A SEMINAR REPORT ON A CONTEMPORARY MANAGEMENT ISSUE TITLED

QUICKLY CHANGING VIEW OF BANKING SECTOR IN INDIA

Submitted for The requirement of The subject seminar on contemporary management issue MASTER OF BUSINESS ADMINISTRATION [M.B.A]

SUBODH INSTITUTE OF MANAGEMENT AND CAREER STUDIES SUBMITTED BY :Ashish Singhal MBA (2012-201 !

Subodh institute of management and career studies B.R.shah MBA bloc Rambagh circle! "aipur
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PREFACE
The introduction and application of the concept of customer services entered in a welcoming way in India only after independence. The banking system in India has come a long way during the last two centuries. Its growth was faster and the coverage wider since 1969. In 1969a major position of banking sector was entrusted to the public sector. This process continued and embraced few private banks in 198 . !ew issues of " 1# like $T% &$ash Transfer %ervice'( %ecurity in )assbook( !ew notes in )lastic( and *irect cash Transfer scheme by )rime +inister through ,adhar. Indian -overnment has several beneficiary schemes for customers in budget " 1#. ,nd *irect cash transfer scheme is most beneficiary for .ural areas. The transfer of ownership of banks from the public to private was aimed at entrusting the banks with greater responsibilities for the economic development of India by taking banking services to the masses and taking special care of the weaker section of the society and the priority sector of the economy. Though the number of banks offices magnitude and the variety of their operations has grown considerably during the period of near about three decades( but it appears that the banking sector has entered into serious among customers.

STUDENT DECLARATION

I declare that the submitted work has been completed by me the undersigned and that I have not used any other than permitted reference sources or materials nor engaged in any plagiarism. ,ll references and other sources used by me have been appropriately acknowledged in the work. I further declare that the work has not been submitted for the purpose of academic e/amination( either in its original or similar form( anywhere else.

)lace0 1aipur !ame0 ,shish %inghal

TABLE OF CONTENTS

S" N# 1 " # 7 4 6 < 8 9 1 11 1" 1# 17

Na$% 2istory of 3anking %ystem in India 5unctions of 3ank !ew $T% $he6ue 3ook 8hite 9abel ,T+ &89,' :nhance %ecurity in pass book )lastic +oney0 .s. 1 notes in polymer;plastic on trial basis )hishing( , !ew $rime in )lastic $ard 5rauds -overnment=s *irect cash transfer scheme Technologies in Indian 3anking %ector .ecent *evelopment( -rowth > )rospects Technological Innovation in Indian 3anking %ector %cope for !ew :ntrance $onclusion 3ibliography

&ag% N#" 4 9 11 1# 14 16 1< 18 " "" "< #4 #< #8

HISTORY OF BANKING SYSTEM IN INDIA

PHASE I:- The -eneral 3ank of India was set up in the year 1<86. !e/t came
3ank of 2industan and 3engal 3ank. The :ast of India $ompany established 3ank of 3engal &18 9'( 3ank of 3ombay &187 ' and bank of madras &187#' as independent units and called it )residency 3anks.

PHASE II:- !ationali?ation of Imperial 3ank of India with e/tensive banking

facilities on a large scale specially in rural and semi@urban areas. It formed %tate 3ank of India to act as the principal agent of .3I and to handle banking transaction of the Anion and %tate -overnments all over the country. %even banks forming subsidiary of %tate 3ank of India was nationali?ed in 196 on 19th 1uly( 1969( major process of nationali?ation was carried out. 17 major commercial banks in the country was nationali?ed.

PHASE III:- This phase has introduced many more products and facilities in he
banking sector in its reforms measure. In 1991( under the chairmanship of + !arasimhama( a committee was set up by his name which worked for the liberali?ation of banking practices.

In India since independence following major nationali?ations have taken place 0@ 1979 0 .3I was nationali?ed &.3I was state owned at the time of Indian independence'. 194# 0 ,ir India was nationalised under the ,ir $orporations ,ct 194# 1944 0 $ontrol of Imperial 3ank of India was ac6uired by .3I 1969 0 17 Indian private banks were nationalisedB 19<" 0 1 6 insurance companies were nationalised into four insurance companies 19<# 0 $oal Industry and Cil companies were nationalised 198 0 6 more Indian private banks were nationalised The banking system has capacity to add to the total supply of money by means of credit creation. That is why $rowther has said( DThe bank is a dealer in credit and its own and other peoples.E. It is because of an ability to manipulate credit that banks are used e/tensively as a tool of monetary policy. The through channeling of funds into one or the other direction on a priority basis or e/tending it to one or the other concessional terms and conditions( influence the flow of funds and thereby the nature of economic development.

CLASSIFICATION OF BANKS: In India( the institutions of banking has e/isted for a long time but previously only individuals or family concern carried on banking. They are called indigenous bankers and are known as the multans( mahajans( marwaries( or sahukars in different parts of the country. They accept deposits which are not withdrawable by che6ue. They make e/tensive use of handiest for purpose of remittance and e/tend loans with or without security on varying rates of interest depending on the credit( worthiness of the borrowers. The usual classification of banks apart from indigenous bankers is as follows0
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a'

$entral 3ank 0@ It is the principal banking and monetary institution of a country and has a

monopoly of the note issue. It controls and regulates the activities of other banks. It is usually under government ownership and management and regulates the monitory and credit conditions in the general interests of the economy. b' $ommercial 3anks0 They accept deposit from various sources withdrawable generally at short notice. %ince there deposits are mainly for a short( they grant loans and advances for a short period to meet the working capital needs of trade and industry. c' Industrial 3anks0 They provide industrial capital by subscribing for shares and debentures of companies. They also grant long term loans to meet the fi/ed capital needs of the industry. d' .egional .ural 3ank0 These are special types of banks not like the needs particularly of the weaker sections in rural areas because it was felt that the e/isting institutions have not been able to deliver the goods.

e' $o@operative 3ank0 These are organi?ed by the people for their own collective benefit. These encourage thrift through small savings and advance to loan to their members at fair rates of interest. They are registered under the co@operative societyFs acts.

ESSENTIALS OF SOUND BANKING SYSTEM %tability0 3ank failures damage the whole economy by destroying the general confidence of the people in such situations. 3ank must therefore maintain li6uidity and refrain from riskless lending or investment. The good sense of banks in this respect is reinforced by legislation. In India( under the 3anking .egulation ,ct. 1979( the .eserve 3ank has been given e/tensive powers of supervision( direction and regulation of commercial banks. Insurance of deposits up to .s. " ( has been

introduced so that depositors may feel secure. Training of bank staff has been undertaken to see officers have ade6uate theoretical background.

9i6uidity0 9i6uidity means the capacity to promptly meet the demands of depositors. This can be done only by keeping such cash or near cash. Too much li6uidity is costly( for li6uid assets do not yield much income and a bank cannot offered to ignore profitability. 3ank therefore keep in addition to cash( a large proportion to their funds in reali?able or transferable assets( which also earn income.

5le/ibility0 3oth the deposit and credit systems should be kept so fle/ible that they can meet the varying psychological re6uirements and business needs of the
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customers. The policy of selective liberali?ation and control is an e/ample of fle/ible banking policy. *ispersal0 3anking facilities should not get concentrated in a small region but get dispersed over the whole country to enable e6uitable regional growth. %uch banking can secure better deposit mobili?ation which is essential for a proper and balanced growth. )rofitability0 )rofitability should not be sacrificed( the responsibility to share holders and optional business choices in raising resources and e/tending credit facility within the basic farm work of security of investment demand it. FUNCTIONS OF A BANK The functions of a bank can be summari?ed as follows0 i) Receipt of Depo it , bank receives deposits from individuals( firms and other institutions. *eposits constitute the main resources of a bank. %uch deposits may be different types. *eposits which are withdrawlable on demand are called demand or current deposits other are called time deposits. %aving deposits are those from which withdrawals are restricted as regards the amount and the period. *eposits withdrawlable after the e/piry of an agreed period is known as fi/ed deposit. Interest paid by bank is different for each kind of deposit highest for fi/ed deposit and lowest or even nil for current deposits.

ii) Le!"i!# of Mo!e$: 3anks lend money mainly for industrial and commercial purpose. This lending may take the form of cash credits( overdrafts( loans and advances( or discounting of bills of e/change. Interest charged by banks on such lending varies according to the amount and period involved( social priority nature of security offered( the standing of the borrowers etc. iii) A#e!c$ Se%&ice : , bank renders various services to cons a' $ollection of bills( promissory notes. b' $ollection of dividend( interest( premium etc. c' )urchase and sale of shares and securities. d' ,cting as trustee or e/ecutor when so nominated. e' +aking regular payments such as insurance premiums. i&) Ge!e%'( Se%&ice : , modern bank performs many services of general nature to the public e.g. a' Issue of letters of credit( travelers( che6ue( bank drafts( circular notes etc. b' %afe keeping of valuable in safe deposit vaults. c' %upplying trade information and statistics0 conducting economic surveys. d' )reparation of feasibility studies( project reports etc. <4mers( such as 0

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Ne) CTS c*e+,e -oo.

In a circular to banks( .3I said( D.esidual non@$T%" 1 %tandard che6ues that get presented in the clearing system beyond this e/tended period &+arch " 1#' will continue to be accepted for clearing but will be cleared at less fre6uent intervals.E The central bank( however( indicated it might impose some fee for such che6ues after +arch. D8hile most of the banks have confirmed that they are issuing only multi@city;payable at par $T%@" 1 standard che6ues at present( representations have been received from various stakeholders re6uesting for e/tension of the time beyond *ecember #1( " 1" for withdrawal ; replacement of non@$T%@" 1 %tandard che6ues ; post@dated :+I che6ues with $T%@" 1 standard che6ues(E the circular further said.

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What is CTS?

$T% standard che6ues are aimed at enhancing customer safety and facilitating easier processing. Ander the $T% system( the physical movement of che6ues between banks will be eliminated. !ormally( when you issue a che6ue to someone( he presents the che6ue in his bank to get the credit. ,nd then( the che6ue physically moves from his bank to your bank which involves a lot of time and risk. .3I recogni?ed the disadvantages of this old system and has introduced a new format for che6ues( referred as $T%@" 1 ( where instead of the physical movement of the che6ue( an electronic image of the che6ue is transmitted to the drawee branch &a bank that must pay for a draft or a bill'. The presenting bank &which is the bank of the person to whom you had issued the che6ue to' retains the physical che6ue. In addition to the electronic image( certain relevant information is also transmitted( such as date of presentation( presenting bank details( data on the +I$. band.

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8hite 9abel ,T+ &89,'

8hite 9abel ,T+ &89,' operator is a non@bank entity which can set up( own and operate an automated teller machine &,T+' as e/tended delivery channels.

The .eserve bank of India has given in@principle approval to seven companies to roll out 8hite 9abel ,T+s on ,pril( " 1#. D%even companies have been given authori?ation &to set up 89,s' while five were given in *ecember last year( taking the total to 1". ,s soon as they get their act together( they will be in operation(E said Gijay $hugh( $hief -eneral +anager( .eserve 3ank of India( at the sidelines of a conference hosted by *iscover 5inancial %ervices and !ational )ayments $orporation of India. DCf the total 19 applicants( 1< have been found eligible( 1" have been given the authori?ation. 8e e/pect one or two operators to kick@start business in the ne/t few months. Cne of them is Tata &$ommunications 3anking Infra %olutions'(E $hugh said.

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,bout 1.4 lakh ,T+s can be rolled out in the ne/t three years and two million )o% &)oint@of@%ale' terminals in two years if all the 1< companies start functioning. That is the e/pectation( he added. Ander the .3I guidelines( the authori?ation for setting up a 89, operation would be initially valid for a period of one year under three schemes H ,( 3 and $ H which specify the rural to semi@urban ,T+ ratio for network e/pansion. 89, operators are allowed to charge their customers as per the banksF charges. $urrently( banks are not allowed to charge the customers for the first five transactions in other bank ,T+s. ,bove that( banks levy .s 14 for cash withdrawal and .s 4 for balance en6uiry.

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:nhance %ecurity in pass book

The .eserve 3ank directed all banks to offer the pass book facility( without any charges( to all customers with savings account. IIt has come to our notice that some banks are not issuing pass books to their savings banks account holders &individuals' and only issue a computer generated account statement even when the customer desires pass book facility. I3anks are( therefore( advised to strictly adhere to the instructions...(I the .eserve 3ank of India &.3I' said in a notification. .3I has asked banks to ensure that demand drafts of .s " ( and above are issued with account payee crossing.

IInstruments with account payee crossing are re6uired to be credited to the payee=s account and not paid in cash over the counter.2owever( some unscrupulous elements use demand drafts without any crossing for transfer of money as an alternative to settlement through cash(I .3I said. In view of concerns raised( it said( .3I reiterates that banks shall strictly adhere to the instructions and not collect account payee che6ues for any person other than the payee constituent. 3anks may note that the above prohibition and rela/ation shall also e/tend to drafts( pay orders

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and bankers= che6ues( .3I notification said.

P(' tic Mo!e$: Rs. /0 !ote i! po($1e%2p(' tic o! t%i'( -' i

/-! piece of R 3 /0 !ote -ei!# i!t%o",ce" i! fi&e citie &i43 Koc*i5 M$ o%e5 6'ip,%5 B*,-'!e )'% '!" S*i1(' )it* &'%ie" #eo#%'p*ic'( (oc'tio! '!" c(i1'tic co!"itio! 3

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-overnment will introduce one billion pieces of .s 1 bank notes made of plastic on a field trial basis in five cities( +inister of %tate for 5inance said in )arliament. DIt has been decided by the government and the .3I &.eserve 3ank of India' to introduce one billion pieces of .s 1 notes in polymer;plastic on a field trial basis(E +inister of %tate for 5inance !amo !arain +eena said in a written reply to the .ajya %abha. The minister said the field trail will be conducted in five cities H Jochi( +ysore( 1aipur( 3hubhaneswar and %himla with varied geographical locations and climatic conditions. D.3I has informed that while the primary objective of introduction of polymer notes is to increase its life( it could also help in combating counterfeiting(E he added.

P*i *i!#5 A Ne) C%i1e i! P(' tic C'%" F%',"

,ccording to national cyber@crime estimates( credit card frauds( phishing( hacking into accounts and so on are on the rise and increasing at an alarming rate of # per cent in India.

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DIn the past seven to eight months( we are noticing a rise in phishing complaints in net banking or e@commerce in India. ,nother common complaint is identity theft( done by copying the data from the cardFs magnetic strip( usually at shopping outlets(E says Attam !ayak( group country manager( %outh ,sia( Gisa. 9ast year( the two largest payment processing firmsHGisa and +astercardHsuffered a massive online data breach of 1.4 million card details in !orth ,merica. D,lthough frauds in India are on the rise( it is still one of the lowest impacted countries globally because of stringent .eserve 3ank of India guidelines(E adds !ayak. 8ell( in the last si/ months alone( there have been numerous instances of huge amounts being skimmed &where the magnetic strip of the card has been copied'. +ost recently( unauthori?ed transactions of an estimated .s # crore have affected all the top card@issuing banks( including I$I$I( 2*5$( %3I( $itibank and ,/is 3ank. %enior banking sources told Cutlook that it was suspected that many of these online international transactions might have taken place through cloning or skimming of data at key department stores and fast food joints.

Go&e%!1e!t7 Di%ect c' * t%'! fe% c*e1e

Cne eye on elections " 17( the $ongress@led A), government announced on Tuesday that it was making cash transfers the default system for welfare delivery.
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$ome the first day of " 1#( in 41 districts( a set of central government welfare services will be delivered as money transfers to recipients= bank accounts. +ore services and the rest of the country will follow by ,pril " 17.

A-o,t Di%ect c' * t%'! fe% c*e1e:It is a poverty reduction measure in which government subsidies and other benefits are given directly to the poor in cash rather than in the form of subsidies. 8*'t '%e it -e!efit 9 It can help the government reach out to identified beneficiaries and can plug leakages. $urrently( ration shop owners divert subsidi?ed )*% grains or kerosene to open market and make fast buck. %uch 9eakages could stop. The scheme will also enhance efficiency of welfare schemes. Ho) i it i1p(e1e!te"9 The money is directly transferred into bank accounts of beneficiaries. 9)- and kerosene subsidies( pension payments( scholarships and employment guarantee scheme payments as well as benefits under other government welfare programs will be made directly to beneficiaries. The money can then be used to buy services from the market. 5or eg. if subsidy on 9)- or kerosene is abolished and the government still wants to give the subsidy to the poor( the subsidy portion will be transferred as cash into the banks of the intended beneficiaries. 8*'t '%e t*e c*e1e7 "i '"&'!t'#e 9 It is feared that the money may not be used for the intended purpose and men may s6uander it. H' it '(%e'"$ -ee! i1p(e1e!te" i! I!"i'9
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:lectronic 3enefit Transfer &:3T' has already begun on a pilot basis in ,ndhra )radesh( $hhattisgarh( )unjab( .ajasthan( Tamil !adu( 8est 3engal( Jarnataka( )ondicherry and %ikkim. The government claims the results are encouraging. A%e t*e%e '!$ ot*e% "%')-'c. 9 Kes( because only ,adhar card holders will get cash transfer. ,s of today( only "1 crore of the 1" crore people have ,adhar cards. Two other drawbacks are that most 3)9 families don=t have bank accounts and several villages don=t have any bank branches. These factors can limit the reach of cash transfer. 8*'t '-o,t e( e)*e%e i! t*e )o%("9 +any 9atin ,merican countries have conditional cash transfer schemes in which money is transferred to poor families through women. The money is given( subject to them ensuring that their children attend school regularly( take preventive healthcare measures and provide better nutrition to their children. The Indian scheme is unconditional. 8*'t '%e t*e c*e1e7 po(itic'( i1p(ic'tio! 9 8hile many studies have assessed positive impacts of such schemes( few have looked at their political benefits. , 8orld 3ank study recently reported there is a direct link between cash transfers and voting behavior. It was found beneficiaries e/press a stronger preference for the ruling party that implements and e/pands cash transfers.

Tec*!o(o#ie i! I!"i'! B'!.i!# Secto%

Co1p,te%i 'tio!

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The process of computeri?ation marked the beginning of all technological initiatives in the banking industry. $omputeri?ation of bank branches had started with installation of simple computers to automate the functioning of branches( especially at high traffic branches. Thereafter( Total 3ranch ,utomation was in use( which did not involve bank level branch networking( and did not mean much to the customer. !etworking of branches are now undertaken to ensure better customer service. $ore 3anking %olutions &$3%' is the networking of the branches of a bank( so as to enable the customers to operate their accounts from any bank branch( regardless of which branch he opened the account with. The networking of branches under $3% enables centrali?ed data management and aids in the implementation of internet and mobile banking. 3esides( $3% helps in bringing the complete operations of banks under a single technological platform. $3% implementation in the Indian banking industry is still underway. The vast geographical spread of the branches in the country is the primary reason for the inability of banks to attain complete $3% implementation. S'te((ite B'!.i!# %atellite banking is also an upcoming technological innovation in the Indian banking industry( which is e/pected to help in solving the problem of weak terrestrial communication links in many parts of the country. The use of satellites for establishing connectivity between branches will help banks to reach rural and hilly areas in a better way( and offer better facilities( particularly in relation to electronic funds transfers. 2owever( this involves very high costs to the banks. 2ence( under the proposal made by .3I( it would be bearing a part of the leased rentals for satellite connectivity( if the banks use it for connecting the north eastern states and the under banked districts.

De&e(op1e!t of Di t%i-,tio! C*'!!e( The major and upcoming channels of distribution in the banking industry( besides branches are ,T+s( internet banking( mobile and telephone banking and card based delivery systems.
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A,to1'tic Te((e% M'c*i!e ,T+s were introduced to the Indian banking industry in the early 199 s initiated by foreign banks. +ost foreign banks and some private sector players suffered from a serious handicap at that time@ lack of a strong branch network. ,T+ technology was used as a means to partially overcome this handicap by reaching out to the customers at a lower initial and transaction costs and offering hassle free services. %ince then( innovations in ,T+ technology have come a long way and customer receptiveness has also increased manifold. )ublic sector banks have also now entered the race for e/pansion of ,T+ networks. *evelopment of ,T+ networks is not only leveraged for lowering the transaction costs( but also as an effective marketing channel resource.

C'%" B' e" De(i&e%$ S$ te1 ,mong the card based delivery mechanisms for various banking services( are credit cards( debit cards( smart cards etc. These have been immensely successful in India since their launch. )enetration of these card based systems have increased manifold over the past decade. ,ided by e/panding ,T+ networks and )oint of %ale &)C%' terminals( banks have been able to increase the transition of customers towards these channels( thereby reducing their costs too.

Rece!t De&e(op1e!t5 G%o)t* : P%o pect

6'!,'%$ ;0/<
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CURRENT STATUS AND DE=ELOPMENT OF THE INDIAN BANKING SECTOR:The Indian economyFs liberali?ation in the early 199 s has resulted in the conception of various private sector banks. This has sparked a boom in the countryFs banking sector in the past two decades7. The revenue of Indian banks grew four@fold from A%L 11.8 billion to A%L 76.9 billion( whereas the profit after ta/ rose nearly nine@fold from A%L 1.7 billion to A%L 1" billion over " 1@1 4.

This growth was driven primarily by two factors. 5irst( the influ/ of 5oreign *irect Investment &5*I' of up to <7 per cent with certain restrictions7. %econd( the conservative policies of the .eserve 3ank of India &.3I'( which have shielded Indian banks from recession and global economic turmoil. 5igure 1.1 and 1." compares the countryFs 3anking Inde/ &3anke/' with the %ense/. The 3anke/ is an inde/ tracking the performance of important banking sector stocks( and has grown at a compounded annual growth rate &$,-.' of appro/imately " per cent over " #@1"6. The 5igure below shows that the 3anke/ and the %ense/ have had

similar growth trends over the past decade.

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The high $,-. e/hibited by IndiaFs 3anke/ demonstrates the industryFs resilience to recession and economic instability. This resilience primarily stems from two factors.
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5irst( the highly regulated Indian banking sector restricts e/posure to high risk assets and e/cessive leveraging. %econd( Indian economyFs overall growth rate has been much higher than other economies worldwide<. 2owever( the recent crisis in the euro?one is likely to affect the Indian economy and in particular the countryFs banking sector. The .3IFs 5inancial %tability .eport estimates the claim of :uropean 3anks on India at appro/imately 8.6 per cent of the countryFs -*)( while some analysts estimate the figure to have reached 14 per cent of the -*)<. 5urther( the recent implementation of the 3asel III guidelines may also force :uropean banks to deleverage significantly<. *ata from the International +onetary 5und &I+5' suggests that these banks will deleverage up to A%L ".6 trillion by the end of " 1# especially from the sale of securities and non@core assets. This will see the credit supply to businesses shrinking by 1.< per cent8( thereby driving Indian companies to borrow from the Indian banks at a higher cost in times of inflation and in a period of depreciation in the value of rupee<. The non@performing assets ),s' of banks were pegged at ".9 per cent in the fourth 6uarter of " 11( and are e/pected to rise to #.4 per cent by " 1"9. ,ll these factors might hamper the performance of the Indian banking sector. 2owever( amongst positive initiatives taken by the government( the .3I mandated banks to maintain < per cent of the

provision coverage ratio of their bad loans as on %eptember " 1 ( thereby mitigating the effect of !),s to a certain e/tent1 . The !),s of public( private and foreign banks in India are e/hibited in 5igure ".

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The solace for Indian banks( however( lies in the fact that India has shown a comparatively robust growth in its -*) over past years( which analysts closely correlate to the performance of the banking industry11. The report forecasts that IndiaFs -*) growth will take the si?e of the countryFs banking sector( to the third largest in the world by " "4 11. 5igure # shows the data from the +inistry of 5inance that supports this.

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5igure # demonstrates that the growth of the banking sector in terms of percentage contribution to the -*) has remained mostly uniform over 5K 6@1 . The banking sector is currently growing at appro/imately the same rate as the countryFs economy. ,nother important parameter for assessing the performance of the banking industry is the domestic credit provided as a percentage of the -*)( as e/hibited in 5igure 7 below.

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TECHNOLOGICAL INNO=ATION IN INDIAN BANKING SECTOR

Today we have electronic payment system along with currency notes. IndiaFs financial sector is moving towards a scenario( where it can have new instruments along with li6uidity and safety. Important events in the evolution of new age payment systems in India0 ,rrival of card@ based payments@ debit card( credit card@ late 198 s and early 199 s. Introduction of :lectronic $learing %ervice &:$%' in late 199 s Introduction of :lectronic 5unds Transfer; %pecial :5T &:5T;%:5T' in the early " s 7

.eal Time -ross %ettlement &.T-%' was introduced in +arch "

Introduction of !:5T &!ational :lectronic 5unds Transfer'as a replacement for :5T;%:5T in " 4; 6

)lan for implementation of che6ue truncation system as a pilot program in !ew *elhi in " <.

+igration from cash and che6ue based payment system( it has become a necessity to electronic fund transfer system on account of the following reasons0 1. 9arge volumes of transaction( ". 2igh cost of physical handling and storage of paper instruments. #. *elay in reali?ation is a common feature.
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7. 5inality of payment takes time because the physical movement of instruments in large volumes from branches to and from clearing house( and sorting them according to each bank branch at the center creates problems. RBI *' t'.e! t)o 1'>o% tep to t'c.(e t*i p%o-(e1: Ase Cf +agnetic Ink $haracter .ecognition

&+I$.' technology was resorted to facilitate and e/pedite physical sorting of instruments using high@speed +I$. sorters. There are about 7 +I$. centers in India today. Introduction of :lectronic $learing %ervice.

The :$% was the first version of M:lectronic )ayments in India. It is a mode of electronic funds transfer from one bank account to another bank account using the mechanism of clearing house. It is very useful in case of bulk transfers from one account to many accounts or vice@ versa. There are two types of :$% &:lectronic $learing %ervice' /3 ECS ? c%e"it ;3 ECS- "e-it3 :$% facility is available at more than 6 centers in India. The beneficiary has to maintain an account with one of the banks at :$% center in order to avail benefits of :$%.

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/3 ECS- CREDIT ,dvantages of :$% to ultimate beneficiary are0 !o need to make fre6uent visits to bank for depositing physical paper instruments. !o possibility of loss of instrument and fraudulent encashment !o chance of delay or return in reali?ation of proceeds as in the case of paper instruments.

3enefits to $orporate bodies of :$% %ave on administrative machinery for printing( dispatch and reconciliation ,void the chance of loss of instruments in postal transit ,void the chance of frauds due to fraudulent access to the paper instruments and encashment It can be ensured that the beneficiaryFs accounts get credited on a designated date. ;3 ECS DEBIT It is a scheme under which an account holder with a bank can authori?e an :$% user to recover an amount at a prescribed fre6uency by raising a debit in his account. Atility service providers such as telephone companies( electricity boards( credit card collections( collection of loan installments by bank and

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financial institutions( and investment schemes such as mutual funds are eligible to participate in the :$% debit scheme. ,dvantages of :$% debit scheme0

,. To the ultimate beneficiary is0 :liminates the need of physical visit and the trouble of standing in long 6ueues for making payment There is no need to track down payments by last dates.

3. To the corporate bodies and Institutions are0 %aves on administrative machinery for collecting the che6ues( monitoring their reali?ation and reconciliation 3etter cash management ,voids chances of fraud

.eceives payments on a single date These schemes were introduced when Indian banking was in infant stage of its computeri?ation hence cost benefits could not be ma/imi?ed. EFT E(ect%o!ic F,!" t%'! fe% :5T scheme targeted one to one payments as an alternative to the use of che6ues and drafts for remitting funds between bank accounts located at different centers. :5T encountered the problem of low level of computeri?ation and connectivity in the Indian banking industry.

Co%e B'!.i!# So(,tio!

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$3% is a centrali?ed platform( which creates environment where the entire bank s operations can be controlled( and run from a centrali?ed hub. This creates a centrali?ed customer database( which makes anytime( anywhere( anyway banking possible. Immediate advantages of $3% are0 5aster and efficient customer service. Cffering multiple delivery channels( like ,T+s( $ards( mobile;Telephone 3anking( internet 3anking( $all centers( etc. .educing the operational costs( through manpower saving and space saving. $entrali?ing the back end processes and reporting. $reating a customer profile database( it is a powerful tool for gaining competitive advantage through cross selling opportunities. ,doption of .isk management( by taking care of risk@monitoring and risk@ reporting re6uirements ATM ,T+s are an issue of survival for the banks and are becoming just another part of everyday life. 5alling costs of machines and connectivity is a key factor contributing to the growth of ,T+ network. 3anks have also been cutting costs and gaining synergies through ,T+ sharing agreements amongst themselves( for e/ample0 $ash Tree &3ank of India( Anion 3ank of India( Indian 3ank( *ena 3ank and %yndicate 3ank'
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%3I( 2*5$ 3ank( ATI 3ank( Indian 3ank and ,ndhra 3ank I$I$I 3ank( ,ndhra 3ank and 5ederal 3ank

3anks are now using ,T+s for product promotion as banks market broader financial services to their captive audience of ,T+ users. 3ut these facilities come with added problems when huge amount of money is withdrawn by large number of consumers in a market period &very short period of time'. CRM $ustomer .elationship +anagement %olution is the set of methodologies and tools that help an enterprise manage customer relationships in an organi?ed way @ finding( getting( and retaining customers. It helps to provide better customer service( increase customer revenues( discover new customers and sell products more effectively.

CORPORATE INTERNET BANKING The Internet has initiated an electronic revolution in the global banking sector. Its dynamic and fle/ible nature as well as its ubi6uitous reach has helped in leveraging a variety of banking activities. The Internet has emerged as one of the major distribution channels of banking products and services for banks in the A.% and in :uropean countries. $onsumers are embracing the many benefits of Internet banking like improved customer access which facilitates the offering of more services( attract new customers and reduce customer attrition. ,dvantages of Internet 3anking0
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A3 A"&'!t'#e to c, to1e% : 3anking from your desk0 @ with e@banking services( one can actually carry out a number of transactions sitting on oneFs seat with just a few click. !et banking customers view their account balance and also open fi/ed deposits( transfer funds( pay electricity( telephone or mobile phones bills and much more. Instant information0 The accounts of the customers are updated as soon as the transaction takes place i.e.( the accounts show the information updated to the last second. This means if a che6ue issued by you has been debited from your account in the morning( your account status will reflect this when you log in to your accounts in the afternoon as against the earlier updating at the end of the day.

B3 A"&'!t'#e to t*e -'!. 9esser personnel re6uired0 online banking has encouraged a chunk of people( though a smaller one to carry out most of their transactions from a distance. This has resulted in lesser pressure on the employees in terms of entertaining customers. :asy publicity0 banks can easily pass on the information about their new avenues;schemes without any wastage of time. $ustomers interested in the schemes would revert back and can be attended to later. PAYMENT SYSTEMS BY RBI: Inter@bank $learing %ystem 2igh Galue $learing %ystem
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+I$. $learing %ystem -overnment %ecurities $learing %ystem and .eal Time -ross %ettlement %ystem

3anks not only deal with corporate and individual but also they need to make payments to each other to settle the accounts arising of the transactions carried out for their customers( and also for borrowing or repayment( investments( sale and purchase of various assets. These payments have to be effected through their accounts maintained with the .eserve 3ank of India.

Re'( Ti1e G%o

Sett(e1e!t S$ te1

The inter 3ank )ayments handle large amounts of money. The .T-% system is one in which payment instructions between banks are processed and settled individually and continuously throughout the day. In India currently it covers more than "8( branches of banks. The attraction of .T-% is that the payee banks and their customers receive funds with certainty and finality during the same day enabling them to use the funds immediately without e/posing themselves to risk. .T-% system( do not create credit risk for the receiving participant because they settle the each payment individually ( as soon as it is accepted ( li6uidity risks remains( as well as the possibility of the risks being shifted outside the system .The security has to ensure that hacking is not possible at the site.

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SCOPE FOR NE8 ENTRANTS 81."4N also felt that there was further scope for new entrants in the market( in spite of capital management and human resource constraints( as there continue to remain opportunities in unbanked areas. 8ith only # @#4N of the population financially included( and the Indian banking industry unsaturated with $,-. of well above " N( participants in our survey felt that the market definitely has scope to accommodate new players. 8hile there has been prior debate( we 6uestioned banks on !35$s and Industrial houses being established as banking institutions and find opinion to be marginally against the notion( with #4.<1N in favor while 7".86N were against them being established as banks. 2owever( on further 6uestioning( 4<.17N of respondents feel that the above may be allowed but only if it is along with specific regulatory limitations. 3anks felt that limitations regarding track record( ensuring ade6uate capitali?ation levels( a tiered license that enables new entrants to enter into specific areas of the business only after satisfactorily achieving set milestones for the prior stages( cap on promoter=s holdings and wider public holding in addition to a common banking regulator on a level playing field are essential before they may set themselves up as banks.

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CONCLUSION 5rom the above we can conclude that( 1' ,s the bank is providing many schemes in .ural and Arban sectors and increasing smoothness in transactions. -overnment also help to provide more security to the consumers. ,nd also provide *irect cash transfer scheme to the .ural consumers. "' The working procedure which has been e/isted in the bank is really nice in the nature. The staff which is working in the bank is very co@operative in natures and they are working at their best level and providing best kind of services to its customers. ,s the employees are taking part in the decision making process so they are not having any complaint with the management. #' The bank is conducting many social activities and helping the needy ones. The bank is facing the tremendous challenge in terms of the service( 6uality managing service( competition from other firms and customer satisfaction. The management of the bank is linking to accept the challenge for the process of learning and relearning.

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BIBLIOGRAPHY

)))3)i.ipe"i'3co1 )))3#oo#(e3co1 )))3$'*oo3co1 Ne) p'pe% 1'#'4i!e

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