INDIAN BANKING SYSTEM MMS SEM (III)

UNIVERSITY OF MUMBAI

PROJECT ON

“Study on INDIAN BANKING SYSTEM.”

SUBMITTED BY

PETHAD DHAVAL GIRISH

SEAT NO.: 2122013

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR

THE AWARD OF DEGREE OF MMS (specialization)

OF

UNIVERSITY OF MUMBAI
2022-2023

UNDER THE GUIDANCE OF

Prof. jay pathare

MATOSHRI USHATAI JADHAV INSTITUTE OF MANAGEMENT STUDIES AND

RESEARCH CENTER, BHIWANDI.

1
INDIAN BANKING SYSTEM MMS SEM (III)

CERTIFICATE

This is to certify that Mr. PETHAD DHAVAL GIRISH, a student OF Matoshri

Ushatai Jadhav Institute of Management Studies and Research Centre, Bhiwandi of
MMS Semester-III bearing SEAT No. 2122013 and specializing in FINANCE has
successfully completed the project titled. "Study on INDIAN BANKING SYSTEM .”
Under the guidance of . in partial fulfillment of the requirement of Masters of
Management Studies by University of Mumbai for the Academic Year 2022-2023.

Prof. Prof. Vijay vanjare Dr. Sopanbhamre

(Project guide) ( Coordinator) ( Director)

Examiner: ___________

DATE

2
INDIAN BANKING SYSTEM MMS SEM (III)

ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous, and the depth is so enormous

I would like to acknowledge the following as being idealistic channel and fresh dimensions in the
completion of this project

I take this opportunity to thank the UNIVERSITY OF MUMBAI for giving me chance to do this project

I would like to thank our Director Dr.SopanBhamre Sir for providing the necessary facilities required for
completion of this project

I take this opportunity to thank our CO ORDINATOR Prof. Vijay Vanjare Sir for his moral support and
guidance

I would like to express my sincere gratitude toward my project guide Prof. whose guidance and care made
the project successfully

I would like to thank my college LIBRARY for having provided various reference Books and magazines
related to my project

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially MY PARENTS AND PEERS who supported me throughout my
project work

PETHAD DHAVAL GIRISH

(Name of the student)

3
INDIAN BANKING SYSTEM MMS SEM (III)

Executive summery

The banking industry is one of the most essential financial pillars of the financial sector, and it is
critical to the economy’s functioning. It is critical for a country’s economic development that its
trade, industrial, and farm funding needs are handled with greater commitment and
responsibility. As a result, a country’s progress is inextricably related to the development of
banking. In today’s economy, banks should be viewed as development leaders rather than money
merchants. They play a crucial role in deposit mobilization and credit disbursement to many
sectors of the economy.

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally resilient.

Banks and banking in India have been classified into various groups. In its activities, each group
has its own set of advantages and disadvantages. They have their own distinct target audience.
Some work exclusively in the rural sector, while others work in both rural and urban settings.
The majority of them only serve cities and major towns.

The existing banking structure in India, evolved over several decades, is elaborate and has been
serving the credit and banking services needs of the economy. There are multiple layers in
today's banking structure to cater to the specific and varied requirements of different customers
and borrowers

A study of indian banking system in that we have see that how the bank was establish in India
how the bank was founded and also we can see the history of banking before independence and
after independence and also we can see the working structure of bank in India various
department in India and also schedule and non schedule bank

And also we can see the important function of bank in that we can see the primary function of
bank and also we can see the secondary function of bank and also we can see the some features
of banking sector in India And also we can see that importance of banking sector in India and

4
INDIAN BANKING SYSTEM MMS SEM (III)

new era of banking sector like digital banking related how the bank they work and cater all the
need of customer and in that types of digital banking and also we can see the swot analysis of
banking sector in India like strength, weakness, opportunity, threats. how bank can also
developed the economic also these will all impact on bank also and make new policy also we can
see We can also see the current status of banking sector in india and also we can see the future
status of banking how in future the bank will work and also we can learn the regulation of
banking industry in India and also we can learn the policy of bank in india for customer

5
INDIAN BANKING SYSTEM MMS SEM (III)

SCOPE

 THROUGH THE RESEARCH THE RESEARCHER WILL GET OVERALL

INFORMATION ABOUT THE BANKING PROCEDURE.

 THESE RESEARCH WILL GIVE INFORMATION ABOUT THE BANKING

FACILITY .

 THROUGH THE RESEARCH THE RESEARCHER WILL GET THE LATEST

INFORMATION ABOUT THE INVESTMENT PROVIDED BY BANK IN
SEVERAL SCHEME

 THROUGH THE RESEARCH THE RESEARCHER WILL KNOWN THE

OVERALL FACILITY PROVIDED BY BANK TO THE ACCOUNTHOLDER

 DUE TO RESEARCH THE RESEARCHER WILL KNOWN THE

DIGITIZATION FACILITY PROVIDED BY BANK.

 DUE TO RESEARCH WE KNOWN THE OVERALL BANKING AREAS

6
INDIAN BANKING SYSTEM MMS SEM (III)

OBJECTIVE
 TO UNDERSTAND THE MEANING AND CONCEPT OF BANKING SECTOR
IN INDIA

 TOUNDERSTAND THE SAVING POLICY IN GOOD MANNER

 TO STUDY THE SERVICE GIVEN TO CUSTOMER BY BANK

 TO STUDY THE FINANCE GIVEN BY BANK FOR THE PURPOSE FOR

GROWING THE PUBLIC WEALTH

 TO STUDY THE PROBLEM FACE BY BUSINESS DUE TO BANKING RULES

AND REGULATION

 TO UNDERSTAND THE CRUCIAL ROLE FOR DEVLOPING THE

ECONOM,YOF INDIA

Index

1. NAME OF THE TOPIC PAGE

NO

2. 9-40
Introduction

7
INDIAN BANKING SYSTEM MMS SEM (III)

3. Research methodology 41-46

4. Data analysis and 46-64

interpretation

5. Findings 64-65

6. Recommendation 65-66

7. Conclusion 66-67

8. Reference 68-69

9. 69-71
Annexure

8
INDIAN BANKING SYSTEM MMS SEM (III)

INTRODUCTION

The largest and the oldest bank which is still in existence is the State Bank of India (SBI). It
originated and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was
renamed as the Bank of Bengal. This was one of the three banks founded by a presidency
government, the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843.
The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's
independence, became the State Bank of India in 1955. For many years, the presidency banks
had acted as quasi-central banks, as did their successors, until the Reserve Bank of India[5] was
established in 1935, under the Reserve Bank of India Act, 1934

9
INDIAN BANKING SYSTEM MMS SEM (III)

In 1960, the State Banks of India was given control of eight state-associated banks under the
State Bank of India (Subsidiary Banks) Act, 1959. However the merger of these associated banks
with SBI went into effect on 1 April 2017. In 1969, the Government of India nationalised 14
major private banks; one of the big banks was Bank of India. In 1980, 6 more private banks were
nationalised. These nationalised banks are the majority of lenders in the Indian economy. They
dominate the banking sector because of their large size and widespread networks.

The Indian banking sector is broadly classified into scheduled and non-scheduled banks. The
scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act,
1934. The scheduled banks are further classified into: nationalised banks; State Bank of
India and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private
sector banks.[7] The SBI has merged its Associate banks into itself to create the largest Bank in
India on 1 April 2017. With this merger SBI has a global ranking of 236 on Fortune 500 index.
The term commercial banks refers to both scheduled and non-scheduled commercial banks
regulated under the Banking Regulation Act, 1949

Generally the supply, product range and reach of banking in India is fairly mature-even though
reach in rural India and to the poor still remains a challenge. The government has developed
initiatives to address this through the State Bank of India expanding its branch network and
through the National Bank for Agriculture and Rural Development (NABARD) with facilities
like microfinance.

10
INDIAN BANKING SYSTEM MMS SEM (III)

 HISTORY OF BANKING SECTOR

 Ancient India :
The Vedas are the ancient Indian texts mention the concept of usury, with the word kusidin
translated as "usurer". The Sutras (700–100 BCE) and the Jatakas (600–400 BCE) also mention
usury. Texts of this period also condemned usury: Vasishtha forbade Brahmin and Kshatriya
varnas from participating in usury. By the 2nd century CE, usury became more acceptable.[11]
The Manusmriti considered usury an acceptable means of acquiring wealth or leading a
livelihood.[12] It also considered money lending above a certain rate and different ceiling rates
11
INDIAN BANKING SYSTEM MMS SEM (III)

for different castes a grave sin.The Jatakas, Dharmashastras and Kautilya also mention the
existence of loan deeds, called rnapatra, rnapanna, or rnalekhaya
Later during the Mauryan period (321–185 BCE), an instrument called adesha was in use, which
was an order on a banker directing him to pay the sum on the note to a third person, which
corresponds to the definition of a modern bill of exchange. The considerable use of these
instruments has been recorded[citation needed]. In large towns, merchants also gave letters of
credit to one another

 Medieval Period :
The use of loan deeds continued into the Mughal era and were called dastawez (in Urdu/Hindi).
Two types of loans deeds have been recorded. The dastawez-e-indultalab was payable on
demand and dastawez-e-miadi was payable after a stipulated time. The use of payment directives
by royal treasuries, called barattes, have been also recorded. There are also records of Indian
bankers using issuing bills of exchange on foreign countries. The evolution of hundis, a type of
credit instrument, also occurred during this period and remain in use

 Colonial era
During the period of British rule merchants established the Union Bank of Calcutta in 1829 first
as a private joint stock association, then partnership. Its proprietors were the owners of the earlier
Commercial Bank and the Calcutta Bank, who by mutual consent created Union Bank to replace
these two banks. In 1840 it established an agency at Singapore, and closed the one at Mirzapore
that it had opened in the previous year. Also in 1840 the Bank revealed that it had been the
subject of a fraud by the bank's accountant. Union Bank was incorporated in 1845 but failed in
1848, having been insolvent for some time and having used new money from depositors to pay
its dividends

The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock
bank in India, it was not the first though. That honour belongs to the Bank of Upper India, which
was established in 1863 and survived until 1913, when it failed, with some of its assets and
liabilities being transferred to the Alliance Bank of Simla.
Foreign banks too started to appear, particularly in Calcutta, in the 1860s. Grindlays Bank

12
INDIAN BANKING SYSTEM MMS SEM (III)

opened its first branch in Calcutta in 1864.[18] The Comptoir d'Escompte de Paris opened a
branch in Calcutta in 1860, and another in Bombay in 1862; branches followed in Madras and
Pondicherry, then a French possession. HSBC established itself in Bengal in 1869. Calcutta was
the most active trading port in India, mainly due to the trade of the British Empire, and so
became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in
Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in
1894, which has survived to the present and is now one of the largest banks in India.
Around the turn of the 20th century, the Indian economy was passing through a relative period of
stability. Around five decades had elapsed since the Indian rebellion, and the social, industrial
and 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 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 capitalised 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 Catholic Syrian Bank, The South Indian Bank, Bank of India, Corporation Bank,
Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
The fervour of Swadeshi movement led to the establishment of many private banks in Dakshina
Kannada and Udupi district, which were unified earlier and known by the name South Canara
(South Kanara) district. Four nationalised banks started in this district and also a leading private
sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking

The inaugural officeholder was the Britisher Sir Osborne Smith(1 April 1935), while C. D.

13
INDIAN BANKING SYSTEM MMS SEM (III)

Deshmukh(11 August 1943) was the first Indian governor. On 12 December 2018,Shaktikanta
Das, who was the finance secretary with the Government of India, begins his journey as the new
RBI Governor, taking charge from Urjit R Patel

 POST INDEPENDENCE
During 1938–46, bank branch offices trebled to 3,469[19] and deposits quadrupled to ₹ 962 crore.
Nevertheless, the partition of India in 1947 adversely impacted the economies
of Punjab and West Bengal, paralysing banking activities for months.
India's independence marked the end of a regime of the Laissez-faire for the Indian banking.
The Government of India initiated measures to play an active role in the economic life of the
nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged
a mixed economy. This resulted in greater involvement of the state in different segments of the
economy including banking and finance. The major steps to regulate banking included:

 The Reserve Bank of India, India's central banking authority, was established in April 1935,
but was nationalized on 1 January 1949 under the terms of the Reserve Bank of India
(Transfer to Public Ownership) Act, 1948 (RBI, 2005b
 In 1949, the Banking Regulation Act was enacted, which empowered the Reserve Bank of
India (RBI) to regulate, control, and inspect the banks in India.
 The Banking Regulation Act also provided that no new bank or branch of an existing bank
could be opened without a license from the RBI, and no two banks could have common
directors.
14
INDIAN BANKING SYSTEM MMS SEM (III)

1. Nationalisation in 1969

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India
except the State Bank of India (SBI), remain owned and operated by private persons. By the
1960s, the Indian banking industry had become an important tool to facilitate the development of
the Indian economy. At the same time, it had emerged as a large employer, and a debate had
ensued about the nationalization of the banking industry. [21] Indira Gandhi, the then Prime
Minister of India, expressed the intention of the Government of India in the annual conference of
the All India Congress Meeting in a paper entitled Stray thoughts on Bank Nationalization.

Thereafter, the Government of India issued the Banking Companies (Acquisition and Transfer of
Undertakings) Ordinance, 1969 and nationalized the 14 largest commercial banks with effect
from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the
country. Within two weeks of the issue of the ordinance, the Parliament passed the Banking
Companies.

 ABOUT THE BANKING OVERVIEW

The Indian banking system consists of 12 public sector banks, 22 private sector banks, 46 foreign
banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks
in addition to cooperative credit institutions As of September 2021, the total number of ATMs in
India reached 213,145 out of which 47.5% are in rural and semi urban areas.

In 2020-2022, bank assets across sectors increased. Total assets across the banking sector
(including public and private sector banks) increased to US$ 2.67 trillion in 2022.

In 2022, total assets in the public and private banking sectors were US$ 1,594.51 billion and US$
925.05 billion, respectively.

During FY16-FY22, bank credit increased at a CAGR of 0.62%. As of FY22, total credit
extended surged to US$ 1,532.31 billion. During FY16-FY22, deposits grew at a CAGR of

15
INDIAN BANKING SYSTEM MMS SEM (III)

10.92% and reached US$ 2.12 trillion by FY22. Bank deposits stood at Rs. 173.70 trillion (US$
2.12 trillion) as of November 4, 2022.

According to India Ratings & Research (Ind-Ra), credit growth is expected to hit 10% in 2022-
23 which will be a double digit growth in eight years. As of November 4, 2022 bank credit stood
at Rs. 129.26 lakh crore (US$ 1,585.09 billion).

 Financial Structure

The Reserve Bank of India, the nation’s central bank, began operations on April 01, 1935. It was
established with the objective of ensuring monetary stability and operating the currency and
credit system of the country to its advantage.

In India, the banks are being segregated in different groups. Each group has their own benefits,
own dedicated target markets, limitations in operating in India. The commercial banking
structure in India consists of Scheduled Commercial Banks and Unscheduled Banks. Scheduled
commercial Banks constitute those banks which have been included in the Second Schedule of
Reserve Bank of India (RBI) Act, 1934. For the purpose of assessment of performance of banks,
the Reserve Bank of India categorise them as public sector banks, old private sector banks, new
private sector banks and foreign banks.

16
 INDIAN BANKING SYSTEM MMS SEM (III)

 EXAMPLE OF BANK IN INDIA

Public Sector Banks Private Sector Banks Foreign

Banks

sState Bank of India Catholic Syrian Bank Australia and New Zealand Banking
Allahabad Bank City Union Bank Group Ltd.
National Australia Bank
Andhra Bank Dhanlaxmi Bank
Westpac Banking Corporation
Bank of Baroda Federal Bank
Bank of Bahrain & Kuwait BSC
Bank of India Jammu and Kashmir Bank
AB Bank Ltd.
Bank of Maharashtra Karnataka Bank
HSBC
Canara Bank Karur Vysya Bank
CITI Bank
Central Bank of India Lakshmi Vilas Bank
Deutsche Bank

17
 INDIAN BANKING SYSTEM MMS SEM (III)

Corporation Bank Nainital Bank DBS Bank Ltd.

Dena Bank Ratnakar Bank United Overseas Bank Ltd
Indian Bank South Indian Bank J.P. Morgan Chase Bank
Indian Overseas Bank Tamilnad Mercantile Bank Standard Chartered Bank
Oriental Bank of Axis Bank There are over 40 Foreign Banks in
Commerce India
Development Credit Bank (DCB Bank
Punjab National Bank Ltd)
Punjab & Sind Bank HDFC Bank
Syndicate Bank ICICI Bank
Union Bank of India IndusInd Bank
United Bank of India Kotak Mahindra Bank
UCO Bank Yes Bank
Vijaya Bank IDFC
IDBI Bank Ltd. Bandhan Bank of Bandhan Financial
Services.

18
INDIAN BANKING SYSTEM MMS SEM (III)

 IMPORTANT FUNCTION OF BANK

19
INDIAN BANKING SYSTEM MMS SEM (III)

There are two types of functions of banks:

1. Primary functions
2. Secondary Functions

1. Primary Functions of Bank

All banks have to perform two major primary functions namely:

1. Accepting of deposits
2. Granting of loans and advances

Accepting of Deposits
A very basic yet important function of all the commercial banks is mobilising public funds,
providing safe custody of savings and interest on the savings to depositors. Bank accepts
different types of deposits from the public such as:

1. Saving Deposits:  encourages saving habits among the public. It is suitable for
salary and wage earners. The rate of interest is low. There is no restriction on the number
and amount of withdrawals. The account for saving deposits can be opened in a single
name or in joint names. The depositors just need to maintain minimum balance which
varies across different banks. Also, Bank provides ATM cum debit card, cheque book,
and Internet banking facility. Candidates can know about the Types of Cheques at the
linked page.

2. Fixed Deposits: Also known as Term Deposits. Money is deposited for a fixed

tenure. No withdrawal money during this period allowed. In case depositors withdraw
before maturity, banks levy a penalty for premature withdrawal. As a lump-sum amount
is paid at one time for a specific period, the rate of interest is high but varies with the
period of deposit.

3. Current Deposits: They are opened by businessmen. The account holders get
an overdraft facility on this account. These deposits act as a short term loan to meet

20
INDIAN BANKING SYSTEM MMS SEM (III)

urgent needs. Bank charges a high-interest rate along with the charges for overdraft
facility in order to maintain a reserve for unknown demands for the overdraft.

4. Recurring Deposits: A certain sum of money is deposited in the bank at a

regular interval. Money can be withdrawn only after the expiry of a certain period. A
higher rate of interest is paid on recurring deposits as it provides a benefit of compounded
rate of interest and enables depositors to collect a big sum of money. This type of account
is operated by salaried persons and petty traders

 Granting of Loans & Advances

The deposits accepted from the public are utilised by the banks to advance loans to the
businesses and individuals to meet their uncertainties. Bank charges a higher rate of interest on
loans and advances than what it pays on deposits. The difference between the lending interest
rate and interest rate for deposits is bank profit.

Bank offers the following types of Loans and Advances:

1. Bank Overdraft: This facility is for current account holders. It allows holders
to withdraw money anytime more than available in bank balance but up to the provided
limit. An overdraft facility is granted against collateral security. The interest for overdraft
is paid only on the borrowed amount for the period for which the loan is taken.

2. Loans: Banks lend money to the customer for short term or medium periods of say 1
to 5 years against tangible assets. Nowadays, banks do lend money for the long term. The
borrower repays the money either in a lump-sum amount or in the form of instalments
spread over a pre-decided time period. Bank charges interest on the actual amount of loan
sanctioned, whether withdrawn or not. The interest rate is lower than overdrafts and cash
credits facilities.

3. Discounting the Bill of Exchange: It is a type of short term loan,

where the seller discounts the bill from the bank for some fees. The bank advances

21
INDIAN BANKING SYSTEM MMS SEM (III)

money by discounting or purchasing the bills of exchange. It pays the bill amount to the
drawer(seller) on behalf of the drawee (buyer) by deducting usual discount charges. On
maturity, the bank presents the bill to the drawee or acceptor to collect the bill amount.

 Secondary Functions of Bank

Like Primary Functions of Bank, the secondary functions are also classified into two parts:

1. Agency functions
2. Utility Functions

Agency Functions of Bank

Banks are the agents for their customers, hence it has to perform various agency functions as
mentioned below:

Transfer of Funds: Transfering of funds from one branch/place to another. 

Periodic Collections: Collecting dividend, salary, pension, and similar periodic

collections on the clients’ behalf. 

Periodic Payments: Making periodic payments of rents, electricity bills, etc on behalf
of the client.

Collection of Cheques: Like collecting money from the bills of exchanges, the bank
collects the money of the cheques through the clearing section of its customers.

Portfolio Management: Banks manage the portfolio of their clients. It undertakes

the activity to purchase and sell the shares and debentures of the clients and debits or credits the
account.

Other Agency Functions: Under this bank act as a representative of its clients for
other institutions. It acts as an executor, trustee, administrators, advisers, etc. of the client

22
INDIAN BANKING SYSTEM MMS SEM (III)

 The features of the Indian banking system

1. Deals with Money
A bank’s main characteristic is that it handles all financial transactions. You can put your money
in a bank account, for example, to store it safely, and you will be interested in the money you
save in the account.

2. Provides Loans
23
INDIAN BANKING SYSTEM MMS SEM (III)

Banks gain additional money by providing loans for a variety of products. The bank earns the
additional funds by lending money to the qualifying person at predetermined rates.Banks now
provide loans for a variety of purposes, including study loans, vehicle loans, housing loans,
personal loans, and so on.

3. Withdrawal and payment facilities

Customers can use a bank’s numerous payment and withdrawal services to receive their money
quickly and easily. Customers can use cheques and draughts to withdraw money, as well as
ATMs established by banks at various sites throughout the city.

4. Internet services
Modern banks now provide internet services, which is another element of a bank. The growth of
the internet and its integration into the banking industry has made it even easier for customers to
do numerous transactions. Through their apps, banks are providing online services. You can pay
your bills, buy groceries, and shop without having cash on you.

5. Business
Banking’s sole purpose is not to supply consumers with banking services. To make additional
money, all banks are involved in subsidiary enterprises. Their only responsibility is to deliver
optimum customer satisfaction and maximum interest rates in order to attract more clients to
bank with them. To make a profit, money is moved from one hand to the next.

 The importance of banking system in India

Insufficient capital formation makes economic development difficult in a country. Commercial
banks are encouraging individuals to save their money and mobilize it for beneficial uses at this
time.
Credit creation boosts output, boosting economic growth and, in turn, creating a large number of
job prospects.
Commercial banks promote balanced regional development in India by providing the required
financial infrastructure and money to backward areas.

24
INDIAN BANKING SYSTEM MMS SEM (III)

By providing timely loans to agricultural farmers, commercial banks aid in the promotion of the
primary sector.
They offer advanced loans to consumers for the purchase of assets such as residences, consumer
goods, and furniture, among other things, and they encourage individuals to pursue a higher level
of living.
The banking sector plays a significant part in the Indian economy, as commercial banks support
the Indian government in achieving each aim of the country’s planned economic development.
For both internal and external trade, commercial banks offer the necessary financial backing and
infrastructure

 DIGITAL BANKING SECTOR

25
INDIAN BANKING SYSTEM MMS SEM (III)

Banking: We are familiar with the term 'E-Banking, which is also known as Online Banking or
Virtual Banking or Internet Banking. It is a system which enables banking transactions like
transfer of funds, payment of loans and EMIs, deposits and withdrawals of cash virtually with
the help of internet and without having the need to visit the bank branches. Under e-banking, a
customer can number of get the benefit of services like Internet banking, SMS banking, ATMs,
Mobile banking, e-cheques and debit/credit cards. Digital banking is another term which is often
used as synonymous to e-banking. Both the terms are used interchangeably. But strictly
speaking, digital banking means no or very minimal use of paper currency. However, the paper
currency is still very much in use. At present ATMs are vital part of the banking system, which
facilitate customers in withdrawal of cash as and when there is need. A digital economy is one
where cash transactions

Digital Banking is the automation of traditional banking services. Digital banking enables a
bank’s customers to access banking products and services via an electronic/online platform.
Digital banking means to digitize all of the banking operations and substitute the bank’s physical
presence with an everlasting online presence, eliminating a consumer’s need to visit a branch.

26
 INDIAN BANKING SYSTEM MMS SEM (III)

 Benefits of Digital Banking

Advancing to a more technologically sophisticated way of doing things, it goes without saying
that the benefits long outweigh the costs. Similarly, digital banking as a technological by-product
aims to make life easier for the customers of a bank. Digital banking has the following benefits:

1. Digital banking enables consumers to perform banking functions from the comfort of their
homes, be it an elderly person who is tired of waiting in lines or a working-class professional
who is caught up with work, or a regular person who does not want to visit the bank’s branch to
run a single errand. It also offers convenience.
2. Elaborating on the convenience offered, digital banking lets a user carry out banking work
around the clock, with 24*7 availability of access to banking functions.
3. One of the biggest drawbacks of traditional banking was the overly placed importance on paper.
Banking has become paperless with the development of digital banking as a service. A user can
log into their account at any point in time to monitor records.
4. Digital banking allows a user to set up automatic payments for regular utility bills such as
electricity, gas, phone, and credit cards. The customer no longer has to make a conscious effort
of remembering the due dates. The customer can opt for alerts on upcoming payments and
outstanding dues. 
5. Online shopping has become a cakewalk with payment channels becoming well-integrated with
the online shopping portals. Internet banking has significantly contributed to online payments.
6. Digital banking extending services to remote areas is seemingly a step toward holistic
development. With smartphones at affordable prices and internet access in remote areas, the rural
population can make the most out of digital banking services.
7. Digital banking-enabled fund transfers reduce the risk of counterfeit currency.
8. With the help of digital banking, a user can report and block misplaced credit cards at the click
of a button. This benefit greatly strengthens the privacy and security available to a bank’s
customer.

27
 INDIAN BANKING SYSTEM MMS SEM (III)

9. By promoting a cashless society, digital banking restricts the circulation of black money as the
Government can keep a track of fund movements. In the long run, digital banking is expected to
lower the minting demands of a currency.

 Digital Banking products

If an individual has access to a stable internet connection and an internet-enabled smart

device, digital banking has a lot to offer.

 Digital Product services

 Types of Digital banking payment

Banking cards: Cards are not only used to withdraw cash but also enable other forms of
digital payment. Cards can be used for online transactions and on Point of Sale (PoS) machines.

28
 INDIAN BANKING SYSTEM MMS SEM (III)

Prepaid cards can also be issued by the banks; such cards are not linked to the bank account but
function through the money loaded onto them.

 Unstructured Supplementary Service Data (USSD): By dialing the number *99#, mobile
transactions can be carried out without an application and internet connection. The number holds
nationwide applicability and promotes greater financial inclusion on the ground level. The
service lets the caller surf through an interactive voice menu and chooses the desired option on
the mobile screen. The only catch is the mobile number of the caller should be the one linked to
the particular bank account.

 Aadhaar Enabled Payment System (AEPS): AEPS lets the client initiate banking
instructions following the successful verification of the Aadhaar number.

 Unified Payments Interface (UPI): UPI is the most trending form of digital banking
presently. UPI makes use of a virtual payment address (VPA) so the user can transfer funds
without entering bank account details or IFSC code. Another striking feature of UPI is that the
applications let you consolidate all your bank accounts in one place. Funds can be transferred
and received around the clock with no time restrictions. UPI-based apps in India are BHIM,
PhonePe, and Google Pay. BHIM application, in addition to the transfer of funds to other virtual
addresses and bank accounts, also lets the user transfer funds to another Aadhaar number. More
importantly, UPI-based payments are free of cost. 

 Mobile Wallets: Mobile wallets have eliminated the need to remember four-digit card pins or
enter CVV details or carry loose cash. Mobile wallets store bank account and card credentials to
easily add funds to the wallet and make payments to other merchants with similar applications.
Popular mobile wallets are Paytm, Freecharge, Mobiwik, etc. Mobile wallets, however,
generally have a limit on how much can be deposited in the wallet. A small fee may also be
charged on depositing the funds from the mobile wallet back into the bank account
.
 PoS terminals: Typically, PoS machines are portable devices that read a card to authorize and
complete the payment. Supermarkets and gas stations opt for this method of payment. However,
with digital banking thriving, PoS terminals have evolved into more than physical PoS devices.
Virtual and Mobile PoS terminals have surfaced, which makes use of the mobile phone’s NFC
feature and web-based applications to initiate payment.

 Internet and Mobile Banking: Commonly known as e-banking, internet banking refers to

obtaining certain banking services over the internet, such as fund transfers, and opening and
closing accounts. Internet banking is a subset of digital banking because internet banking is only
limited to core functions. Similarly, mobile banking is availing banking services through mobile-
based applications.

29
INDIAN BANKING SYSTEM MMS SEM (III)

 SWOT ANALYSIS OF BANKING INDUSTRY

 Strengths

Following are the key strengths of the banking sector

One of The Oldest Surviving Industries - With the advent of new technology, whole industries
are often wiped out. The banking industry, however, has not been so susceptible. It has stood the
test of time and helped the human race for a very long period. As life has evolved, banking has
morphed and modified itself to meet the recent needs. From inculcating the habit of savings to
helping people with financial instruments, banks today play a vital and indispensable role in
society.

The Pillar of Financial Stability- The banking industry takes a vital role in ensuring the economic
prosperity and financial stability of a nation. Banks contribute to the economy by fostering
growth. They help the masses manage their wealth and become meaningful contributors to the
national as well as the international economy.

30
INDIAN BANKING SYSTEM MMS SEM (III)

Provider of Financial Instruments - Banks provide their customers with a large number of
financial instruments. Some of the various products offered by banks are stocks, bonds,
insurance and savings accounts. Further, banks have also adopted and

integrated digital technology to provide online banking solutions.

 Weaknesses
Below are the weaknesses of the banking industry. Susceptibility to Global Economics- The
global banking industry is skewed. Europe has cornered over 50% of the worldwide market,
making things pretty unbalanced. Even small changes in the currency exchange rates or spending
and borrowing habits of the people of one major nation can cause the entire banking industry to
take a hit. Such volatility is not desirable.

High Levels of NPAs- NPAs (Non-Performing Assets) are the bane of the banking industry.
NPAs usually denote bad loans that cannot be recovered. This naturally leads to financial losses
for the bank. NPAs can have a crippling effect on the banking sector, and the economy as a
whole. Developing countries such as India face instances of high NPAs which have dealt a
severe blow to the banking industry of the nation.

Lack of Rural Coverage- It has been observed that in most countries the banking industry
focuses mostly on the urban areas, while rural regions are left neglected. This is a significant
weakness in the banking industry.

 Opportunities
Here are the opportunities of the banking industry. Technological Advancements - The banking
industry has always been dependent on technology. This is evident in the slew of digital services
being offered by banks today. However, instead of resting on their laurels, banks should continue
to adopt the latest technological innovations. They should concentrate on bringing out newer
products and services in order to attract future generations.

Rural Expansion Opportunities - The limited presence in rural areas is one of the weak points of
the banking industry. But it can actually convert this weakness into an opportunity. By

31
INDIAN BANKING SYSTEM MMS SEM (III)

expanding into villages and offering their services to the rural population, banks can expand their
customer base considerably.

Social Evolution - Human society is evolving both economically and culturally. In this dynamic
landscape, the needs and demands of customers with rising income levels are bound to change.
Banks need to adapt to this changing society. By providing better services the industry can
solidify its place in the future.

 Threat
Following are the threats of the banking industry.

Technological Advancements - The banking industry has always been dependent on technology.
This is evident in the slew of digital services being offered by banks today. However, instead of
resting on their laurels, banks should continue to adopt the latest technological innovations. They
should concentrate on bringing out newer products and services in order to attract future
generations.

Rural Expansion Opportunities - The limited presence in rural areas is one of the weak points of
the banking industry. But it can actually convert this weakness into an opportunity. By
expanding into villages and offering their services to the rural population, banks can expand their
customer base considerably.

Social Evolution - Human society is evolving both economically and culturally. In this dynamic
landscape, the needs and demands of customers with rising income levels are bound to change.
Banks need to adapt to this changing society. By providing better services the industry can
solidify its place in the future.

32
INDIAN BANKING SYSTEM MMS SEM (III)

 ROLE OF Banks IN Economic Development

ROLE OF BANKS IN ECONOMIC DEVELOPMENTA process of transformation took place in
the banking sector following liberalisation. Thereform measures have had a significant impact on
all aspects of the Indian bankingindustry for the long term. According to the
recommendations of the Narshimhamcommittee, the RBI has allowed private players to enter
the fray. With the entry of privatesector banks and new generation banks, which were
equipped with cutting-edgetechnology and professional management, the dominance of public
sector banks waschallenged. Banks, as the most important player in the money and capital
markets in thefinancial system, have grown in importance over the years to become a significant
part ofany economy. The banking system of any country is critical to its economic
developmentbecause it serves as a formidable financial intermediary. Following are some
examples ofwhy a sound banking system is important for developing countries like India:1.
Removing the deficiency of capital formationEconomic development is not possible in any
economy unless there is an adequateamount of capital formation taking place. Only banks
have the ability to eliminate capitalshortages in developing countries such as India. When a
sound banking system is inplace, it helps to mobilise the small savings of the community and
makes them availablefor investment in productive industries. Banks mobilise deposits
by expanding theirbranch networks as well as by offering a variety of deposit products with
competitiveinterest rates that are tailored to the specific needs of depositors. On the financial
market,the savings that have accumulated are converted into capital. A mechanism like
thiswould have been necessary if the money hadn't been sitting idle.2. Helps in generating
employment opportunityBanks assist in the provision of financial resources to
businesses and industries.Entrepreneurship will take shape in a variety of sizes and fields once
the problem ofcapital deficiency is resolved. This would significantly increase employment and
help toalleviate the unemployment problem. By breaking the vicious cycle of poverty,
thisresults in increased revenue generation, increased savings, and increased
investment.Apart from that, the financial sector contributes to a healthy credit line to the
industrialsector as well. The expansion of the financial sector will undoubtedly
benefitmanufacturing, services, and agriculture, as well as provide solutions to

33
INDIAN BANKING SYSTEM MMS SEM (III)

disguisedunemployment.3. Financial assistance to IndustriesSmall and medium-sized

enterprises (SMEs) are funded in a variety of ways bycommercial banks. They
provide short-term, medium-term, and long-term loans to

businesses in the manufacturing and service sectors, respectively. The

IndustrialDevelopment Bank of India (IDBI) is the primary financial institution in
India thatprovides long-term loans to industrial sectors in a variety of ways, including term
loans,stock purchases and underwriting, debentures, and bonds. The IDBI is known for
itsexpertise in the establishment of the Development Assistance Fund.
Followingliberalisation, even commercial banks began extending long-term loans to
theircustomers. The Credit Guarantee Fund Scheme, which was launched by the governmentand
the Reserve Bank of India to provide guarantee coverage for collateral-free creditfacilities
extended to MSEs up to one crore rupees, is intended to make it easier for smalland medium-
sized businesses to access credit. Furthermore, the definitions of MSMEhave been revised in
order to broaden their scope in order to deal with the pandemicsituations (COVID-19) that are
currently prevailing in the country.4. Promotes saving habits and thrift amongst the
peopleDepositors are attracted to banks by the introduction of attractive deposit schemes and
theprovision of higher rates of interest. Banks offering a variety of deposit products such
assavings accounts, current accounts, recurring deposit accounts, fixed deposit accounts,tax
savings schemes, senior citizen savings accounts, and other similar products in orderto attract a
diverse range of depositors. Customers are drawn to the bank by thesepersonalised
accounts, which also instil a sense of thrift in them.. This benefits theeconomy both
directly and indirectly through the creation of new capital and thegeneration of new
income.5. Enhance standard of livingPeople in underdeveloped countries who are poor and have
low incomes do not havesufficient financial resources to purchase consumer durable goods,
which is a problem.Consumers can obtain loans from commercial banks to help them purchase
items such asfurniture, refrigerators, and other household items. The people of developing
countriesbenefit from this as well, as loans for consumption activities help to raise the standard
ofliving of the population in these countries.6. Helps in implementing Monetary PolicyThe
Reserve Bank of India (RBI) as the regulatory body is reliant on commercial banksfor the
implementation of various economic policies and programmes for the economicdevelopment of
the country. Commercial banks contribute to the growth of a country'seconomy by channelling

34
INDIAN BANKING SYSTEM MMS SEM (III)

resources from the surplus to the deficient sectors of theeconomy. They do this by
acting as a formidable intermediary between the economy andthe rest of the world. The Reserve
Bank of India (RBI) has the ability to effectivelycontrol inflation and money supply through the
banking sector. After the banking sectorunderwent reforms, the bank was transformed into a
powerful backbone of the economi

 Removing the deficiency of capital formation

Economic development is not possible in any economy unless there is an adequate amount of
capital formation taking place. Only banks have the ability to eliminate capital shortages in
developing countries such as India. When a sound banking system is in place, it helps to mobilise
the small savings of the community and makes them available for investment in productive
industries. Banks mobilise deposits by expanding their branch networks as well as by offering a
variety of deposit products with competitive interest rates that are tailored to the specific needs
of depositors. On the financial market, the savings that have accumulated are converted into
capital. A mechanism like this would have been necessary if the money hadn't been sitting idle.

 Helps in generating employment opportunity

Banks assist in the provision of financial resources to businesses and industries.
Entrepreneurship will take shape in a variety of sizes and fields once the problem of capital
deficiency is resolved. This would significantly increase employment and help to alleviate the
unemployment problem. By breaking the vicious cycle of poverty, this results in increased
revenue generation, increased savings, and increased investment. Apart from that, the financial
sector contributes to a healthy credit line to the industrial sector as well. The expansion of the
financial sector will undoubtedly benefit manufacturing, services, and agriculture, as well as
provide solutions to disguised unemployment.

 Financial assistance to Industries

Small and medium-sized enterprises (SMEs) are funded in a variety of ways by commercial
banks. They provide short-term, medium-term, and long-term loans tobusinesses in the
manufacturing and service sectors, respectively. The Industrial Development Bank of India
(IDBI) is the primary financial institution in India that provides long-term loans to industrial
sectors in a variety of ways, including term loans, stock purchases and underwriting, debentures,
and bonds. The IDBI is known for its expertise in the establishment of the Development
Assistance Fund. Following liberalisation, even commercial banks began extending long-term

35
INDIAN BANKING SYSTEM MMS SEM (III)

loans to their customers. The Credit Guarantee Fund Scheme, which was launched by the
government and the Reserve Bank of India to provide guarantee coverage for collateral-free credit
facilities extended to MSEs up to one crore rupees, is intended to make it easier for small and medium-
sized businesses to access credit. Furthermore, the definitions of MSME have been revised in order to
broaden their scope in order to deal with the pandemic situations (COVID-19) that are currently
prevailing in the country.

 Promotes saving habits and thrift amongst the people

Depositors are attracted to banks by the introduction of attractive deposit schemes and the
provision of higher rates of interest. Banks offering a variety of deposit products such as savings
accounts, current accounts, recurring deposit accounts, fixed deposit accounts, tax savings
schemes, senior citizen savings accounts, and other similar products in order to attract a diverse
range of depositors. Customers are drawn to the bank by these personalised accounts, which also
instil a sense of thrift in them.. This benefits the economy both directly and indirectly through the
creation of new capital and the generation of new income.

 Enhance standard of living

People in underdeveloped countries who are poor and have low incomes do not have sufficient
financial resources to purchase consumer durable goods, which is a problem. Consumers can
obtain loans from commercial banks to help them purchase items such as furniture, refrigerators,
and other household items. The people of developing countries benefit from this as well, as loans
for consumption activities help to raise the standard of living of the population in these countries.

36
INDIAN BANKING SYSTEM MMS SEM (III)

 CURRENT STATUS OF BANKIN IN INDIA

 The Indian banking system consists of 12 public sector banks, 22 private sector banks, 44
foreign banks, 43 regional rural banks, 1,484 urban cooperative banks and 96,000 rural
cooperative banks in addition to cooperative credit institutions. As of September 2022,
the total number of ATMs in India reached 217,308 out of which 49.81% are in rural and
semi urban areas.

 As of November 4, 2022 bank credit stood at Rs. 129.26 lakh crore (US$ 1,585.09
billion). As of November 4, 2022 credit to non-food industries stood at Rs. 128.87 lakh
crore (US$ 1.58 trillion).

 In 2020-2022, bank assets across sectors increased. Total assets across the banking sector
(including public and private sector banks) increased to US$ 2.67 trillion in 2022.

 In 2022, total assets in the public and private banking sectors were US$ 1,594.51 billion
and US$ 925.05 billion, respectively.

 RBI has decided to set up Public Credit Registry (PCR), an extensive database of credit
information, accessible to all stakeholders. The Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2017 Bill has been passed and is expected to strengthen the
banking sector. Microfinance industry’s gross loan portfolio (GLP) by 10% in FY22 to
Rs. 2.85 trillion (US$ 36.42 billion).

 As of June 01, 2022, the number of bank accounts—opened under the government’s
flagship financial inclusion drive ‘Pradhan Mantri Jan Dhan Yojana (PMJDY)’—reached
45.60 crore and deposits in the Jan Dhan bank accounts totalled Rs. 1.68 trillion (US$
21.56 billion).

37
INDIAN BANKING SYSTEM MMS SEM (III)

 Rising income is expected to enhance the need for banking services in rural areas, and
therefore, drive the growth of the sector.

 India is the world's largest market for Android-based mobile lending apps, accounting for
~82% of all online lenders worldwide. India currently has 887 active lending apps.

 The digital payments revolution will trigger massive changes in the way credit is
disbursed in India. Debit cards have radically replaced credit cards as the preferred
payment mode in India after Demonetisation. Interface (UPI) recorded 7.30 billion
transactions worth Rs.. 12.11 trillion (US$ 148.63 billion).

 FUTURE STATUS OF INDIA BANKING SECTOR IN

INDIA
The banking industry is undergoing a tremendous transformation vis-à-vis technological
innovations and changing customer behaviour. The FinTech startups have revolutionized this
transformation with innovative products and services to suit the diverse customer base which, in
fact, led to financial inclusion of the unbanked or underbanked communities, as new digital
solutions transcend beyond boundaries of urban settlement.
In India, banks often ensure to incorporate new technologies in their business and operations.
ATMs, online banking, mobile banking, point-of-sale (POS) machines were early technologies
that banks adopted. Today, FinTech players have emerged as disruptors in the financial service
industry by incorporating a number of cutting-edge technologies in their products and service
offerings.
Digital transformation in the country was accelerated owing to the COVID-19 crisis as the social
distancing norms almost destabilized branch operations, and banks needed to focus on remote
solutions for customer-facing operations.
App-based digital payment providers, e-wallets and payment banks expanded their business
during the pandemic. They also started offering savings products such as PayTM Payment Bank,
the emergence of new lending providers for micro-loans (which used to be the forte of the
traditional banks), and new FinTechs started offering credit and Forex products to individuals
without needing to have a bank account.

38
INDIAN BANKING SYSTEM MMS SEM (III)

In FY20, the number of new retail digital payments breached the 30 billion mark and the value of
such transactions went past INR three lakh billion for the first time in India. Reports say the
impact of COVID-19 on digital payments is greater than that of the post-demonetisation drive in
India

 New banking service

The emergence of new banks such as small finance banks, micro-finance institutes, rural banks
and post office savings banks are redefining a very niche user base with tailored products and
trusted relationships. Financial institutions are primarily focusing on people and convenience
banking.
The emergence of new-age technologies such as AI-ML, big data, blockchain, cloud computing,
robotic process automation and others enabled the banking industry to offer customer-centric
offerings to diverse groups of people.
Big data allows banks to create useful insights from unstructured financial and personal data
collected from various sources in order to launch more customer-friendly products and services
as well as expand banking operations.
AI-ML lets banks automate their core-banking services thus easing the customer relationship.
Banks are now incorporating powerful technology such as blockchain to develop an efficient
distributed ledger to record transactions thereby securing the financial data from leaks. In fact,
cybercrimes are a real challenge for banks. Statistics show its rising trend also owing to digital
transformation.
Hence, the banking industry needs to build a strong cyber-risk-free ecosystem by increasing the
awareness of customers and other stakeholders as well as investing in the cybersecurity
infrastructure. Building a culture is the precursor of cybersecurity in any organization to improve
customers’ trusts

 Future banks
The FinTech innovations such as e-wallets, payment gateways, UPI, peer-to-peer lending, etc.
have expanded banking services to a wider customer base and enabled a seamless banking
experience.

39
INDIAN BANKING SYSTEM MMS SEM (III)

Customers now anticipate banks to augment digital interactions and come up with digital
alternatives for their day-to-day banking requirements as they are now more open to trying out a
new app than they were before the COVID-19 pandemic.
Banks therefore are exploring customer-engaging platforms such as social media and messenger
services to expand their businesses. For example, WhatsApp banking is a reality now while other
social media channels are used for building customer relationships.
The concept of remote work culture has been introduced in the banking industry recently, which
will continue to remain in the post-Covid world as well. Banks are trying to adopt more
comprehensive business continuity plans to prepare for unexpected situations like the current
crisis.
This includes a mix of digital workspaces, cloud scalability, intrinsic security and enhanced
network capabilities.
Additionally, regulatory bodies and governments are bringing new frameworks and guidelines
for banks to comply with and banks will need to align their digital transformation strategies time-
to-time.
Despite all these improvements and prospects, banks are crippling with acute skills gap and
talent shortage to take up emerging roles. It highlights the significance of upskilling and
reskilling of banking professionals and freshers to build a future-ready workforce. It is a
collective effort of all the stakeholders including the industry, banks, employees, and educational
and training institutions

40
INDIAN BANKING SYSTEM MMS SEM (III)

 Banking Regulation in India

The Banking Regulation Act, 1949 controls the banking institutions from their birth to death. If
any bank has to start business, it cannot do so unless it has obtained a licence under the
provisions of Banking Regulation Act,1949 and if it has to close down business, the winding of
operations will be as per the provisions of the Banking Regulations Act,1949. Even for the day
today banking business, the Banking Regulation Act, 1949 lays down defined areas including
provisions for penalties in case of violation by the concerned banks.

The Banking Regulation Act came into effect on 16 March 1949 and it applies to the whole of
India. The act was amended by Banking Laws Amendment Act, 1983, The Banking Public
Finance Institutions And Negotiable Instrument Laws Amendment Act, 1988 And The Banking
Regulation Amendment Act, 1994.

The purpose of enacting the Banking Regulation Act, 1949 was two fold:
1. To consolidate and amend the law related to banking companies.
2. To check the abuse of powers by managers of banks and also to safeguard the interest of
depositors and the interest of the country in general.

41
INDIAN BANKING SYSTEM MMS SEM (III)

 Research methodology

WHAT IS RESEARCH?

Research takes place with the purpose of acquiring knowledge to contribute to further
investigation or process to inform action, to prove a theory, or to reach a result. To produce
fruitful experience, the Research must be of high quality. And types of Research
Methodology support to get the best-suited outcome. We can understand the significance
of Research with some fundamental points:

 Research is a way to build knowledge.

 It is an essential requirement to start analyzing, writing, reading, and distributing

information.

 It nourishes and opens up the minds.

 With Research, different understanding issues seem easy.

 Research helps to build confidence and positivity to try on opportunities.

 The importance of Research in any field can’t be ignored. But many skip
researching before starting anything. Lazy students and disinterested academics do
not realize the need for doing research, but it is an imperative procedure to ensure
the safety or positive result of their work. The research covers not only the
education field, but it covers both professionals and non-professionals. Even for

42
INDIAN BANKING SYSTEM MMS SEM (III)

non-professionals, it is meant to acquire knowledge which helps them to sharpen

their skills to survive around intelligence and improve their confidence.
 DEFINITION

 In Research, the world’s’ signifies frequency and intensity, while the ‘search’
syllable is synonymous with discovery. This way, ‘research’ means – the repetitive
and in-depth findings of the objects. In other words, searching for the core of the
items, making some conclusions, discovering new theories, and clarifying those
contributions fall under the process of “research”.
 Research is a well-planned and scientific method of finding solutions to a wide
variety of problems. Under the meaning of Research, there is an attempt made to
obtain a solution to the problem by collecting various types of data and systematic
analysis of the multiple aspects of the issues related. Research is asystematic
method, by which new facts are discovered, or ancient facts are confirmed, and
they study the sequences, interactions, causal interpretations, and natural laws that
determine the points obtained. Research, an attempt is made to solve a theoretical
or practical problem. As per the American sociologist Earl Robert Babbie,
“Research is a systematic inquiry to describe, explain, predict, and control the
observed phenomenon. Research involves inductive and deductive methods.”
 WHAT IS RESEARCH METHODOLOGY?
 The techniques or the specific procedure which helps the students to identify,
choose, process, and analyze information about a subject is called Research
Methodology. It allows the readers to evaluate the validity and reliability of the
study in the research paper. In simple words, it describes what you did and what
made you reach this obtained result. It is practical to know ‘how’ the given
Research or any specific piece of Research was done. How a researcher designs a
comprehensive study to get a reliable outcome which justifies the objectives of the
course can be figured out by research methodology.

Types of Research are as follows:

 Experiments
 Surveys

43
INDIAN BANKING SYSTEM MMS SEM (III)

 Questionnaires
 Interviews
 Case studies
 Participant and non-participant observation
 Observational trials
 Studies using the Delphi method

 PRIMARY DATA
 WHAT IS PRIMARY DATA?
Primary data is a type of data that is collected by researchers directly from main
sources through interviews, surveys, experiments, etc. Primary data are usually
collected from the source—where the data originally originates from and are
regarded as the best kind of data in research.

The sources of primary data are usually chosen and tailored specifically to meet the
demands or requirements of a particular research. Also, before choosing a data
collection source, things like the aim of the research and target population need to
be identified.

For example, when doing a market survey, the goal of the survey and the sample
population need to be identified first.

This is what will determine what data collection source will be most suitable—
an offline survey will be more suitable for a population living in remote areas
without internet connection compared to online surveys.

Primary data sources include; Surveys, observations, experiments, questionnaires,

focus groups, interviews, etc., while secondary data sources include; books,
journals, articles, web pages, blogs, etc.
These sources vary explicitly and there is no intersection between the primary and
secondary data sources.

44
INDIAN BANKING SYSTEM MMS SEM (III)

I HAVE CHOSEN THE QUESTIONNAIRES METHOD BECAUSE:-

Questionnaires are a good way to obtain information from a large number of people and/or
people who may not have the time to attend an interview or take part in experiments. They
enable people to take their time, think about it and come back to the questionnaire later.

Participants can state their views or feelings privately without worrying about the possible
reaction of the researcher.

Unfortunately, some people may still be inclined to try to give socially acceptable answers.
People should be encouraged to answer the questions as honestly as possible so as to avoid
the researchers drawing false conclusions from their study.

Questionnaires typically contain multiple choice questions, attitude scales, closed questions
and open-ended questions. The drawback for researchers is that they usually have a fairly
low response rate and people do not always answer all the questions and/or do not answer
them correctly.

Questionnaires can be administered in a number of different ways (e.g. sent by post or as

email attachments, posted on Internet sites, handed out personally or administered to
captive audience (such as people attending conferences).

Researchers may even decide to administer the questionnaire in person which has the
advantage of including people who have difficulties reading and writing. In this case, the
participant may feel that s/he is taking part in an interview rather than completing a
questionnaire as the researcher will be noting down the responses on his/her behalf

45
INDIAN BANKING SYSTEM MMS SEM (III)

SECONDARY DATA

WHAT IS SECONDARY DATA?

Secondary data refers to data that is collected by someone other than the primary

user. Common sources of secondary data for social science include censuses, information
collected by government departments, organizational records and data that was originally
collected for other research purposes.

Secondary data analysis can save time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, can provide larger and higher-
quality databases that would be unfeasible for any individual researcher to collect on their
own.

In addition, analysts of social and economic change consider secondary data essential,
since it is impossible to conduct a new survey that can adequately capture past change
and/or developments.

However, secondary data analysis can be less useful in marketing research, as data may be
outdated or inaccurate.

Secondary data can be obtained from different sources:

Information collected through censuses or government departments like housing, social

security, electoral statistics, tax records, internet searches or libraries, GPS, remote sensing,
km progress reports.

46
INDIAN BANKING SYSTEM MMS SEM (III)

Administrative data and census, Government departments and agencies routinely collect
information when registering people or carrying out transactions, or for record keeping –
usually when delivering a service. This information is called administrative data.

It can include:

Personal information such as names dates of birth, addresses, information about schools
and educational achievements, information about health, information about criminal
convictions or prison sentences, tax records, such as income.

A census is the procedure of systematically acquiring and recording information about the
members of a given population. It is a regularly occurring and official count of a particular
population.

It is a type of administrative data, but it is collected for the purpose of research at specific
intervals. Most administrative data is collected continuously and for the purpose of
delivering a service to the people.

The secondary data is acquired from the sources of research papers, books, websites and
internet.

47
INDIAN BANKING SYSTEM MMS SEM (III)

 DATA ANALYSIS AND INTERPRETATION

Q1). What is your Age

2%

23% 27%

18 years to 25 years

25 years to 35 years

35 years to 60 years

above 60 years

48%

Interpretation
From the Above pie chart it can say that the age of 18 years to 25 years is 27%
and the age of 25 years to 35 years is 48% and the age of 35 years to 60 years
23% and the age of above 60 years is 2%.

48
INDIAN BANKING SYSTEM MMS SEM (III)

Q2).. What is your education Qualification

10%

Graduate

24% undergraduate

postgraduate

66%

Interpretation
From the above pie chart it can say that the graduate are 66% and
undergraduate are 24% and postgraduate are 10%

49
INDIAN BANKING SYSTEM MMS SEM (III)

Q3).In Which Bank You Have Bank Account

BANK OF BARODA
30%
36% SBI

HDFC

KOTAK

OTHERS
12%

12%
10%

Interpretation
From the above pie diagram it can say that in Bank Of Baroda 36% people have
account in SBI 12% people have account and in HDFC Bank 10% people have
account in KOTAK Bank 12% people have account and in others 30% people have
account

50
INDIAN BANKING SYSTEM MMS SEM (III)

Q4).What is your Occupation

24%

BUSINNESS

PROFESSION
4%

SERVICE

72%

Interpretation
From the above pie diagram it can say that 24% people have there business and 4%
people have there profession and 72% people have there serv

51
INDIAN BANKING SYSTEM MMS SEM (III)

Q5).What is your annual Income

6%

12%

0 - 2 LACS

8% 2 LACS - 5 LACS

5 LACS - 10 LACS

10 LACS- 15 LACS

74%

Interpretation
From the above pie diagram it can say that people income from 0 – 2 lacs is 6% and
2 lacs – 5 lacs is 12% and 5 lacs – 10 lacs is 8% and 10 lacs – 15 lacs is 74%

52
INDIAN BANKING SYSTEM MMS SEM (III)

Q6).Did you think that your bank cater all your banking need

2%

YES NO

98%

Interpretation
From the above pie diagram it can say that 98% people have say that bank cater all
your banking need and 2 % people have say that bank do not cater all your banking
need

53
INDIAN BANKING SYSTEM MMS SEM (III)

Q7).What kind of A/C do you maintain in your bank

2%
2%
18%
CURRENT A/C

SAVING A/C

JOINT A/C

LOAN A/C

78%

Interpretation
From the above pie diagram it can say that 18% people have maintain current
account and 78% people have maintain saving account and 2% people have
maintain joint account and 2% people have maintain loan account.

54
INDIAN BANKING SYSTEM MMS SEM (III)

Q8).Which of the facility is given more important

6%
8%

LOAN FACILITY

O/D FACILITY

ATM FACILITY

86%

Interpretation
From the above pie diagram it can say that 6% people has given more important to
loan facility and 8% people has given more important to o/d facility and 86%
people has given more important to atm facility.

55
INDIAN BANKING SYSTEM MMS SEM (III)

Q9).Do they charge unnecessary for not maintain minimum balance in your A/C

8%

YES

NO

92%

Interpretation
From the above pie diagram it can say that 92% people have say that bank charge
unnecessary for not maintain minimum balance in your account and 8% people
have say that bank not charge unnecessary for not maintain minimum balance in
your accoiunt

56
INDIAN BANKING SYSTEM MMS SEM (III)

Q10).Do you use the service of alternative bank

22%

YES

NO

78%

Interpretation
From the above diagram it can say that 22% people have use the service of
alternative bank and 78% people not use the service of alternative bank

57
INDIAN BANKING SYSTEM MMS SEM (III)

Q11). What do you feel about overall service quality of your bank

6%
14%

EXCELLENT

VERY GOOD

GOOD
44%
AVERAGE
36%
POOR

Interpretation
From the above diagram it can say that 14% people have say that overall service
quality of your bank is excellent and 36% people have say it is very good and 44%
people have say the service is good and 6% people have say service is average and
0% people have say service is poor .

58
INDIAN BANKING SYSTEM MMS SEM (III)

Q12).would you Recommend this bank to your friends Relatives

8%

YES

NO

92%

Interpretation
From the above pie diagram it can say that 92% people will recommend this bank
to your friends relatives and 8% people will not recommend this bank to your
friends relatives .

59
INDIAN BANKING SYSTEM MMS SEM (III)

Q13).When do you think bank what comes first in your mind

4%

PERSONALIZED SERVICE
28%
WIDE BRANCH NNETWORK
32%
CUSTOMER SERVICE

COMPUTERIZED BANKING

CORE BANKING

36%

Interpretation
From the above pue diagram it can say that 28% people will think bank comes first
in your mind and 36% will think wide branch network and 32% will think customer
service and 4% will think computerized banking and 0% will think core banking .

60
INDIAN BANKING SYSTEM MMS SEM (III)

Q14).Do you have face any saving problem

38%
YES NO

62%

Interpretation
From the above diagram it can say that 62% people have say they have to face
saving problem and 38% people have say do not face any saving problem .

61
INDIAN BANKING SYSTEM MMS SEM (III)

Q15).Do you have credit cards / Debit cards

13%

YES

NO

87%

Interpretation
From the above pie diagram it can say that 87% people have credit cards / debit
cards and 13% people do not have credit cards / debit cards .

62
INDIAN BANKING SYSTEM MMS SEM (III)

Q16).Do you use Internent banking

13%

YES NO

87%

Interpretation
From the above pie diagram it can say that 87% people have say use internet
banking and 13% people have not use internet banking .

63
INDIAN BANKING SYSTEM MMS SEM (III)

Q17).Are You Satisfy With Banking Service

10%

YES

NO

90%

Interpretation
From the abve diagram it can say that 90% people will satisfy with banking service
and 10% people will not satisfy with banking service

64
INDIAN BANKING SYSTEM MMS SEM (III)

Q18).According To You what problem you face at a time of banking service

ATM PROBLEM

34%
SERVER DOWN PROBLEM

CHEQUE CLEARING PROBLEM

56%
OTHER

6%
4%

Interpretation
From the above diagram it can say that 56% people will face problem of atm
service 4% people will face server down problem 6% people will face problem of
cheque clearing problem and 34% people face other problem .

65
INDIAN BANKING SYSTEM MMS SEM (III)

 FINDINGS
 After having and analyzed in indian banking system there are so many problem facing in
different areas of banking like private sector , government sector and public sector bank
in india they have issue like loan related ,saving problem and many more.

 They shou;ld focous on online banking more because nowadays people are more prefer to
online banking due to that bank also get ready for those areas

 People are facing more problem on atm related issue , cheque related issue , server error
issue , and other issue also they have to focous .

 Some bank are also going digitally full for customer and it is good for customer because
they will more accurate there transaction

 Due to that bank also going nowadays on clearing and more focous on digitally due to
that people will get more time to cheque and manage there account

 Bank are also provide new facility for customer nowadays because bank can doing not
lending money but also they provide new services to customer like insurance ,mutual
fund and many more

66
INDIAN BANKING SYSTEM MMS SEM (III)

 RECOMANDATION

 I Will like to suggest that indian banking system will more focous on upgradation of
technology and adding new method on banking system they have to more focous on
digitally .

 Bank have should offer new schemes to customer due to that due to that customer should
get easily understood

 Bank should also focous more on digitally like 24* service ,due to that accurate people
will more connect with bank

 I will like to suggest bank should focous on self service opportunities in bank due to that
customer get easily solving there needs

 Bank should focous new techniques and ready for new trends due to that customer get
helpful for doing all there needs

 Banks also provide new schemes it will benefit more to customer

67
INDIAN BANKING SYSTEM MMS SEM (III)

 Conclusion

Banking system is a collection of institutions that provides us with financial services. These
organizations are in charge of running a payment system, making loans, accepting deposits, and
assisting with investments. The Reserve Bank of India (RBI), commercial banks, cooperative
banks, and development banks comprise India’s banking system (development finance
institutions). The core of India’s financial system is these institutions, which serve as a meeting
point for savers and investors. Banks play a vital role in the development of poor countries by
mobilizing resources and efficiently allocating to them.

Banking holds a crucial role in our day-to-day life. We must adhere to the banking system as
responsible citizens. The banking system acts as a crucial base for the financial system as well as
the entire economic system of the country. It provides a base to the market and the companies. In
a crux, we can say that it is the source of channeling the finance by the people of the country.

Hence the over all idea of entire banking system is very important to acquire in india banking as
been started from ancient time and still it as the same importance but it can be said the
importance of banking sector has increasing day by day not only in the economy of country but
in the live of people also today banking is like no one can live without

68
INDIAN BANKING SYSTEM MMS SEM (III)

 REFERENCE

 https://en.wikipedia.org/wiki/Banking_in_India

 https://unacademy.com/content/bank-exam/study-material/general-awareness

 https://www.knightfintech.com/knowledge-center/articles/learning/structure-of-the-
indian-banking-system

 https://byjus.com/bank-exam/history-banking-india/

 https://www.ibef.org/industry/banking-india

69
INDIAN BANKING SYSTEM MMS SEM (III)

 Annexure

INDIAN BANKING SYSTEM

Name - Mobile No -
Gender - Male Female
1.What is your Age
o 18 years to 25 years
o 25 years to 35 years
o 35 years to 60 years
o Above 60 years

2. What is your education Qualification

o Graduate
o Undergraduate
o Post graduate

3. In Which Bank You Have Bank Account

o

4. What is your Occupation

o Business
o Professon
o Service

5. What is your annual Income

o 0 - 2 lacs
o 2 lacs - 5 lacs
o 5 lacs - 10 lacs
o 10 lacs - 15 lacs

6. Do you think that your bank cater all your banking need

70
INDIAN BANKING SYSTEM MMS SEM (III)

o Yes
o No

7. What kind of A/C do you maintain in your bank

o Current A/C
o Saving A/C
o Joint A/C
o Loan A/C

8. Which of the facility is given more important

o Loan facility
o O/D facility
o ATM facility

9.Do they charge unnecessary for not maintain minimum balance in your A/C
o Yes
o No

10.Do you use the service of alternative bank

o Yes
o No

11. What do you feel about overall service quality of your bank
o Excellent
o Very good
o Good
o Average
o Poor

12.would you Recommend this bank to your friends Relatives

o Yes
o No

13.When do you think bank what comes first in your mind

o Personalized service
o Wide branch network
o Customer service
o Computerized banking
o Core banking

71
INDIAN BANKING SYSTEM MMS SEM (III)

14.Do you have face any saving problem

o Yes
o No

15.Do you have credit cards / Debit cards

o Yes
o No

16.Do you use internent banking

o Yes
o No

15.Are You Satisfy With Banking Service

o Yes
o No

16. According To You what problem you face at a time of banking service give suggestion
o ATM PROBLEM
o SERVBER DOWN PROBLEM
o CHEQUE CLEARING PRIOBLEM
o OTHER

Date - Sign -

72