BANKING SECTOR IN INDIA

Banking in India in the modern sense originated in the last decades of the 18th century. Among the first banks were
the Bank of Hindustan, which was established in 1770 and liquidated in 1829-32; and the General Bank of India,
established 1786 but failed in 1791.
The largest bank, and the oldest still in existence, is the State Bank of India. It originated as the Bank of Calcutta in
June 1806. In 1809, it was renamed as the Bank of Bengal. This was one of the three banks funded by a presidency
government; the other two were the Bank of Bombay and the Bank of Madras. 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 was established in 1935, under the Reserve Bank of India Act 1934.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. These are
now called its associate banks. In 1969 the Indian government nationalized 14 major private banks. In 1980, 6 more
private banks were nationalized. These nationalized 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 banks and non-scheduled banks. The scheduled banks
are those which are included under the 2nd Schedule of the Reserve Bank of India Act, 1934. The scheduled banks
are further classified into: nationalized banks; State Bank of India and its associates; Regional Rural Banks (RRBs);
foreign banks; and other Indian private sector banks. The term commercial banks refer to both scheduled and nonscheduled commercial banks which are regulated under the Banking Regulation Act, 1949.
Generally banking in India was fairly mature in terms of supply, product range and reach-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 with things like microfinance.During the period of British rule merchants established the Union Bank
of Calcutta in 1869, 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 honors belongs to the Bank of Upper India, which
was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being
transferred to the Alliance Bank of Simla.
Foreign banks too started to appear, particularly in Calcutta, in the 1860s. The Comptoir d'Escompte de Paris opened
a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French
possession, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India,
mainly due to the trade of the British Empire, and so became a banking 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.The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing
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 into
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.

Nationalization in the 1960s

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India except the State Bank of
India (SBI), continued to be 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. 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. The meeting received the paper
with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an ordinance ('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.Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political
sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies
(Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.A second
dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was
to give the government more control of credit delivery. With the second dose of nationalisation, the Government of
India controlled around 91% of the banking business of India. Later on, in the year 1993, the government
merged New Bank of India with Punjab National Bank. It was the only merger between nationalised banks and
resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the
nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

Liberalization in the 1990s

In the early 1990s, the then government embarked on a policy of liberalization, licensing a small number of private
banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of
such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, UTI
Bank (since renamed Axis Bank), ICIC Bank and HDFC Bank. This move, along with the rapid growth in
the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution
from all the three sectors of banks, namely, government banks, private banks and foreign banks.
The next stage for the Indian banking has been set up with the proposed relaxation in the norms for foreign direct
investment, where all foreign investors in banks may be given voting rights which could exceed the present cap of
10% at present. It has gone up to 74% with some restrictions. The new policy shook the Banking sector in India
completely. Bankers, till this time, were used to the 464 method (borrow at 4%; lend at 6%; go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.
All this led to the retail boom in India. People demanded more from their banks and received more.

CURRENT PERIOD
All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are Scheduled Banks.
These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks. Scheduled Commercial
Banks in India are categorized into five different groups according to their ownership and/or nature of operation.
These bank groups are:

State Bank of India and its Associates

Nationalised Banks

Private Sector Banks

Foreign Banks

Regional Rural Banks.

Cooperative Banks

Scheduled Bank

In the bank group-wise classification, IDBI Bank Ltd. is included in Nationalised Banks. Scheduled Co-operative
Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Cooperative Banks.By 2010, banking in
India was generally fairly mature in terms of supply, product range and reach-even though reach in rural India still
remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in
comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from
the government.
With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the
demand for banking services, especially retail banking, mortgages and investment services are expected to be strong.
One may also expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a
private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private
sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would
need to be vetted by them.In recent years critics have charged that the non-government owned banks are too
aggressive in their loan recovery efforts in connexion with housing, vehicle and personal loans. There are press
reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.
By 2013 the Indian Banking Industry employed 1,175,149 employees and had a total of 109,811 branches in India
and 171 branches abroad and manages an aggregate deposit of 67504.54 billion (US$1.0 trillion or 1.0 trillion)
and bank credit of 52604.59 billion (US$790 billion or 780 billion). The net profit of the banks operating in India
was 1027.51 billion (US$16 billion or 15 billion) against a turnover of 9148.59 billion (US$140 billion or
140 billion) for the financial year 2012-13.On 28 Aug, 2014, Pradhan Mantri Jan Dhan Yojana (
, English: Prime Minister's People Money Scheme) is a scheme for comprehensive financial
inclusion launched by the Prime Minister of India, Narendra Modi. Run by Department of Financial
Services, Ministry of Finance, on the inauguration day, 1.5 Crore (15 million) bank accounts were opened under this

scheme. By 15 July 2015, 16.92 crore accounts were opened, with around 20288.37 crore (US$3.1 billion) were
deposited under the scheme, which also has an option for opening new bank accounts with zero balance.

PUNJAB NATIONAL BANK

Punjab National Bank is an Indian financial services company based in New Delhi, India. Founded in 1894, the
bank has over 6,300 branches and over 7,900 ATMs across 764 cities. It serves over 80 million customers.
Punjab National Bank is one of the Big Four banks of India, along with State Bank of India, ICICI Bank and Bank
of Baroda. It is the third largest bank in India in terms of asset size ( billion by the end of FY 2012-13). The bank has
been ranked 248th biggest bank in the world by the Bankers' Almanac.
PNB has a banking subsidiary in the UK (PNB International Bank, with seven branches in the UK), as well as
branches in Hong Kong, Kowloon, Dubai and Kabul. It has representative offices
in Almaty (Kazakhstan), Dubai, Shanghai (China),Oslo(Norway) and Sydney (Australia). In Bhutan it owns 51% of
Druk PNB Bank, which has five branches. PNB owns 20% of Everest Bank Limited, which has 50 branches in
Nepal. Lastly, PNB owns 84% of JSC (SB) PNB Bank in Kazakhstan, which has four branches.

History
Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act, with its office in Anarkali
Bazaar, Lahore. The founding board was drawn from different parts of India professing different faiths and a varied
back-ground with, however, the common objective of providing country with a truly national bank which would
further the economic interest of the country. PNB's founders included several leaders of the Swadeshi movement
such as Dyal Singh Majithia and Lala Harkishan Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala,
Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the
management of the Bank in its early years. The board first met on 23 May 1894. The bank opened for business on
12 April 1895 in Lahore.
PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has
survived to the present. (The first entirely Indian bank, Oudh Commercial Bank, was established in 1881
in Faizabad but failed in 1958.)
PNB has had the privilege of maintaining accounts of national leaders such as Mahatma Gandhi, Jawahar Lal
Nehru, Lal Bahadur Shastri, Indira Gandhi, as well as the account of the famous Jalianwala Bagh Committee.

Timeline
In 1900, PNB established its first branch outside Lahore in Rawalpindi. Branches in Karachi and Peshawar
followed. The next major event occurred in 1940 when PNB absorbed Bhagwan (or Bhugwan) Dass Bank, which
had its head office in Dehra Dun. At the Partition of India and the commencement of Pakistani independence, PNB
lost its premises in Lahore, but continued to operate in Pakistan. Partition forced PNB to close 92 offices in West
Pakistan, one-third of its total number of branches, and which held 40% of the total deposits. PNB still maintained a
few caretaker branches. On 31 March 1947, even before Partition, PNB had decided to leave Lahore and transfer its
registered office to India; it received permission from the Lahore High Court on 20 June 1947, at which time it
established a new head office at Under Hill Road, Civil Lines in New Delhi. Lala Yodh Raj was the Chairman of the
Bank.

In 1951, PNB acquired the 39 branches of Bharat Bank (est. 1942). Bharat Bank became Bharat Nidhi Ltd.In 1960;
PNB again shifted its head office, this time from Calcutta to Delhi. In 1961, PNB acquired Universal Bank of India,
which Ramakrishna Jain had established in 1938 in Dalmianagar, Bihar. PNP also amalgamated Indo Commercial
Bank (est. 1932 by S. N. N. Sankaralinga Iyer) in a rescue.
Financial performance
#

Particulars

FY 2008-09

FY 2009-10

FY 2010-11

FY 2011-12

FY 2012-13

A Deposits (' INR crores)

209,761

249,330

312,899

379,588

391,560

Advances (' INR crores)

154,703

186,601

242,107

293,775

308,725

Total Business (A+B) (' INR crores)

364,464

435,931

555,006

673,363

700,285

D Total Assets (' INR crores)

246,919

296,633

378,325

458,192

478,877

Operating Profit (' INR crores)

5,690

7,326

9,056

10,614

10,907

Net Profit

3,091

3,905

4,433

4,884

4,748

G Business/Employee

655

808

1,018

1,132

1,165

H Profit/Employee (' INR lakhs)

5.64

7.31

8.35

8.42

8.06

Return on assets (%)

1.39

1.44

1.34

1.19

1.00

Gross NPAs (%)

1.60

1.71

1.79

2.93

4.27

K Net NPAs (%)

0.17

0.53

0.85

1.52

2.35

4,665

4,997

5,189

5,670

5,874

Total Branches

In 1963, The Burmese revolutionary government nationalized PNB's branch in Rangoon (Yangon). This became
People's Bank No. 7.[After the Indo-Pak war, in September 1965 the government of Pakistan seized all the offices in
Pakistan of Indian banks. PNB also had one or more branches in East Pakistan(Bangladesh).The Government of
India (GOI) nationalized PNB and 13 other major commercial banks, on 19 July 1969.In 1976 or 1978, PNB opened
a branch in London. some ten years later, in 1986, the Reserve Bank of India required PNB to transfer its London
branch to State Bank of India after the branch was involved in a fraud scandal.
That same year, 1986, PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The acquisition added
Hindustan's 142 branches to PNB's network. In 1993, PNB acquired New Bank of India, which the GOI had
nationalized in 1980.In 1998 PNB set up a representative office in Almaty, Kazakhstan. In 2003 PNB took
over Nedungadi Bank, the oldest private sector bank in Kerala. At the time of the merger with PNB, Nedungadi
Bank's shares had zero value, with the result that its shareholders received no payment for their shares. PNB also
opened a representative office in London. In 2004, PNB established a branch in Kabul, Afghanistan, a representative
office in Shanghai, and another in Dubai. PNB also established an alliance with Everest Bank in Nepal that permits

migrants to transfer funds easily between India and Everest Bank's 12 branches in Nepal. Currently, PNB owns 20%
of Everest Bank.
Two years later, PNB established PNBIL Punjab National Bank (International) in the UK, with two offices, one
in London, and one in Southall. Since then it has opened more branches, this time in Leicester, Birmingham, Ilford,
Wembley, and Wolverhampton. PNB also opened a branch in Hong Kong. In January 2009, PNB established a
representative office in Oslo, Norway. PNB hopes to upgrade this to a branch in due course. In January 2010, PNB
established a subsidiary in Bhutan. PNB owns 51% of Druk PNB Bank, which has branches
in Thimpu, Phuentsholing, and Wangdue. Local investors own the remaining shares. Then on 1 May, PNB opened
its branch in Dubai's financial center. PNB purchased a small minority stake in Kazakhstan-based JSC Dena Bank.
Within the year PNB increased its ownership and now PNB owns 84% of what has become JSC (SB) PNB. The
subsidiary has branches in Almaty, Astana, Karaganda, and Pavlodar. Dena Bank was established on 20 October
1992 in Pavlodar.

September 2011: PNB opened a representative office in Sydney, Australia.

December 2012: PNB signed an agreement with US based life Insurance company MetLife to acquire a
30% stake in MetLife's Indian affiliate MetLife India Limited. The company would be renamed PNB
MetLife India Limited and PNB would sell MetLife's products in its branches.

LISTING AND SHARE HOLDING

PNB's equity shares are listed on Bombay Stock Exchange and the National Stock Exchange of India. It is a
constituent of the CNX Nifty at the NSE.

Shareholders (as on 31-Dec-2013)

Shareholding

Promoter Group (Govt. of India)

58.87%

Foreign Institutional Investors (FII)

17.51%

Insurance Companies

15.46%

Individual shareholders

04.05%

Banks/Financial Institutions/Mutual Funds/UTI

03.02%

Others

01.09%

Total

100.0%

CURRENT SCENARIO

Punjab National Bank, incorporated in the year 1969, is a Large Cap company (having a market cap of Rs 25,963.8
Cr.) operating in Banks sector.
Punjab National Bank key Products/Revenue Segments include Interest & Discount on Advances & Bills which
contributed Rs 34794.38 Cr to Interest Income (75.12% of Total Interest Income),Income From Investment which
contributed Rs 10599.99 Cr to Interest Income (22.88% of Total Interest Income),Interest On Balances with RBI and
Other Inter-Bank Funds which contributed Rs 632.25 Cr to Interest Income (1.36% of Total Interest Income),Interest
which contributed Rs 288.74 Cr to Interest Income (0.62% of Total Interest Income), for the year ending 31-Mar2015. The Bank has reported a Gross Non Performing Assets (Gross NPAs) of Rs 25397.42 Cr. (6.47% of total
assets) and Net Non Performing Assets (Net NPAs) of Rs 15393.55 Cr. (4.05% of total assets).
For the quarter ended 30-Jun-2015, the company has reported a Standalone Interest Income of Rs. 8908.10 Cr.,
up 3.96% from last quarter Interest Income of Rs. 8568.71 Cr. and up 0.82% from last year same quarter Interest
Income of Rs. 8835.74 Cr. Company has reported net profit after tax of Rs. 720.71 Cr. in latest quarter.

Products and Services

Personal Banking
1. Saving Fund Account
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

PNB Prudent Sweep

Total Freedom Salary Account
PNB Vidyarthi SF Account
PNB Mitra SF Account
Current Accounts
FD Schemes
Loans
Housing, Personal, Educational, Property etc
Cards
Nomination Services

Social Banking
1.
2.
3.

Agriculture Credit
Krishi Card
Schemes for Women

Corporate Banking
1.
2.
3.
4.
5.

Loan against future lease rentals

Exim Finance
Cash Management
Traders Finance
Schemes for SSI Sector

SWOT ANALYSIS OF PUNJAB NATIONAL BANK

Strengths:

PNB has a wide network of branches and ATMs allowing it to cater to large no. of customers
Large customer base
The PNB brand is well established and very well recognized
PNB has adapted to technological changes in the banking sector and can leverage it to cut costs as well as
improve its services
PNB has all the products under its belt, which help it to extend the relationship with existing customer.
PNB has umbrella of products to offer their customers, if once customer has relationship with the bank

Weaknesses:

Casual behavior of bank employees towards customers

Very high levels of gross NPA
Corruption and red tapism prevalent right through the organization typical of a PSU setup
Slow decision making due to large hierarchy
PNB has a defensive approach in lending. Because of this policy companies prefer other banks and PNB in
turn sometimes loose potential customers.
PNB is having little presence Outside India, because of which companies prefer MNC Banks. So if PNB
tries to emerge outside India then it has a huge potential of customers.
With its increasing customer base, PNB is not however, increasing the number of employees accordingly.
This is leading to deterioration of the standard of customer service

Opportunities:

Fast growing Indian economy presents tremendous credit growth opportunity for the bank
Indian Banking sector is witnessing high growth thus PNB should also grows
Dissatisfied Customers of Other Banks: There are many companies which are not satisfied with its current
bank, so PNB with its superior service quality can capture those customers
The Banking sector stands to gain from liberalization which will help PNB spread its wings
PNB can tap the huge potential in Micro Financing by leveraging the penetration of its operations in rural
and semi urban India

Threats

Advent of MNC banks: Large numbers of MNC banks are mushrooming in the Indian market duet the
friendly policies adopted by the government. This can increase the level of competition and prove a
potential threat for the market share of PNB.
Dissatisfied Customers: Poor customer support/ service is creating a lot of dissatisfaction among the
customers, this can prove to be a serious problem as far as the market reputation of the bank is concerned
and cane be a major threat in future business acquisition
Increasing competition from other nationalized banks because of their ever improving service standards