. The major
objective behind nationalisation was to spread banking infrastructure in rural areas and make
cheap finance available to Indian farmers.

List of Public Sector Banks in India is as follows:

Allahabad Bank Andhra Bank
Bank of Baroda Bank of India
Bank of Maharashtra Canara Bank
Central Bank of India Corporation Bank
Dena Bank Indian Bank
Indian Overseas Bank Oriental Bank of Commerce
Punjab and Sind Bank Punjab National Bank
State Bank of Bikaner & Jaipur State Bank of Hyderabad
State Bank of India (SBI) State Bank of Indore
State Bank of Mysore State Bank of Patiala
State Bank of Saurashtra State Bank of Travancore

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Syndicate Bank UCO Bank
Union Bank of India United Bank of India
Vijaya Bank IDBI Bank

3. Private Banks in India

Initially all the banks in India were private banks, which were founded in the pre-independence
era to cater to the banking needs of the people. In 1921, three major banks i.e. Banks of Bengal,
Bank of Bombay, and Bank of Madras, merged to form Imperial Bank of India. In 1935, the
Reserve Bank of India (RBI) was established and it took over the central banking responsibilities
from the Imperial Bank of India, transferring commercial banking functions completely to IBI.
In 1955, after the declaration of first-five year plan, Imperial Bank of India was subsequently
transformed into State Bank of India (SBI). Following this, occurred the nationalization of major
banks in India on 19 July 1969. The Government of India issued an ordinance and nationalized
14 largest commercial banks of India, including Punjab National Bank (PNB), Allahabad Bank,
Canara Bank, Central Bank of India, etc. Thus, public sector banks revived to take up leading
role in the banking structure. In 1980, the GOI nationalized 6 more commercial banks, with
control over 91% of banking business of India. In 1994, the Reserve Bank Of India issued a
policy of liberalization to license limited number of private banks, which came to be known as
New Generation tech-savvy banks. Global Trust Bank was, thus, the first private bank after
liberalization; it was later amalgamated with Oriental Bank of Commerce (OBC). Then Housing
Development Finance Corporation Limited (HDFC) became the first (still existing) to receive an
'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private
sector. At present, Private Banks in India include leading banks like ICICI Banks, ING Vysya
Bank, Jammu & Kashmir Bank, Karnataka Bank, Kotak Mahindra Bank, SBI Commercial and
International Bank, etc. Undoubtedly, being tech-savvy and full of expertise, private banks have
played a major role in the development of Indian banking industry. They have made banking
more efficient and customer friendly. In the process they have jolted public sector banks out of
complacency and forced them to become more competitive.

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Major private banks in India are:
Bank of Rajasthan Catholic Syrian Bank
Dhanalakshmi Bank Federal Bank
HDFC Bank ICICI Bank
ING Vysya Bank Jammu & Kashmir Bank
Karnataka Bank Karur Vysya Bank
SBI Commercial and International Bank UTI Bank
YES Bank

4. Co-operative Banks:
The Co-operative bank has a history of almost 100 years. The Co-operative banks are an
important constituent of the Indian Financial System, judging by the role assigned to them, the
expectations they are supposed to fulfill, their number, and the number of offices they operate.
The co-operative movement originated in the West, but the importance that such banks have
assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing
continues to be important even today, and their business in the urban areas also has increased
phenomenally in recent years mainly due to the sharp increase in the number of cooperative
banks. While the co-operative banks in rural areas mainly finance agricultural based activities
including farming, cattle, milk, hatchery, personal finance etc. along with some small scale
industries and self-employment driven activities, the co-operative banks in urban areas mainly
finance various categories of people for self-employment, industries, small scale units, home
finance, consumer finance, personal finance, etc. Some of the co-operative banks are quite
forward looking and have developed sufficient core competencies to challenge state and private
sector banks. According to NAFCUB the total deposits & lendings of Co-operative Banks is
much more than Old Private Sector Banks & also the New Private Sector Banks. This
exponential growth of Co-operative Banks is attributed mainly to their much better local reach,
personal interaction with customers, their ability to catch the nerve of the local clientele. Though
registered under the Co-operative Societies Act of the Respective States (where formed
originally) the banking related activities of the co-operative banks are also regulated by the

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Reserve Bank of India. They are governed by the Banking Regulations Act 1949 and Banking
Laws (Co-operative Societies) Act, 1965.
There are two main categories of the co-operative banks.
(a) Short term lending oriented co-operative Banks – within this category there are three sub
categories of banks viz state co-operative banks, District co-operative banks and Primary
Agricultural co-operative societies.
(b) Long term lending oriented co-operative Banks – within the second category there are
land development banks at three levels state level, district level and village level.
Features of Cooperative Banks
Co-operative Banks are organized and managed on the principal of co-operation, self-help, and
mutual help. They function with the rule of “one member, one vote”. Function on “no profit, no
loss” basis. Co-operative banks, as a principle, do not pursue the goal of profit maximization.
Co-operative bank performs all the main banking functions of deposit mobilization, supply of
credit and provision of remittance facilities. Co-operative Banks provide limited banking
products and are functionally specialists in agriculture related products. However, co-operative
banks now provide housing loans also.
Co-operative banks are financial intermediaries only partially. The sources of their funds
(resources) are (a) central and state government, (b) the Reserve Bank of India and NABARD,
(c) other co-operative institutions, (d) ownership funds and, (e) deposits or debenture issues. It is
interesting to note that intra-sectoral flows of funds are much greater in co-operative banking
than in commercial banking. Inter-bank deposits, borrowings, and credit from a significant part
of assets and liabilities of co-operative banks. This means that intra-sectoral competition is
absent and intra-sectoral integration is high for co-operative bank. Some co-operative banks are
scheduled banks, while others are non-scheduled banks. For instance, SCBs and some UCBs are
scheduled banks but other co-operative bank are non-scheduled banks. At present, 28 SCBs and
11 UCBs with Demand and Time Liabilities over Rs 50 crore each included in the Second
Schedule of the Reserve Bank of India Act. Co-operative Banks are subject to CRR and liquidity
requirements as other scheduled and nonscheduled banks are. However, their requirements are
less than commercial banks. Since 1966 the lending and deposit rate of commercial banks have
been directly regulated by the Reserve Bank of India.

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5. Foreign Banks in India
Foreign banks have brought latest technology and latest banking practices in India. They have
helped made Indian Banking system more competitive and efficient. Government has come up
with a road map for expansion of foreign banks in India.
The road map has two phases. During the first phase between March 2005 and March 2009,
foreign banks may establish a presence by way of setting up a wholly owned subsidiary (WOS)
or conversion of existing branches into a WOS. The second phase will commence in April 2009
after a review of the experience gained after due consultation with all the stake holders in the
banking sector. The review would examine issues concerning extension of national treatment to
WOS, dilution of stake and permitting mergers/acquisitions of any private sector banks in India
by a foreign bank.

Major foreign banks in India are:

ABN-AMRO Bank Abu Dhabi Commercial Bank Ltd.
American Express Bank Ltd BNP Paribas
Citibank DBS Bank Ltd
Deutsche Bank HSBC Ltd
Standard Chartered Bank Barclays Bank

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 Role of Indian Banking
Banks play a positive role in economic development of a country as repositories of community’s
savings and as purveyors of credit. Indian Banking has aided the economic development during
the last fifty years in an effective way. The banking sector has shown a remarkable
responsiveness to the needs of planned economy. It has brought about a considerable progress in
its efforts at deposit mobilization and has taken a number of measures in the recent past for
accelerating the rate of growth of deposits. As recourse to this, the commercial banks opened
branches in urban, semi-urban and rural areas and have introduced a number of attractive
schemes to foster economic development. The activities of commercial banking have growth in
multi-directional ways as well as multi-dimensional manner. Banks have been playing a catalytic
role in area development, backward area development, extended assistance to rural development
all along helping agriculture, industry, international trade in a significant manner. By
contributing to government securities, bonds and debentures of termlending institutions in the
fields of agriculture, industries and now housing, banks are also providing these institutions with
an access to the common pool of savings mobilized by them, to that extent relieving them of the
responsibility of directly approaching the saver. This intermediation role of banks is particularly
important in the early stages of economic development and financial specification. A country
like India, with different regions at different stages of development, presents an interesting
spectrum of the evolving role of banks, in the matter of inter-mediation and beyond.
Mobilization of resources forms an integral part of the development process in India. In this
process of mobilization, banks are at a great advantage, chiefly because of their network of
branches in the country. And banks have to place considerable reliance on the mobilization of
deposits from the public to finance development programmes. Further, deposit mobalization by
banks in India acquired greater significance in their new role in economic development.
Commercial banks provide short-term and medium-term financial assistance. The short-term
credit facilities are granted for working capital requirements. The medium-term loans are for the
acquisition of land, construction of factory premises and purchase of machinery and equipment.
These loans are generally granted for periods ranging from five to seven years. They also
establish letters of credit on behalf of their clients favouring suppliers of raw

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materials/machinery (both Indian and foreign) which extend the banker’s assurance for payment
and thus help their delivery. Certain transaction, particularly those in contracts of sale of
Government Departments, may require guarantees being issued in lieu of security earnest money
deposits for release of advance money, supply of raw materials for processing, full payment of
bills on the assurance of the performance etc.

Feature of Indian banking

1. Core Banking
A . Get More from the Core: Drivers of Back-office Transformation
In the recent past banks were esoteric institutions that acted as custodians of cash and handed out
loans. Today they have been transformed into dynamic, multichannel organizations that strive to
continuously bring innovative products to the marketplace. All this has been done in order to
improve profitability in the face of relentless competition and increasingly savvy customers. The
globally mobile customer is demanding low cost tailored products across multiple product
channels. There clearly exists a need for banks to move from being product-centric to customer-
centric. Unfortunately, the legacy systems, currently prevalent, lack the agility, flexibility and
scalability needed to meet today’s challenges. Thus, they fail to provide a foundation for future
growth. To counter this, banks need to modernize and transform their core banking systems by
moving towards a centralized back-office and standardized processes, or they run the risk of
paying a heavy price in terms of higher costs and lower profits. At the same time leveraging
SOA (Service Oriented Architecture) for IT will enable product bundling, cross-selling of
products and service customization.

B. Payments Business 3S Approach

Payments - the numero uno facet of a payment system, enables the circulation of funds. Without
a robust infrastructure enabling smooth flow of funds, financial institutions can rarely assume the
role of a financial intermediary in the economy. In order to confront the numerous parallel
players in the remittance market, banks need to maintain a payments system infrastructure and
refine the processes and practices of delivering payment services. This will ensure better turn
around time of payment cycles with faster availability of funds to customers. Banks have

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traditionally treated payments as a specialized stream and segregated the process from other
banking business flows. This has led to the multiplicity of payment acquisition channels and a
plethora of payment networks.  Now banks can capitalize on the payment hub architecture
through a payments system model which is integrated with the core banking solution. Realization
of this would pose survival challenges to average products in the market and cultivate value
propositions for innovative products by scripting successful alliances with customers on one
hand and technology partners on the other. This paper describes the 3S objectives - Speed,
Security and Standards that the payments market across geographies is witnessing and highlights
why an integrated payment module is required to centrally manage the work flow of payment
processes.

C. The Core Banking Juggernaut Rolls On

Tier 1 banks are taking the lead and embarking on a total overhaul of their core processing
platforms. The verdict - new age core systems are leaving an indelible imprint on the banking
landscape, at least to the extent of gaining acceptance and engulfing few legacy systems in its
wake. This article seeks to highlight some of the trends in the core banking space and what the
next year holds out for the banking industry. In the near future one would see a complete
confluence in the paths of banks and independent software vendors through the role of core
banking systems. This shall be done in the quest to redefine their very existence, and for banks to
survive and flourish in an intensely competitive and globalized landscape. There is a focus on
factors that will have attained considerable significance for contemporary banks and will be the
key drivers in selecting the platform that will power banks into the next orbit and beyond.
The paper also draws attention to the strategic challenges before the bank’s stakeholders as well
as some of the critical success factors that banks need to be mindful of in order to derive the
maximum out of their core banking transformation initiatives.

D. Key Challenges in Core Banking Replacement

Successful banks are those that understand the potential of new technologies. They align
themselves to fully leverage the powers of these technologies by focusing on the adaptive
changes that make the technology transformation process successful. The current competitive
environment with increasingly demanding customers is forcing banks to take a reality check on

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the technology environment and ensure that their IT strategy is aligned to their business
objectives. And core banking replacement is often the only solution. Herein banks need to be
mindful of challenges like vendor capabilities and dependency on legacy applications which are
generally associated with core banking deployments and replacements. These challenges once
understood and mitigated properly can result in the bank leapfrogging to a high degree of
differentiation and providing an enriched customer value proposition. This paper details the key
factors banks need to focus on, to enable them to make the core banking transformation a
successful experience.

E. Managing Risks In Core Banking Replacements

Core banking replacement has for quite some time been considered fraught with high risks. The
costs are potentially bordering on the prohibitive and many still believe that their present in-
house systems are satisfactorily serving the purpose. But the wind is changing direction and fast.
There is a rising acknowledgement of the fact that banks, irrespective of size and geography,
face the dual challenge of cutting costs and increasing their internal efficiencies. This is done
with the ultimate aim of improving margins which are clearly under strain. Though it is easy to
select a vendor for implementing a solution, the challenging part is carrying the project through
to a successful implementation. Current requirement is for an experienced vendor with
impeccable implementation credentials who has in the past managed all such challenges well.
Banks thus need to take a holistic view while considering the replacement of their core banking
platform. Risks need to be mitigated and managed and following this line of thought, this paper
delves into the risks that banks should take cognizance of before embarking on what is clearly
going to be the single biggest technology initiative within the bank.

2. Banking Transformation

A. Demand Deposit Account (DDA) Framework with Proven Resilience

U.S. banks, collectively holding over US $7 trillion in deposit accounts, are highly reliant on
their DDA technology frameworks. These solutions must be able to keep pace with the evolution
of deposit accounts in terms of number, size, variety and complexity. Moreover, the staggering
volume of deposit accounts and related transactions is growing at a sharp pace as customers seek

15
to park their money in safe avenues. Clearly, the efficient management of deposits is dependent
on the resilience and flexibility of the technological solution.
B. Banking Efficiency Beyond Cost Cutting 
For the banking industry, which finds itself in the eye of the storm, the need to raise efficiency
has perhaps never been more crucial. Although cost cutting is the first thing that comes to mind,
impulsive slashing of expenditure across the board could actually do more harm than good While
there are several ways to trim the fat, not all of them are appropriate for all banks. Banking
institutions need to realize that there is no one-size-fits-all solution to cost cutting; they need to
do a great deal of analysis to arrive at the one that works best for them. A successful banking
efficiency optimization plan must look beyond mere cost cutting and draw upon a combination
of the different strategies. Important as it may be during good times, the improvement of banking
efficiency assumes paramount significance during bad. However, this calls for more than cost
cutting – an indiscriminate slash and burn approach will not provide the right answers. 80
percent of cost savings can come from 20 percent of expense items; therefore, banks need to do
some careful analysis before arriving at those that present the best opportunity. That apart, they
must institute a host of measures to ensure all-round productivity.

C. Technology-driven Superior Customer Experience

In a recent global benchmarking study, respondents from banks located in 15 countries rated
management of customer experience as the single largest factor for success, yet admitted that
their performance in this area left more to be desired. Banking customers seem to agree with this
view. Their willingness to recommend their bank to others was among the lowest of all
industries, in every market that was surveyed. While most banks realise that quality of customer
experience is critical to their ability to retain customers and acquire new ones, only a few are
able to render more than lip service. Delivering excellent customer experience requires
enterprisewide orientation towards this goal, and that means integrating the front office with
operations in the middle and back office – the good intentions of many banks fall by the wayside
when faced with the enormity of the task.

D. Make Products Work Harder in Tougher Times

Buffeted by the rough winds of the continuing crisis of confidence and the dismal economic
scenario, banks cannot afford to operate as they did during days when credit, cash and

16
confidence were readily available and customers were relatively happy. Nor can they freeze the
organization, and keep from innovating and launching new products, thus slipping on retaining
and gaining customers. Today, banks need business more than anything else – for survival,
sustainability and growth. And to garner business, banks must take a host of measures, including
creating personalized products, streamlining operations, and leveraging a more agile IT
landscape. However, this must be achieved when resources are limited, competition is fierce and
customers are distrustful. Surrounded as they are by tight credit, collapsing companies, bad
loans, risk-averse investors, and nearly nonexistent margins, this is a challenge indeed.

E. Integrated Platform: Where the Future Lies

Silo-based IT systems create operational complexity and redundancy that can increase costs and
diminish the bank’s ability to respond to change. Banks can no longer ignore the fact that a
unified and common information architecture representing its identity, brand and image is as
essential as the functionality it provides.  An Integrated Business Platform translates into
standardized and enterprise-wide common information architecture, aligned seamlessly with a
bank’s business strategy. It connects processes and information in a way that allows banks to
flexibly react to the dynamics of customers and competitors. The IBP has proven advantages and
banks need to consider migrating to such an infrastructure. However, building an integrated
setup need not be a risky undertaking. If fused in a phased manner with the help of a trusted
transformation partner, the IBP can offer banks what a best-of-breed solution cannot – ease of
use, agility, happier customers, lowered costs and increased profits. It can bring the different
departments in a bank in sync with each other to pursue a common goal and enjoy a common
ground for negotiation with the single vendor. This brings in much-needed standardization across
the organization.

3. Trends in Banking
A. New Segmentation Approaches to Drive Product Innovation
Banking customers' demands have kept pace with the rising complexity of their needs. They
expect banks to address their individual requirements with relevant products and services. This
implies that banking institutions must acquire a deeper understanding of their customers at a one-
to-one level, and deploy that insight into product and service innovation. Customer segmentation

17
is central to this objective. Current segmentation practices are mostly unidimensional and based
on a single parameter such as relationship value. Although the relevance of relationship value as
a measure of customer loyalty is beyond doubt, it cannot be the sole criterion for segmentation.
Going forward, banks must refine their segmentation strategy by taking into account a
combination of demographic, social, economic, geographic and linguistic factors.

B. Online Customer Experience: What Works

About 75 percent of American banking customers surveyed during an October 2008 study
reported using online banking to keep track of their expenses. Not surprisingly, a similar number
confirmed that they were watching their finances more closely during the current economic
downturn. Online banking reported the strongest growth among all channels customers wanted to
watch their finances more closely, at least cost, and online banking served both ends. This means
that although business volumes may be down, customers are paying more attention to their
banking activities. Importantly, this opens up opportunities for banks to intensify their customer
relationships, albeit in ways that are not immediately measurable in dollar terms. To do so, banks
must maximize the impact of every customer interaction, delivering a unique and memorable
experience.

C. Go Direct for Deposits

In this increasingly demanding world, banks are traversing a rocky road and need every deposit
that a customer may make. They face both economic and business hurdles. The consumer may
have very little to save and, consequently, banks will get lesser money to put in their coffers.
Even in these trying times, bank customers continue to be discerning, asking for exemplary
service, convenience and tailored products. As they face the economic reality of slowing growth,
high prices and lower wages, customers are more savvy than ever and willing to switch their
business if they do not get value for their money. Banks are asking themselves: How can we cut
costs and increase deposits even as growth slows, inflation soars and customers demand more?
Branches were set up as primary customer touch points, and, as the need for convenience
increased, banks turned to ATMs. However, both require the bank to invest heavily in
infrastructure and manpower, while customers need to travel physically to transact business.

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With the advent of direct banking, banks have a service delivery mechanism that ensures several
advantages – both for the bank and customers.

D. Win the Global Challenge: Consolidate and Standardize

Banks are striving to win in a daunting new world – brutal competition, low margins and
customers who want everything and more. The rapid opening up of emerging economies and the
saturation of developed markets have banks scrambling to tap emerging global opportunities. A
reverse osmosis from the developing nations is also reshaping the industry, all with a view to
attain sustainable growth. As emerging economies open up to offer new opportunities, banks are
setting up operations in multiple countries hoping to gain a fatter wallet-share. They are opting to
expand their presence by entering newer areas in these countries, taking up ambitious Greenfield
projects or extending footprint through mergers and acquisitions. A new trend is emerging
wherein local banks are becoming regional and regional ones are growing into global players.
This paper explores why banks need to leverage IT for competitive advantage and roll out an
operating model for technology that allows people and processes to meet a common business
objective. The paper highlights that consolidation of IT infrastructure and standardization of
products and processes across the bank’s various entities are the two critical imperatives which
can be enabled through a powerful technology platform in a multi-country scenario.

E. One Billion Opportunities: Banking the Unbanked Globally

There is a billion-strong globally distributed market actively seeking financial services which
remain largely unattended to. These prospective customers represent enormous earning potential
for banks, but constitute the unbanked. The unbanked are those who do not utilize banking
services and have limited banking needs. The unbanked are not the poorest of the poor.
However, they certainly include those whom banks need to serve but cannot do so profitably in
the existing banking environment.  Though these consumers need access to banking for savings,
loans and microfinance, they do not have bank accounts. The reasons for this include lack of
steady and substantial income leading to a fear of insufficient funds for an account, limited
access to banks (especially in remote areas), lack of formal employment that precludes a
financial history, poor financial literacy or even psychological factors such as mistrust of
financial institutions. Another important reason for this predicament of the unbanked is that

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banks do not offer them suitable products tailored to their needs. In effect, they have been
excluded by the banks’ inability to understand the unbanked market requirements and the banks’
unwillingness to adopt innovative models to serve them.
4. e-Banking
A. Web 2.0 in Banking and Financial Services Industry
Web 2.0 is changing the way we interact online. Web 2.0 tools like Wikis, blogs, surveys,
ratings, polls, widgets and social networking are being widely used across industry verticals for
improving customer loyalty and thus business This paper attempts to explore the possibilities of
Web 2.0 in banking and financial services industry and the ways in which such tools can be
deployed to improve customer stickiness and bring increased business to financial Institutions.

B. Internet Banking: Relevance in a Changing World

Banks will do well to partner with an Internet banking solution provider which has not only the
expertise to translate their vision into a cutting edge e-banking experience for the user, but also
the foresight to define boundaries for safety. With security concerns adequately addressed, next
generation Internet banking is full of exciting possibilities. Banks that seize the opportunity may
find that Internet banking can become a means of differentiating themselves from competitors,
rather than a mere cost cutting tool. Clearly, providing a more powerful and interactive e-
banking experience, is the way forward.

C. Mobilizing Customers: Mobile Banking in the US

All over the world, people are experiencing the convenience of mobile banking. Gartner has
estimated that there will be 33 million mobile payment users worldwide in 2008, expecting this
number to triple to 103.9 million users in 2011. Mobile banking is set for rapid growth with the
number of global mobile banking transactions predicted to ramp up from 2.7 billion in 2007 to
37 billion by 2011, according to Juniper Research. In its report, ‘Mobile Financial Services:
Banking & Payment Markets 2007-2011’, Juniper forecasts there will be an additional 517
million mobile users of MFS over that four year period, with a total of 612 million users globally
generating more than $587 billion worth of financial transactions by 2011. In contrast with the
rest of the world, mobile banking in the US took some time to take off. One of the primary

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reasons was the legislative hassle involved. The banking environment is a tough one in the best
of times.

D. The Next Wave in Internet Banking

The Internet banking model was originally built with a view to merely replace identified brick-
&-mortar services and provide an online means of reaching out to the bank. This model was not
mature enough for the market as these Internet banking solutions served as mere aggregating
mechanisms. Slowly new features like inter-bank local payments, international remittances,
communication through secure e-mail with dedicated relationship managers from the bank and
exposure of account relationships through online channels were added. Banks then started to use
the model as a ‘differentiating’ factor. Today, the banking business is driven by one mantra -
virtually all types and kinds of banking services to be made extendable across channels,
including the Internet. With the growth of Internet banking being driven even harder by the retail
boom, banks can increasingly rely on new-generation electronic banking solutions built on open
architecture, with robust security features, that provide true relationship banking functionality as
well as be scalable and flexible to meet the changing demands of the retail customer. This paper
looks at what Internet banking has been so far and delves into what the future ahead could be
like. It also highlights the importance of having solution vendors who move in sync with the
market, focusing on building beyond their core competencies.

E. Managing Security in Mobile and Wireless Services

As banks adopt multi-delivery channels in response to customer demands for greater
convenience and lower costs, the wireless channel has seen growing acceptance in the retail
payments and brokerage segments. This is being driven by the ubiquitous nature of wireless
devices and their consumer acceptance as well as by the benefits of convenience and low
transaction costs. With the increased benefits and convenience of mobile and wireless
applications in the banking industry there are also increasing risks in security and hence, the need
for security solutions. Three points of security vulnerability exist: the mobile device itself, the
wireless channel, and the network connection between the wireless Web servers and the back-
end transaction servers. The wireless signals may also be picked up beyond the intended
recipients creating potential security hazards. Thus, stricter security policies, WLAN security

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upgrades, the use of encryption technology such as virtual private networks and end-to-end
security solutions are highly recommended. Effective enforcement of security policies is as
critical to mobile security as is the implementation of comprehensive mobile security solutions.

5. Corporate Banking
A. Corporate Origination
Deals in the corporate and investment banking world are significantly different from retail
lending. With corporate houses getting a flurry of offers from several banks, deal structures, rates
and fees are negotiated. The banker or relationship manager who has the best relationship wins
the deal, possibly not always on desired terms, but at rates closer to the best offered by
competition. Given the relatively lower volumes, and the high degree of flexibility required (read
manual intervention), it is no wonder that automation is yet to make a complete inroad into
corporate origination. The senior corporate bankers are busy dealing with their high end
corporate customers and sewing up highly structured deals. Accessing systems either for inquiry
on the portfolio or originating a loan has, till now, been passé. However, this view is set to
change. This paper highlights that the rarefied world of corporate origination is now practically
the final frontier for technology led transformation. Technology can play a significant role in
transforming the current paper-intensive process into a more efficient one, improving
productivity, reducing turn around time in processing credit applications, and more importantly
bringing in electronic audit trails. From a system perspective, paper also discusses the various
challenges that the elements of the corporate origination process pose for banks worldwide.

B. Corporate Banking: Towards A Paperless Haven

The banking industry has seen investment of millions of dollars in technology-led business
transformation. Myriad systems exist in a bank to manage corporate customer relationship,
maintain customer databases, regulatory compliance, origination and on boarding, financial
analysis, accounting, transaction management, portfolio management and much more.

C. Corporate Relationship Management – A Perspective

KYC or 'Know Your Customer has more than one connotation to it. The obvious connotation is
from the regulatory viewpoint. The other dimension of KYC refers to knowing your corporate

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clients in order to design the right solutions for them, which in turn creates stronger business
relationships. To the bank, it means supplementary business opportunities and better service, and
to the customer, it means better business support and value for money.

6. CRM (custmer relationship management)

A. Social CRM - A Way to Innovate Banking CRM

Banks may derive both quantitative and qualitative benefits by upgrading their CRM system with
Social CRM. On the quantitative side there are benefits of cost reduction. There is a benefit of
reduced capital cost by owning less capacity database. Further, there is a benefit of reduced
operational cost by getting away from the maintenance of this database. On the qualitative side
again there are benefits of cost reduction. Increased engagement of bank representatives and
DSAs will result in increased productivity and hence reduced operational cost. Also, the way in
which customer information is used by social CRM will result in to greater customer satisfaction
and hence increased business for banks. Therefore, banks may improve both top line and bottom
line numbers by adopting social CRM. Conclusively, it makes sense to upgrade banking CRM
with Web 2.0 capabilities and to assume that customer data may not be owned by CRM itself.

B. CRM in banking
This paper brings forth the views that were discussed at Finacle Connect Virtual Industry
Roundtable by a panel of industry experts who deliberated on the current trends in CRM, and
how banks are using CRM to deepen their relationship with customers. Basically, CRM is a key
element of differentiation that lets banks develop their customer base and sales capacity. Today
the environment is changing dramatically, and so is banks’ approach to their customers. A well
thought out CRM strategy lets them improve the sales experience of the customer; develop the
potential value for customers, increase sales, productivity and efficiency; and create personalized
one-to-one service. It is important that the client not the product is in the center. This is the
reason why banks should try to improve the following processes and support it with systems
-customer service and advice, customer analytics and campaign-management .CRM, at the end
of day, should be a business strategy more than anything else. In the roundtable some issues

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discussed were benefits that banks can hope to achieve through deploying CRM solutions, how
has the understanding of CRM in banking changed today as compared to a few years back and
how the technology has matured in this time and the impact it has on banks today.

C. The 2nd Generation of CRM

Customers and customer relationships lie at the very core of the business of banking. It is
therefore not surprising that CRM (customer relationship management) solutions promising
banks the ability to manage customer relationships were instantly popular when they were
launched over a decade back. Unfortunately, a majority of these initiatives turned out to be
costly, complex enterprise-wide projects with lengthy implementation time and banks did not get
adequate returns from their massive investments. In those early days, neither banks nor the
vendors realized that CRM goes much beyond technology. The organizational structure and
processes at the bank need to change to adequately support a CRM solution. Now, banks realize
that CRM is a continuous process – it is a journey, not a destination. To be successful in this
arena, they need to embrace CRM as a philosophy and adopt a strategy for managing customer
relationships that effectively addresses three key areas: people, processes and technology.  This
paper emphasizes that in addition to the sales, marketing and service capabilities inherent in a
generic CRM solution, these specialized solutions should offer banking specific features like a
CIF tailored to the banking environment, ready-to-deploy banking templates and requests,
origination integrated with sales and service and comprehensive support for call centre agents.
Banks will, thus, easily be able to gain the long sought after 360 degree view of customers real-
time. Buoyed by developments in technology that has made CRM deployment much simpler
than before, banks are all set to ride the second wave of CRM.

7. Retail Banking
A. Rural Banking in India: Realizing the Potential through Technology
Catalyzed by the growth of the domestic economy, the banking sector in India has truly come of
age. But with the current slowdown and fears of a global recession, the Indian economy and the
banking sector have been looking for new avenues of growth. In the face of these circumstances,

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it is ironic that rural banking which has hitherto been a slow growth sector could prove the next
development engine for Indian banks. With affordable and relevant technology driving
penetration as well as providing an improved service experience, rural banking could bring in
financial inclusion and help banks grow their business radically.

B. Future-ready and Futuristic: The Business of Retail Banking

Driven by forces that are often beyond their control, the banking industry in general and retail
banking in particular are undergoing a major transformation. Banks are introducing enterprise-
wide changes, spanning the dimensions of people, process, and technology, to deal with the
challenges and retain their competitive edge.  What impact will these changes have on the bank?
What will the bank of the future look like? This paper seeks to explore banking of the future and
its characteristics to better understand how a bank can ride the wave of change and use the
gathering momentum to advantage.

C. Latin America: The New El Dorado of Retail Banking

The Latin American banking market is changing rapidly. From the mid-1990s, American and
Spanish banks have led a foreign invasion, radically changing the banking technology, to deal
with the challenges and retain their competitive edge. such as Banco Santander, BBVA and
HSBC, the share of foreign ownership in the banking systems of Latin American countries has
soared. Most of these acquisitions have been made by non-US institutions. Thirty-one of the Top
100 banks are foreign-owned, 29 by single banking entities, and two either by banking consortia
or non-banking companies. This paper explores characteristics of retail banking in Latin America
that will help us understand the way forward for institutions to capitalize on the opportunities in
the region.

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 Limitation of banking

1 Bank Liability For Negligent Advice

“If undertakes to advise he must exercise reasonable care and skill in giving the advice. He is
under no obligation to advise, but if he takes upon himself to do so, he will incur liability if he
does so negligently.” 'House of Lords in Banbury v. Bank of Montreal. The issue of legal
liability of banks in the provision of negligent advice is one doctrine of law that has evolved
through the years. In light of current controversies hounding the UK banking sector, it is not far-
fetched nay unthinkable to surmise that such act would again be subjected to closer scrutiny and
for the courts to perhaps develop, clarify, and/or expand the doctrine’s reach. At the outset, are
banks under a duty to provide advice to their clients on financial matters? This paper shall start
by defining the nature of banker-customer relationship and how it arises. It shall be followed by
a discussion on the several circumstances whereby banks may be held liable for issuing negligent
advice as well as the evolution of such finding of liability. Factors underpinning courts’
decisions vis-à-vis this issue shall also be identified. In the concluding portions,
recommendations shall likewise be provided as to how courts should apply this doctrine in order
to effectuate its purpose. It is essential to identify at what point the banker-customer relationship
arises because a duty to exercise reasonable care and skill vis-à-vis customers’ financial matters
is owed when a banker-customer relationship begins”. Normally, this relationship commences
when a customer opens an account with a bank.

2 Risk Management

The significant transformation of the banking industry in India is clearly evident from the
changes that have occurred in the financial markets, institutions and products. While
deregulation has opened up new vistas for banks to argument revenues, it has entailed greater
competition and consequently greater risks. Cross- border flows and entry of new products,
particularly derivative instruments, have impacted significantly on the domestic banking sector
forcing banks to adjust the product mix, as also to effect rapid changes in their processes and
operations in order to remain competitive to the globalized environment. These developments
have facilitated greater choice for consumers, who have become more discerning and demanding
compelling banks to offer a broader range of products through diverse distribution channels. The

26
traditional face of banks as mere financial intermediaries has since altered and risk management
has emerged as their defining attribute. Currently, the most important factor shaping the world is
globalization. The benefits of globalization have been well documented and are being
increasingly recognized. Integration of domestic markets with international financial markets has
been facilitated by tremendous advancement in information and communications technology.
But, such an environment has also meant that a problem in one country can sometimes adversely
impact one or more countries instantaneously, even if they are fundamentally strong.

3 Accessibility Issue In Internet

Internet banking in Malaysia by Bank Negara Malaysia (BNM) since 1 June 2000 has set the
banking sector as well as the community under revolution. Nine year later, 10 of the registered
local commercial banks (including Islamic bank), have offered the Internet banking channel
services. Not to mention the locally incorporated foreign banks that are allowed to offer Internet
banking service for consumers in Malaysia since 2002 (Goi, 2005). The banking sector in
Malaysia is no longer stands on brick and mortar services but also fully fledged on click and
mortar services. The deployment of Internet banking by financial institutions have reduce the
cost of serving customer, minimize turnaround time, and at the same time providing service
efficiently and effectively. Internet banking provides individual customers the flexibility of 24
hours access to banking services and eliminates the need to visit the bank for most banking
services and transactions ending is the principal business activity for most commercial banks.
The loan portfolio is typically the largest asset and the predominate source of revenue. As such,
it is one of the greatest sources of risk to a bank’s safety and soundness. Whether due to lax
credit standards, poor portfolio risk management, or weakness in the economy, loan portfolio
problems have historically been the major cause of bank losses and failures. Effective
management of the loan portfolio and the credit function is fundamental to a bank’s safety and
soundness. Loan portfolio management (LPM) is the process by which risks that are inherent in
the credit process are managed and controlled. Because review of the Loan portfolio
management (LPM) process is so important, it is a primary supervisory activity. Assessing Loan
portfolio management involves evaluating the steps bank management takes to identify and
control risk throughout the credit process. The assessment focuses on what management does to
identify issues before they become problems. Prudent risk selection is vital to maintaining

27
favorable loan quality. Therefore, the historical emphasis on controlling the quality of individual
loan approvals and managing the performance of loans continues to be essential. But better
technology and information systems have opened the door to better management methods.

4. Banking Operation

Modern banking system plays a vital role for a nation’s economic development. Over the last
few years the banking world has been undergoing a lot of changes due to deregulation,
technological innovations, globalization etc. These changes also made revolutionary changes of a
country’s economy. Present world is changing rapidly to face the challenge of competitive free
market economy. It is well recognized that there is an urgent need for better-qualified
management and better-trained staff in the dynamic global financial market. Bangladesh is no
exception of this trend. Banking sector in Bangladesh is facing challenges from different angles
though its prospect is bright in the future. Money and banking is the center around which all
economic science clusters. Hence the educational institutions are giving emphasis on the applied
part of banking education. This report has been prepared as an integral part of BBA program
under the Department of Business Administration, Victoria University of Bangladesh.
Banking industry consists of 3 sectors: i) Central Banking ii) Commercial Banking and iii)
Specialized Banking. Based on the nature of main source of earning commercial banks can be
divided in to 2 groups a) Conventional Banking and b) Islamic Banking. A number of studies
have been conducted in the area of conventional banking; but a few numbers of studies have
been done in the area of Islamic banking sector. This sector has been pursuing the policy of
expansion and growth of branches. How far the policy of expansion is associated with the
dynamics of performance measures of Islamic banks is yet to be investigated. In an attempt to
examine the dynamics of performances of an Islamic bank, a case study on an Islamic bank has
been done. Social Islami Bank Limited was selected for the study purpose.

5. Corporate And Wholesale Finance

Discuss & explain the justification for private banks financing balance of payments deficits in
1970s and assess the medium & long term implications of this type of financining for the
international banking system. Before commenting or justifying the statement “private banks
financing balance of payments deficits in 1970s” following question should be address: “what

28
was the reason or in simpler form the problem that lead to private banks financing balance of
payments deficits?” Answer to the question is the massive & stubborn imbalance that prevailed
in payments relations among nations due to the actions of the member countries in OPEC. The
“quintupling” of oil prices in 1974 resulted in the increasing deficits on the current accounts of
OECD and non-OPEC less developed countries (LDCs). If looked back in 1950s and 1960s the
pattern of imbalance between these gropes was fairly constant but during 1973 – 1974 and again
in late 1970s and early 1980s the pattern was marked by the high surplus of the OPEC sector and
very huge deficits on the current account of the OECD and non-OPEC LDCs sector. This is clear
shown by the increase of deficit from $2 billion in 1973 to $52 billion the following year, a
combined analysis of OECD and LDCs. The picture of the world economy in 1970’s was quite
bad for most of the nations, on one hand members of OPEC whose importing absorption was low
were enjoying huge amount of surplus money on the other hand OECD and non OPEC LDCs
were suffering from the burden of massive deficits bills. In response to the situation of OECD
and non OPEC LDCs payment of deficits, two options were in front of them, first was to draw
down assets and the second was to borrow money in form of foreign aid and in the case of non
OPEC LDCs both options had to be considered in order to finance imbalance. Since cutting
down the consumption of imported goods is found painful and difficult by the countries.

6. Marketing Environment

Pakistan’s economic recovery has gained further traction during the fiscal year 2004-05, with the
economy expanding at its fastest clip in two decades. The exceptionally strong growth was
underpinned by accommodative macroeconomic policies, growing domestic demand, renewed
confidence of private sector, fiscal discipline and competitive exchange rates.
The outgoing fiscal year has indeed been an eventful year for Pakistan’s economy. The year has
posted several multiyear “firsts”. Pakistan’s real GDP growth of 8.4 percent in 2004-05 is the
fastest pace in two decades; the fifth time in the country’s history that it exceeded 8 percent
growth mark; Pakistan positioned itself as the second fastest growing economy after China in
2004-05; its per capita income crossed $ 700 mark; Pakistan achieved highest ever production of
cotton (14.6 million bales) and wheat (21.1 million tons) in 2004-05; it has seen the largest ever
expansion of private sector credit in 2004-05; exit from the IMF Programme marks an important
milestone; Pakistan became the fourth sovereign to issue an Islamic Bond (Sukuk), following

29
Malaysia, Qatar and Bahrain; the country’s public and external debt burden declined to their
lowest in decades; current account balance slipped into the red after posting surpluses for three
consecutive years; and inflation at 9.3 percent is the highest in 8 years. Pakistan is in the midst of
an economic upturn. During the fiscal year 2004-05, many of its macroeconomic indicators show
marked improvement over last year. The most important achievements of the year include: the
fastest pace in real GDP growth, powered by stellar growth in large-scale manufacturing, a sharp
pick up in agriculture, a continuing robust...

7. Cultural Challenges

"Culture in a global economy is a critical factor in international business. While many business
transactions make economic sense, the ability to successfully fulfill profitable relationships often
depends on being able to reconcile international differences arising from separate cultures."
"Understanding cultural differences is an initial step, but managers also need to engage in
learning processes to develop international cultural competence. Cross-cultural training enables
managers to acquire both knowledge and skills to fulfill the role of cultural agents." Advancing
cultural intelligence and international cultural competence is critical to the future success of
managers and leaders working in a global context. (Wong, n.d., p.1). In these pages, I will
analyze the cross-cultural differences between the United States and Czech Republic, determine
comparative advantages in this country, and recommend ways to minimize the risks of
establishing a franchise overseas. According to the web site http://www.allbusiness.com,
"franchise is a legal and commercial relationship between the owner of a trademark, service
mark, trade name, or advertising symbol and an individual or group wishing to use that
identification in a business." franchise business has been authorized by a parent company, or
franchisor, to sell their goods and/or services either in a retail space or a designated geographical
area. The franchise governs the method of conducting business between the two parties.
Generally, a franchisee sells goods or services supplied by the franchisor or that meet the
franchisor's quality standards. This relationship is regulated by FTC laws.

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 Present scenario
 Banking industry has been undergoing a rapid transformation.
 Banks today are market driven and market responsive.
 With the entry of new players and multiple channels, customers (both corporate and
retail) have become more discerning and less "loyal" to banks. This makes it imperative
that banks provide best possible products and services to ensure customer satisfaction.
 They have been managing a world of information about customers - their profiles,
location, needs, requirements, cash positions, etc.
 Furthermore, banks have very strong in-house research and market intelligence units in
order to face the future challenges of competition, especially customer retention.
 They are focusing on region-specific campaigns rather than national media campaigns as
effective strategy for a diverse country like India Apart from the Mobile Banking,
including of SMS Banking, Net Banking and ATMs are the major steps taken by the
banks in India towards modernization.
 Customer-centricity also implies increasing investment in technology.

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 Service given by banks

Demat Account
Demat refers to a dematerialised account. Demat account is just like a bank account where actual
money is replaced by shares. Just as a bank account is required if we want to save money or
make cheque payments, we need to open a demat account in order to buy or sell shares.

Current Account
Current Account is primarily meant for businessmen, firms, companies, public enterprises
etc.that have numerous daily banking transactions. Current Accounts are cheque operated
accounts meant neither for the purpose of earning interest nor for the purpose of savings but only
for convenience of business hence they are non-interest bearing accounts

Savings Bank Account

Savings Bank Accounts are meant to promote the habit of saving among the citizens while
allowing them to use their funds when required. The main advantage of Savings Bank Account is
its high liquidity and safety.

Recurring Bank Deposits

Under a Recurring Deposit account (RD account), a specific amount is invested in bank on
monthly basis for a fixed rate of return. The deposit has a fixed tenure, at the end of which the
principal sum as well as the interest earned during that period is returned to the investor.

Bank Fixed Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit Account, a certain
sum of money is deposited in the bank for a specified time period with a fixed rate of interest.
The rate of interest for Bank Fixed Deposits depends on the maturity period. It is higher in case
of longer maturity period. There is great flexibility in maturity period and it ranges from 15days
to 5 years.

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Senior Citizen Saving Scheme 2004
The Senior Citizen Saving Scheme 2004 had been introduced by the Government of India for the
benefit of senior citizens who have crossed the age of 60 years. However, under some
circumstances the people above 55 years of age are also eligible to enjoy the benefits of this
scheme.

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 BIBLIOGRAPHY

Web sites:

www.google.com

www.Ask.com

www.wiki.answer.com

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