UNIVERSITY OF MUMBAI

A PROJECT REPORT ON
commercial bank
A PROJECT REPORT SUBMITTED IN PARTIAL
FULFILLMENT OF THE REQUIREMENT FOR

BACHELOR OF MANAGEMENTSTUDIES
SUBMITTED BY:
Shivaji balu atugade
BATCHLOROF MANAGEMENT STUDIES
SEMESTER-V
2016-2017

UNDER THE GUIDANCE OF:

PROF: SUNANDA R. DONGARE

SANPADA COLLEGE OF COMMERCE &

TECHNOLOGY
PLOT NO: 3, 4 & 5, SECTOR-2, SANPADA (EAST)

NAVI MUMBAI-400705

UNIVERSITY OF MUMBAI

A PROJECT REPORT ON
commercial bank

A PROJECT REPORT SUBMITTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENT FOR
BACHELOR OF MANAGEMENT STUDIES (BMS)
SUBMITTED BY:
Shivaji balu atugade
Roll no: 05
BACHELOR OF MANAGEMENT STUDIES
SEMESTER-V
2016-2017

UNDER THE GUIDANCE OF:

PROF: SUNANDA R. DONGARE

ORIENTAL EDUCATION SOCITYS

SANPADA COLLEGE OF COMMERCE &

TECHNOLOGY
PLOT NO. 3,4,5, SECTOR 2, SANPADA, NAVI MUMBAI
400705

CERTIFICATE
This is to certify that mr.shivajibaluatugade OF Third year of BACHELOR
OF MANAGEMENT STUDIES,
semester v has undertaken and completed the project work titled
commercial bank during the academic year 2016-2017 under the
guidance of Prof. Sunanda r. dongaresubmitted on

to this college

in fulfilment of the curriculum of Third year of bachelor of commerce in

management studies, University of Mumbai.
This is a bonafide project work and the information presented is true and
original to the best of our knowledge and belief.

PROJECT GUIDE
PRINCIPAL
(PROF. SUNANDA DONGARE)
M. MULEY)

HEAD OF THE DEPARTMENT

(PROF. CHANCHAL KAUR)

(DR.D.

SANPADA COLLEGE OF COMMERCE &

TECHNOLOGY
PLOT NO: 3, 4 & 5, SECTOR-2, SANPADA
(EAST)
NAVI MUMBAI -400705.
DECLARATION

I, SHIVAJI BALU ATUGADE, STUDENT OF SANPADA COLLEGE

OF COMMERCE & TECHNOLOGY STUDIES BACHELOR OF
MANAGEMENT
DECLARE

THAT

STUDIES,
I

HAVE

FIFTH

SEMESTER;

COMPLETED

THIS

HEREBY
PROJECT

REPORTON COMMERCIAL BANK DURING THE ACADEMIC

YEAR 2016-2017. THE INFORMATION SUBMITTED IS TRUE
AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

NAME: SHIVAJI
BALU ATUGADE
DATE:

ACKNOWLEDGEMENT
At the outset, I am thankful to my institute Oriental Education
Society, and the authorities, for providing me an opportunity
to undertake my BATCHLOR OF MANAGEMENT
STUDIES, Semester V (2016-17), and also for sponsoring me
to undertake project. I am thankful to the management for
giving me an opportunity to undertake my project
(COMMERCIAL BANK) under the guidance of Prof.
Sunanda R. Dongare as my mentor.
I would like to thank our Faculty guide, Prof. Mustak Deraiya
(Professor, Oriental Education Society), for providing valuable
suggestions and guidance during the project. His perspective has
encouraged me to incorporate a different dimension to the
project
I am grateful to my colleagues for being a wonderful support a
through at the same time I am thankful to all my friends of
Oriental Education Society, for being with me at different
junctures of need.
I also acknowledge great sense of gratitude to all those who
have enriched and improved my thinking, through their
conversations, thoughts, experience and guided me to complete
this report.

NAMESHIVAJI BALU ATUGADE

EXECUTIVE SUMMARY
Commercial banks occupy a dominant place in the money market. They, as a matter
of fact, form the largest component in the banking structure of any country. They are
the oldest, largest and fastest growing financial institutions in India. They are profit
making institutions, dealing in money and credit. Commercial banks play a major role
in the growth and development of the country due to the modern organization and
functioning, huge funds and wide network all over the country.
Thus, they are like a reservoir into which flow the savings, the idle surplus money of
households and from which loans are given on interest to businessmen and others who
need them for investment or productive uses.
Commercial banks are very important source of institutional credit as they are
the major depository of peoples savings. They are very important devices for
providing short term credit to trade and commerce. Commercial Banks being
repositories of deposits have played significant role in garnering savings of the people
particularly after the nationalization. Thus, they have made praiseworthy efforts in
pooling the savings.

TABLE OF CONTENTS

Introduction

Origin and Evolution of Indian Banking

Opinions differ as to the origin of the work "Banking". The word "Bank" is
said to be of Germanic origin, cognate with the French word "Banque" and the Italian
word "Banca", both meaning "bench". It is surmised that the word would have drawn
its meaning from the practice of the Jewish money-changers of Lombardy, a district in
North Italy, who in the middle ages used to do their business sitting on a bench in the
market place. Again, the etymological origin of the word gains further relevance from
the derivation of the word "Bankrupt" from the French word "Banque route" and the
Italian word "Banca-rotta" meaning "Broken bench" due probably to the then
prevalent practice of breaking the bench of the money-changer, when he failed.
Banking is different from money-lending but two terms have in practice been
taken to convey the same meaning. Banking has two important functions to perform,
one of accepting deposits and other of lending monies and/or investment of funds. It
follows from the above that the rates of interest allowed on deposits and charged on
advances must be known and reasonable. The money-lender advances money out of
his own private wealth hardly accepts deposits and usually charges high rates of
interest. More often, the rates of interest relate to the needs of the borrower. Moneylending was practiced in all countries including India, much earlier than the recent
type of Banking came on scene.

Significance of Banks

The importance of a bank to modern economy, so as to enable them to develop, can be

stated as follows:
(i) The banks collect the savings of those people who can save and allocate them to
those who need it. These savings would have remained idle due to ignorance of the
people and due to the fact that they were in scattered and oddly small quantities. But
banks collect them and divide them in the portions as required by the different
investors.

(ii) Banks preserve the financial resources of the country & it is expected that they
allocate them appropriately in the suitable & desirable manner.
(iii) They make available the means for sending funds from one place to another and
do this in cheap, safe and convenient manner.
economy and essential for financing the developmental process, is governed by banks.
change its currency and credit policy frequently, This is done by RBI, by changing the
supply of money with the changing needs of the public.
Although traditionally, the main business of banks is acceptance of deposits
and lending, the banks have now spread their wings far and wide into many allied and
even unrelated activities.

Structure of Banking System

At present, the organized banking system in India can be broadly divided into three
categories:
i)
ii)
iii)

The Central Bank of the country, the Reserve Bank of India

The Commercial Banks
The Cooperative Banks.
The RBI is the apex monetary and banking authority in the country and has the
responsibility to control the banking system in India.

Objective of the study

The objective of the study can be considered as follows:-

The study includes essential core topics.

It aims at giving a thorough grounding on the subject.
The study is comprehensive.

It helps to improve the research and investigation

ability.

It enables to think logically and practically

Scope of study

Expectations from the study are that it may contribute to the real scenario of
commercial banking demand and accordingly the banks can go for new innovative
schemes. It will also specify some recommendations and based on that banks can
make suitable arrangements.
Banking, in its crude form, is an age-old phenomenon. It was in existence even in
ancient times, too. It is the business of providing financial services to consumers and
businesses. They are the single major source of institutional finance in the country.
According to Section 5 (c) of the Banking Regulation Act, 1949 - Banking
company means any company which transacts the business of banking in India.
Section 5 (b) of the act defines banking as accepting for the purpose of lending or
investment of deposits of money fro the public repayable on demand or otherwise and
withdrawable by cheque, draft, order or otherwise.
Banking services also serve two primary purposes. First, by supplying
customers with the basic mediums-of-exchange (cash, checking accounts, and credit
cards), banks play a key role in the way goods and services are purchased. Without
these familiar methods of payment, goods could only be exchanged by barter(trading
one good for another), which is extremely time-consuming and inefficient. Second, by
accepting money deposits from savers and then lending the money to borrowers,
banks encourage the flow of money to productive use and investments. This in turn
allows the economy to grow. Without this flow, savings would sit idle in someones
safe or pocket, money would not be available to borrow, people would not be able to
purchase cars or houses, and businesses would not be able to build new factories the
economy needs to produce more goods and grow. Enabling the flow of money from
savers to investors is called financial intermediation, and thus, banking is extremely
important to a free market economy.

Research Methodology
The research methodology is data collection through:PRIMARY SOURCES
SECONDARY SOURCES
Primary Sources: Survey by distributing questionnaire to the people taking
sample size of 100, Interviews conducted with bankers; accumulating knowledge and
help from friends, professors, etc.
Secondary Sources: Gathering data through books, journals, magazines,
websites, newspapers, etc.

Commercial bank
Commercial banks are the oldest, biggest, and fastest growing intermediaries in India.
they are also the most important depositories of public saving and the most important
disburses of finance. commercial banking in India is a unique systems, the like of
which exist nowhere in the world. the truth of this statement becomes clear as one
studies the philosophy and approaches that have contributed to the evolution of the
banking policy, programmes and operation in India.
The banking systems in India works under the constraints that go with social control
and public ownership. the public ownership of banks has been achieved in three
stages:19July1969, and April 1980. Not only the private sector and foreign banks are
required to meet targets in respect of sectoral development of credit, regional
distribution of branches, and regional credit- deposits ratios. the operations of banks
have been determined by Lead Bank Scheme, Differential Rate of Interest Scheme,
Credit Authorisation Scheme, inventory norms and lending systems prescribed by the
authorities, the formulation of the credit plans, and Service Area Approach.
A commercial bank is a type of financial intermediary and a type of bank.
Commercial banking is also known as business banking. It is a bank that provides
checking accounts, savings accounts, and money market accounts and that accepts
time deposits. After the Great Depression, the U.S. Congress required that banks
engage only in banking activities, whereas investment banks were limited to capital
market activities. As the two no longer have to be under separate ownership under
U.S. law, some use the term "commercial bank" to refer to a bank or a division of a
bank primarily dealing with deposits and loans from corporations or large businesses.
In some other jurisdictions, the strict separation of investment and commercial
banking never applied. Commercial banking may also be seen as distinct from retail
banking, which involves the provision of financial services direct to consumers. Many
banks offer both commercial and retail banking services.
A commercialbank is a type of financial intermediary and a type of bank.
Commercialbanking is also known as business banking. It is a bank that provides
checking accounts, savings accounts market activities. As the two no longer have to
be under separate ownership under U.S. law, some use the term "commercialbank" to
refer to a bank or a division of a bank primarily dealing.

COMMERCIAL BANKS BASIC DEPOSITS, CREDIT, CRR AND SLR IS

COMPULSORY TO KEEP WITH RBI
Deposits Rs. 17,81,580Crore
Credits Rs. 11,27,433Crore

Bank Rate 6% (even in Oct 2005)

Prime Lending Rate (PLR) in between 10.5% -11.50%
CRR 4.50%
SLR 25%

Presently, as a part of deregulation many new generation private sector banks have
been permitted viz. ICICI 1 (IDBI) HDFC and the nationalized banks are being
privatized to the extent of 49%.

DEFINATION AND MEANING

DEFINITION

Section 5 [b] of the Act define, banking as, "accepting for the purpose of lending or
investment of deposits of money from the public repayable on demand or otherwise &
withdrawal by Cheques, Drafts, Order or Otherwise".
According to Prof. Sayers, "A bank is an institution whose debts are widely accepted in
settlement of other people's debts to each other." In this definition Sayers has
emphasized the transactions from debts which are raised by a financial institution..

MEANING
A commercial bank is a financial intermediary which collects credit from lenders in
the form of deposits and lends in the form of loans. A commercial bank holds deposits
for individuals and businesses in the form of checking and savings accounts and
certificates of deposit of varying maturities while a commercial bank issues loans in
the form of personal and business loans as well as mortgages. The term commercial
bank came about as a way to distinguish it from an "investment bank." The primary
difference between a commercial bank and its counterpart is that a commercial bank
earns revenue by issuing primary loans from its pool of deposits while an investment
bank brings debt and equity offerings to market for a fee. Among its assets, including
loans, a commercial bank holds a portfolio of other securities to generate proprietary
income.
Commercial banking activites are different than those of investment banking, which
include underwriting, acting as an intermediary between an issuer of securities and the
investing public, facilitating mergers and other corporate reorganizations, and also
acting as a broker for institutional clients.

THE ROLE AND FUNCTIONS OF OF COMMERCIAL

BANKS
PRIMARY FUNCTIONS
processing of payments by way of telegraphic transfer, EFTPOS, internet
banking, or other means.
I.

II.

Accepting Deposits : Commercial bank accepts various types of deposits from

public especially from its clients. It includes saving account deposits, recurring
account deposits, fixed deposits, etc. These deposits are payable after a certain
time period.
Making Advances : The commercial banks provide loans and advances of
various forms. It includes an over draft facility, cash credit, bill discounting,
etc. They also give demand and demand and term loans to all types of clients
against proper security.

III.

Credit creation : It is most significant function of the commercial banks. While

sanctioning a loan to a customer, a bank does not provide cash to the borrower
Instead it opens a deposit account from where the borrower can withdraw. In
other words while sanctioning a loan a bank automatically creates deposits.
This is known as a credit creation from commercial bank.

IV.

lending money by overdraft, installment loan, or other means

providing documentary and standby letter of credit, guarantees, performance
bonds, securities underwriting commitments and other forms of off balance
sheet exposures

V.

Discounting of Bills:- Banks provide short-term finance by discounting bills,

that is, making payment of the amount before the due date of the bills after
deducting a certain rate of discount. The party gets the funds without waiting
for the date of maturity of the bills. In case any bill is dishonoured on the due
date, the bank can recover the amount from the customer.

VI.

Overdraft:- Overdraft is also a credit facility granted by bank. A customer who

has a current account with the bank is allowed to withdraw more than the
amount of credit balance in his account. It is a temporary arrangement.
Overdraft facility with a specified limit is allowed either on the security of
assets, or on personal security.

SECONDARY FUNCTIONS

Along with the primary functions each commercial bank has to perform several
secondary functions too. It includes many agency functions or general utility
functions. The secondary functions of commercial banks can be divided into agency
functions and utility functions.

Agency Functions :
Various
agency
functions
of
commercial
To collect and clear cheque, dividends and interest warrant.

banks

To make payment of rent, insurance premium, etc.

To deal in foreign exchange transactions.
To purchase and sell securities.
To act as trusty, attorney, correspondent and executor.
To accept tax proceeds and tax returns.

General Utility Functions :

The general utility functions of the commercial banks include
To provide money transfer facility.
To issue traveller'scheque.
To act as referees.
To accept various bills for payment e.g phone bills, gas bills, water bills, etc.
To provide merchant banking facility.
To provide various cards such as credit cards, debit cards, Smart cards, etc.
Besides the primary of accepting deposits and lending money,
banks perform a number of other functions which are called secondary
functions. These are as follows a) Issuing letters of credit, travellerscheques, circular notes etc.
b) Undertaking safe custody of valuables, important documents, and

are

securities by providing safe deposit vaults or lockers;

c) Providing customers with facilities of foreign exchange.
d) Transferring money from one place to another; and from one
branch to another branch of the bank.
e) Standing guarantee on behalf of its customers, for making
PAYMENTS for purchase of goods, machinery, vehicles etc.
f) Collecting and supplying business information;
g) Issuing demand drafts and pay orders; and,
h) Providing reports on the credit worthiness of customers.

SPECIAL ROLE OF COMMERCIAL BANKS

As said earlier, commercial banks have a special role in India. In fact, many financial
experts even abroad have, of late, been emphasising the special place that banks hold
in their countries also. The "privileged role" of the banks is the result of their unique
features. For example, the liabilities of banks are money, and, therefore, they are an
important part of the payments mechanism of any country; they also have access to
the discount window of the RBI, call money market (as both borrowers and lenders),
and the deposit insurance. It would be difficult to eliminate such distinctive features
of banks in the near future. There is also an important question as to whether they
should be wiped out, and, if it is done, whether it would not have adverse
consequences on the financial system.

For a financial system to mobilise and allocate savings of the country successfully and
productively, and to facilitate day-to-day transactions, there must be a class of
financial institutions that the public views as safe and convenient outlets for its
savings. In virtually all countries, the single dominant class of institutions that has
emerged to play this crucial role as both the repository of a large fraction of the
society's liquid savings and the entity through which payments are made is the
commercial banks. The structure and working of the banking system are integral to a
country's financial stability and economic growth.

Bank lending is specially important for companies. The theory of financial contracting
under asymmetric information holds that information-intensive and informationproblematic firms submit to the tight and detailed loan covenants so as to reduce
agency costs. They delegate the tasks of monitoring and renegotiating debt contracts
to financial intermediaries because these tasks are costly and the intermediaries are in
a better position to reduce the costs. Intermediaries are more efficient in monitoring
debt contracts because they are unlikely to free-ride on information-production by
others as they have a larger stake, and they can renegotiate contracts more cheaply
than the dispersed debenture holders. The public bond covenants tend to set their
conditions on events that are relatively easy to verify, viz., a major change in capital
structure or a downgrading of credit rating. In contrast, the intermediary loan
contracts are conditioned by performance measures such as working capital and net
worth which are less easily controlled by the managers.
Further, the violation of a financial covenant often triggers financial distress. When
this happens, banks can restructure the terms of contracts, viz., wave covenants,
extend maturity, extend more loans, and require more collateral. Such a flexibility
reduces the cost of financial distress. Information asymmetries and free-riding by
bond-holders, on the other hand, may force the financially distressed firms into

inefficient spending cutbacks, and even bankruptcy. It has been found in the US that
the firms' stock prices rise after an announcement that they have received bank loans,
while they fall in response to announcement of a public bond offering.

Similarly, there are reasons why loans from even other financial institutions may not
be a perfect substitute for bank loans. The economies of scope between deposit taking
and lending give banks an information advantage over finance companies and other
financial institutions. The deposit history of firms may inform banks about the credit
risk involved in lending to these firms. Information on deposits activity may also
make it easier for banks to monitor working capital covenants. The phenomenon of
"compensating balances" can mostly exist only in the case of banks, and not other
institutions. The lending and deposit-taking activities of banks are complementary,
and, go to build up banking relationship which increases the availability of funds to
the firms, which, in turn, enables them to partially avoid taking more expensive trade
credit. Personal relationships are far less important in borrowing from other financial
institutions than from banks. Moreover, significant differences in collateral
requirements exist between banks and other financial institutions. All such differences
effectively segment the market for business lending, and make bank loans highly
unsubstitutable.

The Indian banking system has a very wide reach and deep presence in metropolises,
cities, semi-urban areas, and the remotest corners of the rural areas with its vast
number of branches. It is one of the largest banking systems in the world. It has been
rightly claimed in certain circles that the diversification and development of the
Indian economy are in no small measure due to the active role banks have played in
financing economic activities of different sectors They have been playing an
important role in developing mutual funds, merchant banks, Primary Dealers, asset
management companies, and debt markets. They operate as issuers, investors,
underwriters, guarantors in financial-markets. By their participation, banks influence
the growth and liquidity of debt markets.

They would help in securitisation of debt market. They hold about 60 per cent of debt
stock of government securities, and they account for more than 50 per cent of the
issuance of bonds through public issues and private placements.

Because of such considerations, the important position which banks have historically
come to occupy in India should not be unwittingly destroyed or undermine in the
name of promoting equity culture. Otherwise, monetary authorities would find it more
and more difficult to achieve the goal of stability of the financial system and of the
prices. The banking reforms, therefore, must aim not only at profitable banking but
also at a viable, sound, safe, and social banking.

INVESTMENT OF COMMERCIAL BANKS

BANKS HAVE FOUR CATEGORIES OF ASSETS:

Cash in hand and balances with the RBI,

Assets with the banking system,
Investments in government and other approved securities, and
Bank credit.
Among these assets, investment in cash and government securities serves the liquidity
requirements of banks and is influenced by the RBI policy. Quantitatively, bank credit
and investment in government securities are banks' most important assets.
Commercial banks in India invest a negligible part of their resources in shares and
debentures of joint stock companies. In fact, for a long time they were discouraged
from undertaking such investments. However, since 2/3 years, the policy in this
regard has been liberalised and at present banks are allowed to invest five per cent of
their incremental deposits in corporate shares and convertible debentures.
Commercial banks' investments are of three types:
(a) Government of India securities;
(b) other approved securities, and
(c) non- approved securities.

While the first two types are known as SLR securities, the third one is known as nonSLR securities.

INVESTMENT IN SLR SECURITIES

At present, the banks are statutorily required to invest 25 per cent of their demand and
time liabilities in the first two types of securities. The investments in the first type of
securities is the major part of banks' investments. The government securities
accounted for 95.59 per cent of their total investment portfolio in 2002-03. Their
investments in the second type are marginal, while those in the third type are
emerging as substantial investments.
The commercial banks' investments in Central government securities were 28.1 per
cent and 31. 6 per cent of their total assets in 2001-02 and 2002-03, respectively. The
other approved securities accounted for hardly one-or two per cent of the assets of
commercial banks in the years just mentioned.
The phenomenon of investments in government securities far in excess of statutory
requirements has been due to
(a) high fiscal deficit effect,
(b) capital adequacy norms effect,
(c) foreign exchange sterilisation effect, and
(d) slack credit demand effect.
All these effects are easy to understand. The fiscal deficit has been largely financed
through public borrowings, and the banks have been the major subscribers to the
government borrowing programme. Similarly, due to unprecedented and heavy
increase in foreign exchange accruals, the RBI has been carrying out an intensive
sterilisationProgramme which has resulted in a significant increase in the supply of
government securities, which the banks have been purchasing. Further, all scheduled
banks are required to maintain minimum capital to total risk weighted assets ratio
which was nine per cent in 2002-03. Given the very-low-risk (risk less) nature of the
government securities, banks have preferred to buy and hold substantial amount of
government securities for this purpose also. Finally, due to industrial recession in the
recent past, the industrial sector's credit off take has been slack, and banks, therefore,
have invested their surplus liquidity in government securities.
Thus, the banks' investments in government securities cannot really be decided in
terms of the ideology of public vs. private sector. The large size of the State and the
attendant enormous volume of government expenditure, the portfolio management
considerations of banks, the accrual of resources to the banks, foreign capital flows,
and demand for credit, have always determined and will continue to determine the
level of investment-deposit ratio of banks. Hence, it is erroneous to argue, as the RBI
has done, that a large recourse of banks to gilts to invest their resources is a

dissipation of "banking knowledge capital" regarding credit appraisal, or a possibility

of severing of the link between liquidity, credit, money, and economic activity.

INVESTMENT IN NON-SLR SECURITIES

After 1985, there has been a liberalisation of investment norms for banks which has
enabled them to be active players in financial markets. The ambit of eligible
investments has been enlarged to cover Commercial Paper (CP)" units of mutual
funds, shares and debentures of PSUs, and shares and debentures of private corporate
sector, which are all known as non-SLR investments. Similarly, the limit on
investments in the capital market has been gradually increased. Now, banks can invest
in equities to the extent of five per cent of their outstanding (and not incremental as
earlier) advances. Effective May 2001, the total exposure of a bank to stock markets
with sub-ceilings for total advances to all stock brokers and merchant bankers has
been limited to five per cent of the total advances (including CPs) as on March 31 of
the previous year.
The aggregate balance sheet of SCBs expanded at a higher rate of 19.3% excluding
the impact of conversion of a non-banking entity into a banking entity since October
1, 2004) during 2004-2005 as compared with 16.2 percent in 2003-04. The ratio of
assets of SCBs to GDP at factor cost at current prices increased significantly to 80%
from 78.3% in 2003-04 reflecting further deepening of leverage enjoyed by the
banking sector. The degree of leverage enjoyed by the banking system as reflected in
the equity multiplier declined to 15.8-16.9 in the previous year.
The behavior of major balance sheet indicators show that a divergent during 2004-05.
on the back of robust economic growth and industrial recovery, loans and advances
witnessed strong growth, while investment in rising interest rate scenario, slowed
down significantly. Deposits showed a lackluster performance in the wake of
increased competition from other saving instruments. Borrowings and net-owned
funds however, increased sharply underscoring the growing importance of nondeposits resources of SCBs.
Bank group-wise, assets of new private sector banks grew at the highest rate.
(19.4%),followed by public sector banks(15.1%eacluding the conversion
impact),foreign banks (13.6%) and old private sector banks (10.6%).PSBs continued
to accounts for the major share in he total assets, deposits, advances and investments
of SCBs at end-March 2005, followed distantly by new private sector banks.

DEPOSITS

Deposits of SCBs grew at a lower rate 15.4 per cent (excluding the conversion
impact) during 2004-05 as compared with 16.4 per cent in the previous year on
account of slowdown in demand deposits and savings deposits. Deceleration in
demand deposits was due mainly to the base effect as demand deposits had witnessed
an usually high growth last year. The growth in demand deposits, however was in line
with the long-term average. Savings deposits, which reflect the strength of the retail
liability franchise and are at the core of the banks customer acquisition efforts grew
at a healthy rate, though the growth was somewhat lower than the high growth of last
year. The higher growth of term deposits was mainly o ac count of NRI deposits and
certificate of deposits (CDs).Excluding these deposits, the growth rate of term
deposits showed a declaration, which was on account of a possible substitution in
favour of postal deposits and other investments products, which continued to grow at
a high rate benefiting from tax incentives and their attractive rate of return in
comparison with time deposits.

Factors Affecting Composition of Bank Deposits

The following factors appear to be relevant:
(a) Increase in national income.
(b) Expansion of banking facilities in new areas and for new classes of
people.
(c) Increase of banking habit.
(d) Increase in the relative rates of return on deposits.
(e) Increase in deficit financing.
(f) Increase in bank credit.
(g) Inflow of deposits from Non-Resident Indians (NRIs).

RBI PENALISES 19 COMMERCIAL BANKS

Srinagar, May 1: The Reserve Bank of India has imposed penalties on 19 commercial
banks.
A notification by the central bank, copy of which is available on its site, said in
exercise of the powers vested with it under the provisions of Section 47A(1)
(b) Read with Section 46(4)(i) of the Banking Regulation Act, 1949, the RBI has
imposed penalties on 19 commercial banks.
Some of the banks on whom the penalties have been imposed are ICICI Bank, HDFC
Bank, PNB Paribas, Yes Bank, etc.
The penalties have been imposed for contravention of various instructions issued by
the Reserve Bank in respect of derivatives, such as, failure to carry out due diligence
in regard to suitability of products, selling derivative products to users not having risk
management policies and not verifying the underlying/ adequacy of underlying and
eligible limits under past performance route, it said.
The notification, a copy of which is with Greater Kashmir, reads: The Reserve Bank
had issued Show Cause Notices to these banks. In response to this, the banks
submitted their written replies. On a careful examination of the banks written replies
and the oral submissions made during the personal hearings, the Reserve Bank found
that the violations were established and the penalties were thus imposed.
The banks have been imposed the penalty of Rs 5 lakh to Rs 15 lakh. While the ICICI
Bank, HDFC Bank and Yes Bank each have been imposed a penalty of Rs 15 lakhs,
the PNB Paribas has been saddled with a penalty of Rs 10 lakhs.

COMMERCIAL BANKS AND MICROFINANCE

Within the spectrum of lower-income population who lack access to financial
services, a distinction can be drawn between the extremely poor and the economically
active poor. The extremely poor are considered to be those individuals who have
insufficient resources to meet defined basic consumption needs, including people who
are not qualified to work (due to age, health and ethnic origin reasons, among others)
or whose income is so low that they are not able to meet their household basic needs.
This group has prior needs such as food and shelter, and therefore requires tools
distinct from financial services to get out of poverty.
In this regard, Robinson M.S. (2001) asserts: It is sometimes forgotten although
generally not by borrowers that another word for credit is debt. When loans are
provided to the very poor, the borrowers may not be able to use the loans effectively
because they lack opportunities for profitable self-employment (), (thus being)
unable to repay loan principal and interest.

INCENTIVES AND DISINCENTIVES

BANKS ENTRY INTO MF

FOR

COMMERCIAL

Banks and financial institutions have been entering the microfinance market in
increasing numbers over the past years. This phenomenon (known as downscaling),
together with that of upgrading, is resulting in a growing number of formal regulated
institutions partially or totally moving into MF.
It is necessary to analyze what drives a traditional banker to engage in MF in order to
fully understand why downscaling has developed so much worldwide. There are
several factors that motivate the bank to start making microloans. These factors are
related both to the banks internal organization and to the market in which this bank
operates. However, the main incentive is basically related to the fact that profits are in
line with the risks incurred.

Growing competition in markets traditionally served by banks e.g., loans to big

companies, small and medium-sized businesses and consumers along with the
resulting fall in banks returns has encouraged the search for new market niches. In
countries with no experience in MF, there exists an unattended market segment which
may be viewed by banks as a potential source of rapid growth and positive returns.

Entering a new sector enables banks to diversify their loan portfolio, focusing on a
population segment previously unattended by them. By making loans to thousands of
small borrowers, the microlending portfolio itself achieves substantial diversification
in terms of number of clients served, although the level of diversification by activity
and geographical area is usually low. Commercial banks can overcome this obstacle
thanks to their branch networks across the major cities in the country. In addition, the
performance of the microlending portfolio may have low correlations with traditional
bank business lines due to the very different nature of the clients and activities.
Similarly, having a sector specialized in MF may help commercial banks improve
their public image, as caring for the most disadvantaged social sectors is welcomed
by clients and society in general.

DRIVERS FOR BANK ENTRY INTO MICROFINANCE

Internal Factor
Profit
Risk diversification
Excess liquidity
Image
Cross-selling opportunities
Bank leadership
Social responsibility
Public relations
Compatibility with bank strategy

External Factor
Large microenterpise or low-income market
Competition
Trend or fad
Regulations
Government or donor initiative
Market pressure on margins
Desertion of traditional clients

ACTIVITIES (GENERALLY) AUTHORIZED BY THE BCRA TO

BE PERFORMED BY COMMERCIAL BANKS AND FINANCE
COMPANIES:1. Stock exchange brokers or dealers operating outside the stock exchange.
networks exploitation and management.
3. Systems for electronic transmission of transactions with institutions and/or clients.
4. Pension funds management.
5. Mutual fund portfolio management (management company).
6. Issuance of credit/debit and other similar instruments.
7. Closed savings management.
8. Financial assistance through leasing transactions of capital goods, durable goods
and real estate, acquired for such
purpose (leasing) or over credits arising from sales (factoring).
9. Management of public utilities, loan, etc. collection, payment of salaries, payments
to suppliers and fiscal receipt
collection.
10. Services of data processing and/or transmission of information related to financial
activities.
11. Services of credit information for commercial and financial use (financial record
database)
12. Advice on financial and investment issues, and for mergers and/or acquisitions of
companies, provided that this
13. Mutual guarantee companies, acting as protector partner.
14. Funds management and/or trusts administration advice as regards activities
consistent with the institution type.
15. Financial trusts fiduciary.
16. Transportation and/or custody of
service of mailing and financial

money and securities, including transport

documentation of institutions and/or their customers. Associated security service for

local financial institutions. In
both cases, as long as it is a complement of the service provided to the owner
institution/s.

17. Service of securities and book-entry mortgage bond registry officer

18. Service of liquidation of securities operations.
19. Clearing houses.
20. Temporary acquisition of interest in companies in order to facilitate their
development, with the aim of selling the
relevant stock holdings in the future. Financial advice on planning and managing to
such companies.

TAX REFORM AFFECT COMMERCIAL BANKS

Iast year, Congress enacted the Tax Reform Act of 1986, which fundamentally
restructures and sim- plifies the federal income tax system. Beginning in 1987,
individuals and corporations face much simpler federal income tax rules that contain
lower marginal tax rates. There is widespread speculation about the effects of such
sweeping federal income tax reform. Economists, policymakers, and politicians are
debating the extent to which the new tax rules could adversely affect specific
economic sectors or groups, particularly capital-intensive indumies, certain income
classes of individual taxpayers, real estate, and the banking industry. In the
commercial banking industry, the new tax rules will affect banks at a time when the
commercial banking system is undergoing profound structural changes that are
eroding the industry's ability to consistently generate healthy profits on traditional
banking products and services. During the balance of the 1980s and into the 19!90s,
commercial banks will face several critical issues, including risk-based capital
standards, deregulation, broader geographic competition, and possibly increasing
competition fiom nonbank companies like Sears, Roebuck and Company, and Merrill
Lynch & Co., Inc.
Tax-Exempt Securities. Under the old tax rules, commercial banks could deduct 80
percent of interest expenses that were incurred to carry taxexempt securities in their
asset portfolios. As a consequence, there was a strong incentive for commercial banks
to hold municipal securities to reduce their federal tax burden.
The new tax rules disallow 100 percent of the interest charge for carrying municipal
obligations acquired after August 7 , 1986. There is one exception: under the new tax
rules, a municipality still will be permitted to sell up to $10 million of bonds to a
financial institution per year, and the financial institution can apply the old interest
expense disallowance rule (20 per- cent) to the bonds.
The old tax law required that a commercial bank determine its bad-debt reserve
deduction for tax purposes by using one of two methods: the experience method or the
percentage method. Under the experience method, a bank bases its loan-loss
deduction on the average loan losses of the previous six years. Under the percentage
method, a bank deducts provisions to a loan-loss reserve equal to 0.6 percent of
eligible loans outstanding.

COMMERCIAL BANKS SERVICES PROVIDED TO

THEIR CUSTOMERS
Different modes of Acceptance of Deposits
Banks receive money from the public by way of deposits. The following
types of deposits are usually received by banks:
i) Current deposit
ii) Saving deposit
iii) Fixed deposit26 :: Business Studies
iv) Recurring deposit
v) Miscellaneous deposits
i) Current Deposit
Also called demand deposit, current deposit can be withdrawn by the depositor at
any time by cheques. Businessmen generally open current accounts with banks.
Current accounts do not carry any interest as the amount deposited in these accounts
is repayable on demand without any restriction.
The Reserve bank of India prohibits payment of interest on currentaccounts or on
deposits upto 14 Days or less except where prior sanction has been obtained. Banks
usually charge a small amount known as incidental charges on current deposit
accounts depending on the number of transaction.Savings deposit/Savings Bank
AccountsSavings deposit account is meant for individuals who wish to deposit small
amounts out of their current income. It helps in safe guardingtheir future and also
earning interest on the savings. A saving account c an be opened with or
withoutcheque book f a c i l i ty. The r e a r e restrictions on the withdrawls from
this account. Savings account holders are also allowed to deposit cheques, drafts,
dividend warrants, etc.drawn in their favour for collection by the bank. To open a
savings account, it is necessary for the depositor to be introduced by a person having a
current or savings account with the same bank.
Fixed deposit
The term Fixed deposit means deposit repayable after the expiry of a specified
period. Since it is repayable only after a fixed period of time, which is to be
determined at the time of opening of the account, it is also known as time deposit.
Fixed deposits are most useful for a commercial bank. Since they are repayable only
after a fixed period, the bank may invest these funds more profitably by lending at
higher rates of interest and for relatively longer periods. The rate of interest on fixed

deposits depends upon the period of deposits. The longer the period, the higher is the
rate of interest offered. The rate of interest toFunctions of
Commercial Banks :
be allowed on fixed deposits is governed by rules laid down by the
Reserve Bank of India.
Recurring Deposits
Recurring Deposits are gaining wide popularity these days. Under this type of deposit,
the depositor is required to deposit a fixed amount of money every month for a
specific period of time. Each instalment may vary from Rs.5/- to Rs.500/- or more per
month and the period of account may vary from 12 months to 10 years. After the
completion of the specified period, the customer gets back all his deposits
alongwiththe cumulative interest accrued on the deposits.
Miscellaneous Deposits
Banks have introduced several deposit schemes to attract deposits from different types
of people, like Home Construction deposit scheme, Sickness Benefit deposit scheme,
Children Gift plan, Old age pension
scheme, Mini deposit scheme, etc.
Different methods of Granting Loans by Bank
The basic function of a commercial bank is to make loans and advancesout of the
money which is received from the public by way of deposits. The loans are
particularly granted to businessmen and members of the public against personal
security, gold and silver and other movable and immovable assets. Commercial bank
generally lend money in the
following form:
i) Cash credit
ii) Loans
iii) Bank overdraft, and
iv) Discounting of Bills
i) Cash Credit :
A cash credit is an arrangement whereby the bank agrees to lend money to the
borrower upto a certain limit. The bank puts this amount of money to the credit of the
borrower. The borrower draws the money28 :: Business Studies as and when he
needs. Interest is charged only on the amount actually drawn and not on the amount
placed to the credit of borrowers account. Cash credit is generally granted on a bond

of credit or certain other securities. This a very popular method of lending in our
country.
ii) Loans :
A specified amount sanctioned by a bank to the customer is called a loan. It is
granted for a fixed period, say six months, or a year. The specified amount is put on
the credit of the borrowers account. He can withdraw this amount in lump sum or can
draw cheques against this sum for any amount. Interest is charged on the full amount
even if theborrower does not utilise it. The rate of interest is lower on loans in
comparison to cash credit. A loan is generally granted against the security of property
or personal security. The loan may be repaid in lump sum or in instalments. Every
bank has its own procedure of granting loans. Hence a bank is at liberty to grant loan
depending on its own resources.
The loan can be granted as:
a) Demand loan, or
b) Term loan
a) Demand loan
Demand loan is repayable on demand. In other words it is repayable at short notice.
The entire amount of demand loan is disbursed at one time and the borrower has to
pay interest on it. The borrower can repay the loan either in lumpsum (one time) or as
agreed with the bank. Loans are normally granted by the bank against tangible
securities including securities like N.S.C., KisanVikasPatra, Life Insurance policies
and U.T.I. certificates.
b) Term loans
Medium and long term loans are called Term loans. Term loans are granted for more
than one year and repayment of such loans is spread over a longer period. The
repayment is generally made in suitable instalments of fixed amount. These loans are
repayable over a period of 5 years and maximum upto 15 years.
Functions of Commercial Banks ::
Term loan is required for the purpose of setting up of newbusiness activity,
renovation, modernisation, expansion/extension of existing units, purchase of plant
and machinery, vehicles, land for setting up a factory, construction of factory building
or purchase of other immovable assets. These loans are generally secured against the
mortgage of land, plant and machinery, building and other securities. The normal rate
of interest charged for such loans is generally quite high.
iii) Bank Overdraft
Overdraft facility is more or less similar to cash credit facility. Overdraft facility is the
result of an agreement with the bank by which a current account holder is allowed to
withdraw a specified amount over and above the credit balance in his/her account. It

is a short term facility. This facility is made available to current account holders who
operate their account through cheques. The customer is permitted to withdraw the
amount as and when he/she needs it and to repay it through depositsin his account as
and when it is convenient to him/her.Overdraft facility is generally granted by bank on
the basis of a writtenrequest by the customer. Some times, banks also insist on either
apromissory note from the borrower or personal security to ensure safety of funds.
Interest is charged on actual amount withdrawn by the customer. The interest rate on
overdraft is higher than that of the rate on loan.
iv) Discounting of Bills
Apart from granting cash credit, loans and overdraft, banks also grant financial
assistance to customers by discounting bills of exchange. Banks purchase the bills at
face value minus interest at current rate of interest for the period of the bill. This is
known as discounting of bills. Bills of exchange are negotiable instruments and
enable the debtors to discharge their obligations towards their creditors. Such bills of
exchange arise out of commercial transactions both in internal trade and external
trade. By discounting these bills before they are due for a nominal amount, the banks
help the business community. Of course, the banks recover the full amount of these
bills from the persons liable to make

EVALUATION AND STRUCTURE OF COMMERCIAL

BANKS IN INDIA
INTRODUCTION

Opinions differ as to the origin of the work "Banking". The word "Bank" is said to be
of Germanic origin, cognate with the French word "Banque" and the Italian word
"Banca", both meaning "bench". It is surmised that the word would have drawn its
meaning from the practice of the Jewish money-changers of Lombardy, a district in
North Italy, who in the middle ages used to do their business sitting on a bench in the
market place. Again, the etymological origin of the word gains further relevance from
the derivation of the word "Bankrupt" from the French word "Banque route" and the
Italian word "Banca-rotta" meaning "Broken bench" due probably to the then
prevalent practice of breaking the bench of the money-changer, when he failed.
Banking is different from money-lending but two terms have in practice been taken to
convey the same meaning. Banking has two important functions to perform, one of
accepting deposits and other of lending monies and/or investment of funds. It follows
from the above that the rates of interest allowed on deposits and charged on advances
must be known and reasonable. The money-lender advances money out of his own
private wealth, hardly accepts deposits and usually charges high rates of interest.
More often, the rates of interest relate to the needs of the borrower. Money-lending
was practised in all countries including India, much earlier than the recent type of
Banking came on scene.
In the earlier societies functions of a bank were done by the corresponding institutions
dealing with loans and advances. Britishers brought into India the modern concept of
banking by the start of Bank of England in 1694. In 1708, the bank of England was
given the monopoly for the issue of currency notes by an Act. In nineteenth century
various banks started operations, which primarily were receiving money on deposits,
lending money, transferring money from one place to another and bill discounting.

HISTORY OF BANKING IN INDIA:

Banking in India has a very old origin. It started in the Vedic period where literature
shows the giving of loans to others on interest. The interest rates ranged from two to
five percent per month. The payment of debt was made pious obligation on the heir of
the dead person.

Modern banking in India began with the rise of power of the British. To raise the
resources for the attaining the power the East India Company on 2nd June 1806
promoted the Bank of Calcutta. In the mean while two other banks Bank of Bombay
and Bank of Madras were started on 15th April 1840 and 1st July, 1843 respectively.
In 1862 the right to issue the notes was taken away from the presidency banks. The
government also withdrew the nominee directors from these banks. The bank of
Bombay collapsed in 1867 and was put under the voluntary liquidation in 1868 and
was finally wound up in 1872. The bank was however able to meet the liability of
public in full. A new bank called new Bank of Bombay was started in 1867.

On 27th January 1921 all the three presidency banks were merged together to form
the Imperial Bank by passing the Imperial Bank of India Act, 1920. The bank did not
have the right to issue the notes but had the permission to manage the clearing house
and hold Government balances. In 1934, Reserve Bank of India came into being
which was made the Central Bank and had power to issue the notes and was also the
banker to the Government. The Imperial Bank was given right to act as the agent of
the Reserve Bank of India and represent the bank where it had no braches.

In 1955 by passing the State Bank of India 1955, the Imperial Bank was taken over
and assets were vested in a new bank, the State Bank of India..

Bank Nationalization:
After the independence the major historical event in banking sector was the
nationalization of 14 major banks on 19th July 1969. The nationalization was deemed
as a major step in achieving the socialistic pattern of society. In 1980 six more banks
were nationalized taking the total nationalized banks to twenty.

STRUCTURE OF SCHEDULE COMMERCIAL BANKS:

The composition of the board of directors of a scheduled commercial bank shall

consist of whole time chairman. Section 10A of the Banking Regulation Act, 1949
provides that not less than fifty-one per cent, of the total number of members of the
Board of directors of a banking company shall consist of persons, who shall have
special knowledge or practical experience in respect of one or more of the matters
including accountancy, agriculture and rural economy, banking, co-operation,
economics, finance, law, small-scale industry, or any other matter the special
knowledge of, and practical experience in, which would, in the opinion of the Reserve
Bank, be useful to the banking company. Out of the aforesaid number of directors, not
less than two shall be persons having special knowledge or practical experience in
respect of agriculture and rural economy, co-operation or small-scale industry.
Besides the above the board of the scheduled bank shall consist of the directors
representing workmen and officer employees. The Reserve Bank of India and the
Central Government also has right to appoint their nominees into the board of the
banks.
Present scenario of the banks in India:
Banks are extremely useful and indispensable in the modern community. The banks
create the purchasing power in the form of bank notes, cheques bills, drafts etc,
transfers funds bring borrows and lenders together, encourage the habit of saving
among people.
The banks have played substantial role in the growth of Indian economy. From the
meager start in 1860 the banks have come to long way. At present in India there are 20
nationalized banks, State bank of India and its seven Associate banks, 21 old private
sector banks and 8 new private sector banks. Besides them there are more than 30
foreign banks either operating themselves or having their branches in India.

DIFFERENCE BETWEEN COMMERCIAL BANKS AND

RESERVE BANK (CENTRAL BANK)
COMMERCIAL BANK
A Commercial Bank was established under Banking Regulation Act, 1949.
A commercial bank occupies a subordinate position in the banking structure of
a country.
There is a large number or network of different commercial banks in a
country.
It is a profit oriented financial institution.
A commercial bank cannot print currency notes.
It creates credit money.
It can be owned by the government or it may be privately owned.
A commercial bank perform certain primary and secondary functions.
It cannot act as a clearing house.
Individuals and institutions are the account holders of these banks.
It can provide short term and medium term loans to the individuals and
industries.
Only a few commercial banks are nationalized.

CENTRAL BANK
The Central Bank of a country was established under a special statue. In India
RBI was established under the RBI Act of 1934.
The central bank occupies a dominating position as it is the apex bank among
all the banks in the country.
There can be only one central bank for the entire economy.

It is a non-profit making financial institution.

The central bank has the monopoly power to issue currency notes from Rs.2
and above.
It is owned by the central government.
A central bank regulates money supply in the country by exercising its control
on commercial banks.
It can act as clearing house.
All commercial banks and the government are the account holders of this
bank.
It can provide loans to schedule banks and financial institutions.

COMMERCIAL BANKING VS. INVESTMENT BANKING

COMMERCIAL BANKS
A commercial bank may legally take deposits for checking and savings accounts from
consumers. The federal government provides insurance guarantees on these deposits
through the Federal Deposit Insurance Corporation (the FDIC), on amounts up to $100,000.
To get FDIC guarantees, commercial banks must follow a myriad of regulations.
The typical commercial banking process is fairly straightforward. You deposit money into
your bank, and the bank loans that money to consumers and companies in need of capital
(cash). You borrow to buy a house, finance a car, or finance an addition to your home.
Companies borrow to finance the growth of their company or meet immediate cash needs.
Companies that borrow from commercial banks can range in size from the dry cleaner on
the corner to a multinational conglomerate. The commercial bank generates a profit by
paying depositors a lower interest rate than the bank charges on loans.

INVESTMENT BANKS
An investment bank operates differently. An investment bank does not have an inventory of
cash deposits to lend as a commercial bank does. In essence, an investment bank acts as an
intermediary, and matches sellers of stocks and bonds with buyers of stocks and bonds.
Note, however, that companies use investment banks toward the same end as they use
commercial banks. If a company needs capital, it may get a loan from a bank, or it may ask
an investment bank to sell equity or debt (stocks or bonds). Because commercial banks
already have funds available from their depositors and an investment bank typically does
not, an I-bank must spend considerable time finding investors in order to obtain capital for
its client. (Note that as investment banks are increasingly seeking to become "one-stop"
financing sources, many I-banks have set aside billions of dollars of their own capital that
they can use to loan to clients directly.)

MAJOR ADVANTAGES OF COMMERCIAL BANKS

The importance of a bank to modern economy, so as to enable them to develop, can be
stated as follow:
(i) The banks collect the savings of those people who can save and allocate them to those
who need it. These savings would have remained idle due to ignorance of the people and
due to the fact that they were in scattered and oddly small quantities. But banks collect them
and divide them in the portions as required by the different investors.
(ii) Banks preserve the financial resources of the country and it is expected of them that they
allocate them appropriately in the suitable and desirable manner.
(iii) They make available the means for sending funds from one place to another and do this
in cheap, safe and convenient manner.

(iv) Banks arrange for payments by changes, order or bearer, crossed and uncrossed, which
is the easiest and most convenient, Besides they also care for making such payments as safe
as possible.
(v) Banks also help their customers, in the task of preserving their precious possessions
intact and safe.
(vi) To advance money, the basis of modern industry and economy and essential for
financing the developmental process, is governed by banks.
(vii) It makes the monetary system elastic. Such elasticity is greatly desired in the present
economy, where the phase of economy goes on changing and with such changes, demand
for money is required. It is quite proper and convenient for the government and R.B.I. to
change its currency and credit policy frequently, This is done by RBI, by changing the
supply of money with the changing the supply of money with the changing needs of the
public.
Although traditionally, the main business of banks is acceptance of deposits and lending, the
banks have now spread their wings far and wide into many allied and even unrelated
activities.
Banking as an Ancestral Service
For the history of modern banking in India, a reference to the English Agency Houses in the
days of East India Company is necessary. Those agency houses, with no capital of their own
and depending entirely on deposits, were in fact trading firms carrying on banking as a part
of their business and vanished form the scene in the crises of 1829-32. In the first half of the
19th century, the East India company established 3 banks The Bank of Bengal in 1809, the
Bank of Bombay in 1840 and the Bank of Madras in 1843.
The Bank of Bengal was given Charter with a capital of Rs.50 Lakhs. This bank was given
powers in different years as to:
(i) Rate of interest was limited to 12%.
(iii) Power to issue currency notes was given in 1824.
(iii) Power to open new branches given in 1839.

(iv) Power to deal in inland exchange was given in 1839.

MAJOR DISADVANTAGES OF COMMERCIAL BANKS

I.

Low performance: When the ownership is in public sector, the employs do not
work for profit and do not there performance and efficiency of the employs
remains poor.

II.

Lack of competition: Competition is necessary for development and increasing

the production. Commercial banks has decreased the spirit of competition.

III.

Favoritism: The management of commercial bank will provide jobs to there

favored persons because the political leaders have influence upon the state
authorities. Policy of partiality is adopted by the commercial banks.

IV.

Unbalanced distribution of credit: Agricultural sector is the major sector of the

economy. It should be given top priority in connection with distribution of
credit. After nationalization, balance distribution of credit has not been made.

V.

Encourage political monopoly: commercial banks will increase the influence

of politicians over fiscal and monitory structure of country. It will encourage
political monopoly in the country.

VI.

Increase the burden of the government: Government has to run many sectors of
the economy after commercial banks. There will be an extra burden on the
government. It is in the favor of the nation of that policy of the
denationalization should be adopted.

Major Problems Faced by Indias Nationalized Banks

Losses in Rural Branches:

Most of the rural branches are running at a loss because of high overheads and
prevalence of the barter system in most parts of rural India.

Large Over-Dues:
The small branches of commercial banks are now faced with a new problema large
amount of overdue advances to farmers. The decision of the former National Front
Government to waive all loans to farmers up to the value of Rs. 10,000 crores has
added to the plight of such banks.

Non-Performing Assets:
The commercial banks at present do not have any machinery to ensure that their loans
and advances are, in fact, going into productive use in the larger public interest. Due
to a high proportion of non-performing assets or outstanding due to banks from
borrowers they are incurring huge losses. Most of them are also unable to maintain
capital adequacy ratio.

Advance to Priority Sector:

As far as advances to the priority sectors are concerned, the progress has been slow.
This is partly attributable to the fact that the bank officials from top to bottom could
not accept nationalisation gracefully, viz., diversion of a certain portion of resources
to the top priority and hitherto neglected sectors. This is also attributable to the poor
and unsatisfactory loan recovery rates from the agricultural and small sectors.

Competition from Non-Banking Financial Institution:

As far as deposit mobilisation is concerned, commercial banks have been facing stiff
challenges from non-banking financial intermediaries such as mutual funds, housing
finance corporations, leasing and investment companies. All these institutions
compete closely with commercial banks in attracting public deposits and offer higher
rates of interest than are paid by commercial banks.

Competition with Foreign Banks:

Foreign banks and the smaller private sector banks have registered higher increase in
deposits. One reason seems to be that non-nationalised banks offer betters customer
service. This creates the impression that a diversion of deposits from the nationalised
banks to other banks has probably taken place.

Gap between Promise and Performance:

One major weakness of the nationalised banking system in India is its failure to
sustain the desired credit pattern and fill in credit gaps in different sectors. Even
though there has been a reorientation of bank objectives, the bank staff has remained
virtually static and the bank procedures and practices have continued to remain old
and outmoded.

Bureaucratisation:
Another problem faced by the commercial banks is bureaucratisation of the banking
system. This is indeed the result of nationalisation. The smooth functioning of banks
has been hampered by red-tapism, long delays, lack of initiative and failure to take
quick decisions.

Political Pressures:
The smooth working of nationalised banks has also been hampered by growing
political pressures from the Centre and the States. Nationalised banks often face lots
of difficulties due to various political pressures. Such pressures are created in the
selection of personnel and grant of loans to particular parties without considering their
creditworthiness

Case study of ICICI BANK and SBI BANK

Analysis of Financial statement of

ICICI BANK&SBI BANK

ICICI BANK is top commercial private sector bank and SBI BANK is a
top public sector commercial bank. So I am select this two banks.

ICICI BANK

TYPE

PUBLIC
BSE: 532174
NSE: ICICIBANK

TRADED AS

NYSE: IBN
BSE SENSEX CONSTITUENT
CNX NIFTY

INDUSTRY

FOUNDED

BANKING, FINANCIAL SERVICES

1994

HEADQUARTERS

MUMBAI, MAHARASHTRA, INDIA.

KEY PEOPLE

Mr. M.K. SHARMA (Chairman)

Mrs. CHANDA KOCHHAR (MD & CEO)

AREA SERVED

WORLDWIDE

PRODUCTS

Credit sale, Consumer banking,

Corporate banking, Finance & Insurance,
Investment banking, Private banking,
Wealth management, loans,

Payment solutions.

REVENUE

US $10.3 Billion

INCOME

US $3.6 Billion

PROFIT

US $1.5 Billion

TOTAL ASSETS

US $108.8 Billion

TOTAL EQUITY

US $13.5 Billion

NO OF EMPLOYEES

74096

SLOGAN

HUM HAI NA

WEBSITE

www.icicibank.com

INTRODUCTION

ICICI Bank (Industrial Credit and Investment Corporation of India) is an Indian

multinational banking and financial services company headquartered in Mumbai,
Maharashtra, India, with its registered office in Vadodara. In 2014, it was the second
largest bank in India in terms of assets and third in term of market capitalisation. It
offers a wide range of banking products and financial services for corporate and retail
customers through a variety of delivery channels and specialised subsidiaries in the
areas of investment banking, life, non-life insurance, venture capital and asset
management. The bank has a network of 4,450 branches and 13,995 ATMs in India,
and has a presence in 19 countries including India.

ICICI Bank is one of the Big Four banks of India, along with State Bank of India,
Bank of Baroda and Punjab National Bank. The bank has subsidiaries in the United
Kingdom and Canada; branches in United States, Singapore, Bahrain, Hong Kong, Sri
Lanka, Qatar, Oman, Dubai International Finance Centre, China and South Africa;
and representative offices in United Arab Emirates, Bangladesh, Malaysia and
Indonesia. The company's UK subsidiary has also established branches in Belgium
and Germany.

HISTORY
ICICI Bank was established by the Industrial Credit and Investment Corporation
of India (ICICI) , an Indian financial institution, as a wholly owned subsidiary in
1994. The parent company was formed in 1955 as a joint-venture of the World Bank,
India's public-sector banks and public-sector insurance companies to provide project
financing to Indian industry. The bank was founded as the Industrial Credit and
Investment Corporation of India Bank, before it changed its name to the abbreviated
ICICI Bank. The parent company was later merged with the bank.
ICICI Bank launched internet banking operations in 1998.
ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public
offering of shares in India in 1998, followed by an equity offering in the form of
American Depositary Receipts on the NYSE in 2000. ICICI Bank acquired the Bank

of Madura Limited in an all-stock deal in 2001 and sold additional stakes to

institutional investors during 2001-02.
In the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services group, offering a wide
variety of products and services, both directly and through a number of subsidiaries
and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and
the first bank or financial institution from non-Japan Asia to be listed on the NYSE.
In 2000, ICICI Bank became the first Indian bank to list on the New York Stock
Exchange with its five million American depository shares issue generating a demand
book 13 times the offer size.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly owned retail finance subsidiaries, ICICI
Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI
Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January
2002, by the High Court of Gujarat at Ahmedabad in March 2002 and by the High
Court of Judicature at Mumbai and the Reserve Bank of India in April 2002.
In 2008, following the 2008 financial crisis, customers rushed to ICICI ATMs and
branches in some locations due to rumours of adverse financial position of ICICI
Bank. The Reserve Bank of India issued a clarification on the financial strength of
ICICI Bank to dispel the rumours.

ACQUISITIONS

1996: SCICI Ltd. A diversified financial institution with headquarters in

Mumbai.

1997: ITC Classic Finance. incorporated in 1986, ITC Classic was a non-bank
financial firm that engaged in hire, purchase, and leasing operations. At the
time of being acquired, ITC Classic had eight offices, 26 outlets, and 700
brokers.

1998: Anagram(ENAGRAM) Finance. Anagram had built up a network of

some 50 branches in Gujarat, Rajasthan, and Maharashtra that were primarily
engaged in retail financing of cars and trucks. It also had some 250,000
depositors.

2001: Bank of Madurai

2002: The Darjeeling and Shimla branches of Grindlays Bank

2005: Investitsionno-Kreditny Bank (IKB), a Russian bank

2007: Sangli Bank. Sangli Bank was a private sector unlisted bank, founded in
1916, and 30% owned by the Bahte family. Its headquarters were in Sangli in
Maharashtra, and it had 198 branches. It had 158 in Maharashtra and 31 in
Karnataka, and others in Gujarat, Andhra Pradesh, Tamil Nadu, Goa, and
Delhi. Its branches were relatively evenly split between metropolitan areas and
rural or semi-urban areas.

2010: The Bank of Rajasthan (BOR) was acquired by the ICICI Bank in 2010
for 30 billion. RBI was critical of BOR's promoters not reducing their
holdings in the company. BOR has since been merged with ICICI Bank.

ROLE IN INDIAN FINANCIAL INFRASTRUCTURE

The bank has contributed to the set-up of a number of Indian institutions to establish
financial infrastructure in the country over the years:

National Stock Exchange - The National Stock Exchange was promoted by

India's leading financial institutions (including ICICI Ltd.) in 1992 on behalf
of the Government of India with the objective of establishing a nationwide
trading facility for equities, debt instruments and hybrids, by ensuring equal

access to investors all over the country through an appropriate communication

network.

Credit Rating Information Services of India Limited (CRISIL) - In 1987,

ICICI Ltd along with UTI set up CRISIL as India's first professional credit
rating agency. CRISIL offers a comprehensive range of integrated products
and service offerings.

de credit ratings, capital market information, industry analysis and detailed

reports.

National Commodities and Derivatives Exchange Limited - NCDEX is an

online multi-commodity exchange, set up in 2003, by ICICI Bank Ltd, LIC,
NABARD, NSE, Canara Bank, CRISIL, Goldman Sachs, Indian Farmers
Fertiliser Cooperative Limited (IFFCO) and Punjab National Bank.

Financial Innovation Network and Operations Pvt Ltd. - ICICI Bank has
facilitated setting up of "FINO Cross Link to Case Link Study" in 2006, as a
company that would provide technology solutions and services to reach the
underserved and underbanked population of the country. Using technologies
like smart cards, biometrics and a basket of support services, FINO enables
financial institutions to conceptualise, develop and operationalise projects to
support sector initiatives in microfinance and livelihoods.

Entrepreneurship Development Institute of India - Entrepreneurship

Development Institute of India (EDII), an autonomous body and not-for-profit
society, was set up in 1983, by the erstwhile apex financial institutions like
IDBI, ICICI, IFCI and SBI with the support of the Government of Gujarat as a
national resource organisation committed to entrepreneurship development,
education, training.

North Eastern Development Finance Corporation - North Eastern

Development Finance Corporation (NEDFI) was promoted by national level
financial institutions like ICICI Ltd in 1995 at Guwahati, Assam for the
development of industries, infrastructure, animal husbandry, agri-horticulture
plantation, medicinal plants, sericulture, aquaculture, poultry and dairy in the
North Eastern states of India. NEDFI is the premier financial and development
institution for the North East region.

Asset Reconstruction Company India Limited - Following the enactment of

the Securitisation Act in 2002, ICICI Bank, together with other institutions, set
up Asset Reconstruction Company India Limited (ARCIL) in 2003, to create a

facilitative environment for the resolution of distressed debt in India. ARCIL

was established to acquire non-performing assets (NPAs) from financial
institutions and banks with a view to enhance the management of these assets
and help in the maximisation of recovery. This would relieve institutions and
banks from the burden of pursuing NPAs, and allow them to focus on core
banking activities.

Credit Information Bureau of India Limited - ICICI Bank has also helped in
setting up Credit Information Bureau of India Limited (CIBIL), India's first
national credit bureau in 2000. CIBIL provides a repository of information
(which contains the credit history of commercial and consumer borrowers) to
its members in the form of credit information reports. The members of CIBIL
include banks, financial institutions, state financial corporations, non-banking
financial companies, housing finance companies and credit card companies.

Institutional Investor Advisory Services India Limited (IiAS) ICICI Bank

has indirectly invested in Institutional Investor Advisory Services, through
ICICI Prudential Life Insurance Company, in IiAS. IiAS is a voting advisory
firm aka proxy firm, dedicated to providing participants in the Indian market
with data, research and commentary. It provides recommendations on
resolutions placed before shareholders of over 300 companies.

PRODUCTS

ICICI Merchant Services

ICICI Merchant Services represents an alliance formed in 2009 between ICICI Bank,
Indias largest private sector bank, and First Data, a global leader in electronic
commerce and payment services. First Data is the majority stakeholder in the alliance
with ICICI Bank holding 19%.

Money2India
Money2India (www.money2India.com) is an online money transfer tracking service
offered to Non-Resident Indians by ICICI Bank Ltd. With an ever-expanding base
since its launch, it is the preferred mode of online money transfers to India,
facilitating seamless money transfers with round the clock customer service
availability. To use this service, a user needs to complete a simple one-time online

registration by accessing www.money2India.com and can thereafter, start sending

money from any bank in 9 countries (USA, Canada, UK, Singapore, Australia, UAE,
Sweden, Switzerland and Hong Kong) to any beneficiary account with over 100
banks in India.

Money2India Europe
ICICI Bank UK PLC, Germany branch provides money transfer and tracking service
(Money2India Europe, Money2India.EU) in 20 European countries. The platform
facilitates money transfer to India by allowing remitter to initiate money transfer
instruction on M2E. Depending on the country of residence and the financial
institution with which the user is holding the bank account, he / she has an option to
transfer money through payment gateway integrated with the platform with
guaranteed exchange rate.
The Money2India Europe Mobile App is a full-fledged remittance platform for the
customers, who prefers to use mobile device to handle the transactions.

Extra home loans

ICICI Bank Extraa Home Loans are 'mortgage-guarantee' backed loans for retail
customers who aspire to purchase their first homes in the affordable housing segment.
This was introduced in August 2015 in association with India Mortgage Guarantee
Corporation (IMGC). IMGC is a joint venture between National Housing Bank
(NHB), an RBI subsidiary which regulates Home Finance Companies in India;
NYSE-listed Genworth Financial Inc., a Fortune 500 company; International Finance
Corporation (IFC) and Asian Development Bank (ADB).

Smart Vault
Smart Vault are fully automated lockers available 24x7, including weekends and
post banking hours were launched in August 2015. The Smart Vault uses robotic
technology to access the lockers from the safe vault conveniently at any time of their
preference in total privacy, without any intervention of the branch staff.

Saral Loans
In August 2015, ICICI Bank introduced Saral-Rural Housing Loan. Applicants from
rural areas including women borrowers as well as seekers from weaker sections can
now avail home loans at the ICICI Bank Base Rate (I-Base) which is currently at
9.70%. An eligible borrower can take up to Rs.15 lac under the ICICI Bank SaralRural Housing Loan.

ICICI Bank Unifare Bangalore Metro Card

ICICI Bank and Bangalore Metro Rail Corporation Limited (BMRCL) in April 2015,
announced the launch of the ICICI Bank Unifare Bangalore Metro Card to offer the

commuters dual benefits of an ICICI Bank credit or debit card and BMRCLs smart
card, called Namma Metro Smart Card.

'Touch n Remit' facility for NRIs in Kingdom of Bahrain

In March 2015, ICICI Bank tied up with SADAD Electronic Payments WLL to offer
remittance service for NRIs based in Bahrain, enabling them to transfer monies
instantly to India from the latters kiosks spread across the Kingdom of Bahrain. This
facility has been named as Touch n Remit.

ICICI Bank Ltd launches 'Video Banking' for NRI

In February 2015, ICICI Bank announced the launch of 'Video Banking' for all its
NRI (Non Resident Indian) customers. Using this service, the customers can now
connect with a customer care representative over a video call, round-the-clock, on all
days from anywhere using their smart phone.

Pockets by ICICI Bank

In February 2015, ICICI Bank Re-Launched POCKETS, now working as a "Digital
wallet" for everyone (Android OS users only). The Wallet can be opened by anyone
and can conduct transactions like recharge, shopping, transfer money using the virtual
visa card which is issued when signing up for the wallet.

ICICIBankPay on Twitter
ICICI Bank in January, 2015 launched banking services on Twitter, christened as
'ICICIBankPay'. This service in India enables ICICI Bank customers to transfer
money to anyone in the country who has a Twitter account, check account balance,
view last three transactions and recharge prepaid mobile in a completely secure
manner.

Contactless Credit and Debit Cards

ICICI Bank in January, 2015 announced the launch of the countrys first Contactless
debit and credit cards, enabling its customers to make electronic payments by just
waving the cards near the merchant terminal in lieu of dipping or swiping them. These
cards are based on the Near Field Communication (NFC) technology, which provides
customers the improved convenience of speed as these cards require significantly less
time than traditional cards to complete a transaction along with enhanced security as
they remain in control of the customer.

MySavings Rewards
ICICI Bank has rolled-out the programme 'MySavings Rewards' from 1 September
2012, where reward points are offered to individual domestic customers for a variety

of transactions done through the savings bank account. Reward points are offered
automatically to customers for activating Internet banking, shopping online/ paying
utility bills with Internet banking and auto-debit from savings account towards
equated monthly installments for home/ auto/ personal loan/ recurring deposit.
Customers are required to maintain a monthly average balance of 15,000 or more.
th Indian bank will recuire 5.5% interest on short term loans and long term bonds and
mortgages loans up to $2 million up to 20years to pay back annual interest of 5.5%
short term loans from 3 months up to 3years at 5.5% .credit interest is reduced to 10%
annually

.
iWish- the flexible recurring deposit
iWish is a flexible recurring deposit product launched by ICICI Bank for its savings
account customers. Unlike a traditional recurring deposit, iWish allows customers to
save varying amounts of money at any time of their choice. Customers can create
several goals and track their progress on an online interface.
ICICI Bank has developed this product in collaboration with Social Money. ICICI
Bank has also launched an app for Android and Apple smartwatches. The app will
provide the facility of online banking transaction from smartwatch.

Software robotics
ICICI on 10 Sep 2016 announced 'software robotics' initiative - a first by any Indian
bank. Over 200 software robots are now performing over 10 lakh transactions per day
for the bank which comprises 10% of its total transactions. The bank will engage 500
software robots by the end of the year which will help it to automate 20% of its total
transactions.

Go Green Initiative
The Go Green Initiative is an initiative that moves beyond people, processes and
customers to cost effective automated channels to build awareness of our
environment, nation and society. The various green products and services are
Instabanking (alternate banking options like- Internet banking, i-Mobile banking, &
IVR Banking. On 22 September 2014 ICICI Bank launched Four New Next Gen
Mobile Banking Apps), Vehicle Finance for car models which use alternate modes of
energy (50% waiver on processing fee of auto loans.

Literary Endeavours
ICICI Bank launched the JiyoKhulke contest on March 16, 2015 wherein ICICI
customers were invited to write their JiyoKhulke moment their most cherished
moment of life in a choice of 11 languages. In 2016 the efforts of ICICI enters
Limca Book of Records.

SUBSIDIARIES
DOMESTIC

ICICI Prudential Life Insurance Company Limited

ICICI Lombard General Insurance Company Limited

ICICI Prudential Asset Management Company Limited

ICICI Prudential Trust Limited

ICICI Securities Limited

ICICI Securities Primary Dealership Limited

ICICI Venture Funds Management Company Limited

ICICI Home Finance Company Limited

ICICI Investment Management Company Limited

ICICI Trusteeship Services Limited

ICICI Prudential Pension Funds Management Company Limited.

INTERNATINAL

ICICI Bank USA

ICICI Bank UK PLC

ICICI Bank Canada

ICICI Bank Germany

ICICI Bank Eurasia Limited Liability Company

ICICI Securities Holdings Inc.

ICICI Securities Inc.

ICICI International Limited

Annual results in brief

2016

2015

2014

2013

2012

Operating profit

31,988.06

33,695.32

31,242.89

29,260.18

24,109.17

Interest

31,515.39

30,051.53

27,702.59

26,209.19

22,808.50

Gross profit

23,863.53

19,719.91

16,594.57

13,199.23

10,386.47

EPS (Rs)

16.72

19.27

16.99

14.43

11.22

STATE BANK OF INDIA

State Bank of India

TYPE

PUBLIC
NSE: SBIN
BSE: 500112

TRADED AS

LSE: SBID
BSE SENSEX CONSTITUENT
CNX NIFTY CONSTITUENT

INDUSTRY

BANKING, FINANCIAL SERVICES

FOUNDED

2 JUNE 1806, BANK OF CALCUTTA

27 JANUARY 1921, IMPERIAL BANK OF INDIA

1 JULY 1955, STATE BANK OF INDIA

2 JUNE 1956, NATIONALIZATION

HEADQUARTERS

MUMBAI, MAHARASHTRA, INDIA.

KEY PEOPLE
ARUNDHATI
BHATTACHARYA(CHAIRPERSON)

AREA SERVED

WORLDWIDE

PRODUCTS

Consumer banking, Credit cards,

Corporate banking, Finance & Insurance,
Investment banking, Private banking,
Wealth management, loans,

Payment solutions.

REVENUE

US $41 billion

PROFIT

US $1.9 billion

OWNER

GOVERNMENT OF INDIA

NO OF EMPLOYEES

293,459

SLOGAN

The Banker to every Indian

WEBSITE

www.sbi.co.in

INTRODUCATION
State Bank of India (SBI) is an Indian multinational, public sector banking and
financial services company. It is a government-owned corporation with its
headquarters in Mumbai, Maharashtra. As of 2014-15, it had assets of 20.480 trillion
(US$300 billion) and more than 14,000 branches, including 191 foreign offices spread
across 36 countries, making it the largest banking and financial services company in
India by assets.
The company is ranked 232nd on the Fortune Global 500 list of the world's biggest
corporations as of 2016.
The bank traces its ancestry to British India, through the Imperial Bank of India, to
the founding, in 1806, of the Bank of Calcutta, making it the oldest commercial bank
in the Indian Subcontinent. Bank of Madras merged into the other two "presidency
banks" in British India, Bank of Calcutta and Bank of Bombay, to form the Imperial
Bank of India, which in turn became the State Bank of India in 1955. Government of
India owned the Imperial Bank of India in 1955, with Reserve Bank of India (India's
Central Bank) taking a 60% stake, and renamed it the State Bank of India. In 2008,
the government took over the stake held by the Reserve Bank of India.
State Bank of India is a banking behemoth and has 20% market share in deposits and
loans among Indian commercial banks

HISTORY
The roots of the State Bank of India lie in the first decade of the 19th century, when
the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June
1806. The Bank of Bengal was one of three Presidency banks, the other two being the
Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras
(incorporated on 1 July 1843). All three Presidency banks were incorporated as joint
stock companies and were the result of royal charters. These three banks received the
exclusive right to issue paper currency till 1861 when, with the Paper Currency Act,
the right was taken over by the Government of India. The Presidency banks
amalgamated on 27 January 1921, and the re-organised banking entity took as its
name Imperial Bank of India. The Imperial Bank of India remained a joint stock
company but without Government participation.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of
India, which is India's central bank, acquired a controlling interest in the Imperial
Bank of India. On 1 July 1955, the imperial Bank of India became the State Bank of
India. In 2008, the Government of India acquired the Reserve Bank of India's stake in
SBI so as to remove any conflict of interest because the RBI is the country's banking
regulatory authority.
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This
made SBI subsidiaries of eight that had belonged to princely states prior to their
nationalization and operatonal take-over between September 1959 and October 1960,
which made eight state banks associates of SBI. This acquisition was in tune with the

first Five Year Plan, which prioritised the development of rural India. The government
integrated these banks into the State Bank of India system to expand its rural
outreach. In 1963 SBI merged State Bank of Jaipur (est. 1943) and State Bank of
Bikaner (est.1944).
SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911),
which SBI acquired in 1969, together with its 28 branches. The next year SBI
acquired National Bank of Lahore (est. 1942), which had 24 branches. Five years
later, in 1975, SBI acquired KrishnaramBaldeo Bank, which had been established in
1916 in Gwalior State, under the patronage of Maharaja MadhoRaoScindia. The bank
had been the DukanPichadi, a small moneylender, owned by the Maharaja. The new
bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of
Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the
State Bank of Travancore, already had an extensive network in Kerala.
The new logo of the SBI was actually the aerial view of the Kankaria Lake in
Ahmedabad, Gujrat on 1 October 1971 and was designed by ShekharKammat.
There has been a proposal to merge all the associate banks into SBI to create a "mega
bank" and streamline the group's operations.
The first step towards unification occurred on 13 August 2008 when State Bank of
Saurashtra merged with SBI, reducing the number of associate state banks from seven
to six. Then on 19 June 2009 the SBI board approved the absorption of State Bank of
Indore. SBI holds 98.3% in State Bank of Indore. (Individuals who held the shares
prior to its takeover by the government hold the balance of 1.7%.)

ASSICIATE BANKS
SBI now has one associate bank, down from the eight that it originally acquired in
1959. All use the State Bank of India logo, which is a blue circle, and all use the
"State Bank of" name, followed by the regional headquarters' name:

State Bank of Patiala (founded 1917)

State Bank of Mysore (founded 1913)

State Bank of Bikaner & Jaipur (founded 1963)

State Bank of Hyderabad (founded 1941)

State Bank of Travancore (founded 1945)

BharatiyaMahila Bank(founded 2013)

The banks which are merged are:

State Bank of Saurashtra (merged 2008)

State Bank of Indore (merged 2010)

The negotiations for merging of 5 associate banks State Bank of Bikaner and Jaipur,
State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank
of Travancore and BharatiyaMahila Bank by acquire their businesses including assets
and liabilities with SBI started in 2016. The merger of these six subsidiaries was
approved by Union Cabinet on 15 June 2016. The State Bank of India and all its
associate banks are identified by the same blue keyhole logo. The State Bank of India
wordmark usually has one standard typeface, but also utilises other typefaces.

NON BANKING SUBSIDIARIES

Apart from its five associate banks, SBI also has the following non-banking
subsidiaries:

SBI Capital Markets Ltd

SBI Funds Management Pvt Ltd

SBI Factors & Commercial Services Pvt Ltd

SBI Cards& Payments Services Pvt. Ltd. (SBICPSL)

SBI DFHI Ltd

SBI Life Insurance Company Limited

SBI General Insurance

In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with
26% of the remaining capital), to form a joint venture life insurance company named
SBI Life Insurance company Ltd. In 2004, SBI DFHI (Discount and Finance House of
India) was founded with its headquarters in Mumbai.

RECENT AWARDS AND RECOGNITIONS

SBI was ranked as the top bank in India based on tier 1 capital by The Banker
magazine in a 2014 ranking.
SBI was ranked 298th in the Fortune Global 500 rankings of the world's biggest
corporations for the year 2012
.
SBI was named the 29th most reputed company in the world according to Forbes
2009 rankings
SBI was 50th Most Trusted brand in India as per the Brand Trust Report 2013, an
annual study conducted by Trust Research Advisory, a brand analytics company
and subsequently, in the Brand Trust Report 2014, SBI finished as India's 19th
Most Trusted Brand in India.

Annual results in brief

(Rscrore)
2016

2015

2014

2013

2012

Sales

1,63,685.3
1

1,52,397.0
7

1,36,350.8
0

1,19,657.1
0

1,06,521.4
5

Operating
profit

92,419.19

94,119.89

84,689.60

79,241.85

80,452.46

Interest

1,06,803.4
9

97,381.82

87,068.63

75,325.80

63,230.37

Gross profit

43,257.81

38,913.50

32,109.24

31,081.72

31,573.54

EPS (Rs)

12.82

17.55

14.59

20.62

17.45

Data analysis and interpretation

ICICI BANK

Operating profit
Interest
Gross profit

2016

2015

2014

2013

2012

31,988.06
31,515.39
23,863.53

33,695.32
30,051.53
19,719.91

31,242.89
27,702.59
16,594.57

29,260.18
26,209.19
13,199.23

24,109.17
22,808.50
10,386.47

EPS (Rs)

16.72

19.27

16.99

14.43

11.22

40,000.00
35,000.00
30,000.00
25,000.00

Operating profit
Interest

20,000.00

Gross profit

15,000.00

EPS (Rs)

10,000.00
5,000.00
0.00
2016

2015

2014

2013

2012

Interpretation2012 to 2016 annual results are shows. 2015 is the highest EPS and
2012 is lowest EPS of ICICI BANK.

STATE BANK OF INDIA

2016

2015

2014

2013

2012

Operating profit

92,419.19

94,119.89

84,689.60

79,241.85

80,452.46

Interest

1,06,803.49

97,381.82

87,068.63

75,325.80

63,230.37

Gross profit

43,257.81

38,913.50

32,109.24

31,081.72

31,573.54

EPS (Rs)

12.82

17.55

14.59

20.62

17.45

120,000.00
100,000.00
80,000.00
Operating profit
Interest

60,000.00

Gross profit
EPS (Rs)

40,000.00
20,000.00
0.00
2016

2015

2014

2013

2012

Interpretation2012 to 2016 annual results are shows. 2013 is the EPS

achievements and 2016 is lowest EPS of SBI BANK.

FINDING

Operating profit of icici bank 31,988.06 and sbi bank 92,419.19. sbi bank is more
operating profit compare to icici bank.
Interest of icici bank is 31,515.39 and sbi bank 1,06,803.49. sbi bank is more
interest compare to icici bank.
Gross profit of icici bank is 23,863.53 and sbi bank 43,257.81. sbi bank is more
gross profit compare to icici bank.

EPS of icici bank is 16.72 and sbi bank 12.82. icici bank is more EPS compare ti
sbi bank.

RECOMMENDATIONS

Banking in india has made a remarkable process in its growth and expansion,
as well as business with social perspective in the fulfillment of national
objectives. Indian commercial banking has developed, but its perfection is yet
to be seen. There still remains many tasks to be fulfilled.

Still there are villages left without banking facilities, so many more rural
banks branches need to be opened.

Quality of commercial banking facilities should be improved to the at most

satisfaction
Of the customers.

Banking staff should be adequately trained.

More lending should be made in favour of property sectors

Malpractics, fraud corruption and red- tapism must be done away with.

More attention should be paid to the development of exports.

Interest rates on deposits should be enhanced reasonably up to 12-13 % so that

savers get their legitimate returns.

CONCLUSION

Commercial banks in india achieved astounding success by enormously spreading

banking services in far- flung and unbanked areas of the country through their
massive branch network are garnering burgeoning amount of savings which represent
half of the GDP of the country, A major portion of these resources had been deployed
to meet the needs of priority sectors which are critical to the economy.

However, it is crucial for the commercial banking industry to meet the

increasingly complex savings and financing needs of the economy by offering a wider
and flexible range of financial products tailored for all types of customers. In recent
years it is being felt widely that the commercial banking system has not actually
grown as sound and vibrant as it needed to be. Strong capital position and balance
sheet places the commercial banks in a better position to deal with and absorbthe
economic shocks. These banks need to face competition without diluting the operating
standards.
Thus, commercial banks occupy a dominant place in the money market,
they are like a reservoir into which flow the saving, the idle surplus, money of
households and from which loans are given on interest to businessman and others who
need themfor investment or productive uses.

BIBLIOGRAPHY

Annual reports of icici bank.

Annual reports of state bank of india.

Website-

www.wikipedia.org

www.sbi.co.in

www.icici.com

QUESTIONNAIRE
Dear sir/Madam,

Name :-

...............................................................................................................

Address :-................................................................................................................

................................................................................................................................

Gender
Male
Female

Household income level

Less than Rs 15000
Rs15001 Rs25000
Rs25001 Rs50000
More than Rs50000

1.

How satisfied are you with the service you received?

excellent
very good
neutral
poor
very poor

*2. How likely are you to recommend our service to others Banks??
yes
maybe
no

*3. Which type of account do you have in commercial bank?

Saving Account
Current Account
Demat Account

*4. Which type of services you have ever used ?

NRI Banking
Forex Trade
Investment and Insurance
Cards

*5. How are the services of commercial banks

excellent
very good
neutral
poor
very poor

*6. Is the commercial banks are better than co-operative banks?

Yes
No

*7.Which service additionally you used of this following list ?

O
n
l
i
n
e
b
a
n
k
i
n
g
T
e
l
e
B
a
n
k
i
n
g
I
V
R
s
B
a
n
k
i
n
g

M
o
b
i
l
e
B
a
n
k
i
n
g
N
o
n
e
o
f
a
l
l
*
8
.
W
o
u
l
d
y
o
u
l
i
k
e
a
n
y

s
u
g
g
e
s
t
i
o
n
s
a
n
d
i
m
p
r
o
v
e
m
e
n
t
i
n
c
o
m
m
e
r
c
i
a
l
b
a
n
k
i
n
g

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