INTRODUCTION

Definition of the Bank :

Financial institution whose primary activity is to act as a payment agent for

customers and to borrow and lend money. Banks are important players of the market and
offer services as loans and funds.

Banking was originated in 18Th century

First bank were General Bank of India and Bank of Hindustan ,now defunct.
Punjab National Bank and Bank of India was the only private bank in 1908.Allahabad
bank first fully India owned bank in 1865.

In India, given the relatively underdeveloped capital market and with little internal resources,
firms and economic entities depend, largely, on financial intermediaries to meet their fund
requirements.. The major institutional suppliers of credit in India are banks and non-bank
financial institutions (that is, development financial institutions or DFIs), other financial
institutions (FIs), and non-banking finance companies (NBFCs). The non-institutional or
unorganized sources of credit include indigenous bankers and money-lenders. Information
about the unorganized sector is limited and not readily available.

An important feature of the credit market is its term structure:

(a) Short-term credit

(b) Medium-term credit

(c) Long-term credit.

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 SCOPE OF THE STUDY

1. The research would highlight the comparative position of a sample commercial bank with
respect to ICICI Bank - the first Indian Universal Bank, which would help the concerned
banks to know where it stands with respect to Universal Bank.
2. The research would enumerate the financial health and risk exposure of sample
commercial banks in terms of the CAMEL Model. This would be helpful to understand the
relative strength and risk exposure of Indian commercial banks.
3. The research would also point out the perception of Bank Managers on Universal banking
concept and at the same time would also bring to light the perception of customers of banks
regarding the awareness and demand of various services presently offered by the banks.
4. The research can be used as a base for Post-doctoral research work

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SIGNIFICANCE OF THE STUDY

 To make a detailed study of various financial services provide by the different banks.
 To analyze customers view point regarding their banks.
 To study effective and most popular bank among the customers regarding its services.
 To find out the rate of interest of banks and reaction of customers on it.
 To make analysis on the economic benefits provided by various banks.
 Suggest the investors whether to invest in shares of Banking Companies.

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 INTRODUCTION TO BANKING SECTOR

A SNAPSHOT OF THE BANKING INDUSTRY

The Reserve Bank of India (RBI), as the central bank of the country, closely monitors
developments in the whole financial sector.

The banking sector is dominated by Scheduled Commercial Banks (SBCs). As at end

March 2002, there were 296 Commercial banks operating in India. This included 27 Public
Sector Banks (PSBs), 31 Private, 42 Foreign and 196 Regional Rural Banks. Also, there were
67 scheduled co-operative banks consisting of 51 scheduled urban cooperative banks and 16
scheduled state co-operative banks.

State Bank of India is still the largest bank in India with the market share of 20% ICICI
and its two subsidiaries merged with ICICI Bank, leading creating the second largest bank in
India with a balance sheet size of Rs. 1040bn.

Net banking, phone banking, mobile mechanism for sharing of information on

borrowers / potential borrowers by banks and Financial Institutions, the Credit Information
Bureau (India) Ltd. (CIBIL) was set up in August 2000. The Bureau provides a framework
for collecting, processing and sharing credit information on borrowers of credit institutions.
SBI and HDFC are the promoters of the CIBIL.

The RBI is now planning to transfer of its stakes in the SBI, NHB and National bank
for Agricultural and Rural Development to the private players. Also, the Government has
sought to lower its holding in PSBs to a minimum of 33% of total capital by allowing them to
raise capital from the market. Banks are free to acquire shares, convertible debentures of
corporate and units of equity oriented mutual funds, subject to a ceiling of 5% of the total
outstanding advances (including commercial paper) as on March 31 of the previous year.

The finance ministry spelt out structure of the government-sponsored ARC called the
Asset Reconstruction Company (India) Limited (ARCIL), this pilot project of the ministry
would pave way for smoother functioning of the credit market in the country. The
government will hold 49% state and private players will hold the rest 51%- the majority
being held by ICICI Bank (24.5%).

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TYPES / CLASSIFICATIONS OF BANKS

The Indian banking industry, which is governed by the Banking Regulation Act, 1949 can be
broadly classified into two major categories, non-scheduled banks and scheduled banks.
Scheduled banks comprise commercial banks and the co-operative banks. In Terms of
ownership, commercial bank can further grouped into nationalized banks. The State Bank of
India and its group banks, regional rural banks and private sector banks (the old / new domestic
and foreign). These banks have over 67,000 branches spread across the country. The Indian
banking industry is a mix of the public sector, private sector and foreign banks.

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COMMERCIAL BANK
Commercial bank has 2 meanings:
 It is the term used for normal banks to distinguish it from investment bank.
 It is also refer for a bank to divisional of bank that mostly deals with deposits and
loans for corporation or large business, as opposed to normal individual member of
public, it is the most successful department of banking.
A. COMMUNITY DEVELOPMENT BANK

Community development bank are REGULATED BANK that are

provided financial services and credit to understand population.

B. PRIVATE BANK
Private bank manage the ASSET of high individual net worth.
C. OFF-SHORE BANK
Offshore bank is located with jurisdiction of with low taxation and
regulation.
D. SAVING BANK
Saving bank accepts saving deposits.
E. POSTAL SAVING BANK
Postal Saving bank are Saving bank associated with national postal
system.

There are some examples of private sector banks:

PRIVATE SECTOR BANKS: HDFC, ICICI, Yes Bank, KOTAK MAHINDRA

Bank,

RURAL BANK; United Bank Of India, Syndicate Bank, NABARD.

COMMERCIAL BANK: SBI, CENTRAL Bank, PNB, HSBC, ICICI, HDFC etc.

RETAIL BANK; BOB, PNB

UNIVERSAL BANK; Deutsche Bank

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SERVICES PROVIDED BY BANK:

Banks Provide 2 Types Of Services

 Fund based
 Non-fund based

FUND BASED AND NON-FUND BASED FUNCTIONS

The difference between fund-based and non-fund based credit assistance lies mainlyin
the cash outflow. While the former involves all immediate cash outflow, the latter may or
may not involve cash outflow from a banker. In other words, a fund basedcredit facility to a
borrower would result in depletion of actual liquidity of a banker immediately whereas grant
of non-fund based credit facilities to a borrower may or may not affect the banker’s liquidity.

FUND BASED SERVICES

Fund based function of a bank are those in which bank makes deployment of their funds
either by granting advances or by giving or by making investment for meeting gaps in
funds requirement of their customer borrower .
A. LOAN
Loan is a type of fund based lending. It is a single advance in which the entire amount of
assistance is disbursed at one time only, either in cash or by transfer to the borrower’s
account. The loan is generally provided at a cost i.e. interest. The loan amount is paid
back in regular installments, or partial repayments, in an annuity, each installment is the
same amount.

B. CASH CREDIT:

This facility is given by the banker to the customer by way of ascertain amount of credit
facility. Its limit is fixed on the basis of security of thecompany`s current assets.

C. OVERDRAFT:

Over draft is a type of fund based lending. It occurs when money is withdrawn from a
bank account and the available balance becomes nil. In this situation the account is
said to be overdrawn. Legally, overdraft is a demand assistance given by the bank. It

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 is given for a very short period of time, at the end of which the company is supposed
to repay the amount. Interest is payable on the actual amount drawn.

D. BILLS PURCHASED

Bills facility enables the company to get the immediate payment against credit invoices raised
by the company. The bank holds the invoices till the Purchased/ discounted customer has
actually made the payment. A limit has been fixed in case of the company beyond which the
bills are not purchased or discounted by the bank.

NON FUND BASED SERVICE

Non fund based lending, where the lending bank does not commit any physical outflow of
funds. The funds position of the lending bank remains in tac.

A. LETTER OF CREDIT: A Letter of Credit (L/C) is a written document issued by the

Buyers' Banker (BBK), at a request of the Buyer (B), in favor of the Seller(S), whereby
the Buyer's Banker (BBK) gives an undertaking to the Seller(S) that, in the event of the
Seller tendering the Bill of Exchange to the Seller's Banker (SBK), along with all there
required documents, in strict compliance of all the terms and conditions stipulated in the
L/C, the entire amount of the bill will be paid to the Seller (S) by the Seller's
Banker (SBK), on behalf of the Buyer's Banker (BBK) immediately, as has been, in turn,
undertaken by the buyer to his own Banker(BBK).

B. BANK GUARANTEE: It is customary for the Bank, in normal course of business, to

issue and execute guarantees in favor of third parties on behalf of the customers. The
Bank guarantees are governed by various provisions as contained in the Indian Contract
Act,1872. The commercial transactions, bank’s customers are sometimes required to give
a Bank Guarantee. This is mostly as well as alternate to keep cash as a security deposit.
The third party who seeks the guarantee, not being aware of the customer’s financial
standing prefers a bank guarantee. In turn the Bank, which very well understands the
financial standing of the customer, undertakes the guarantee of the customer’s financial
commitments or performance of contracts by him. The bank charges commission for this
service, which depends on the security available and the financial stability of the
customer.

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F. AGENCY FUNCTIONS
 Collecting of B/E, P-notes, cheque & securities
 Selling of products of insurance co./ MF
 Granting & issuing LC, traveler's cheque
 Agent for any govt., local authority, etc
G. MERCHANT BANKING
 Syndication OF loans
 Venture capital finance
 Public issue management
 Corporate counseling
 Mergers & acquisitions
 Portfolio management services
 Investment counseling
H. E-BANKING
 Electronic payment system
 ATM
 Tele-banking
 Credit card and debit card
 Online banking
I. MOBILE BANKING
 Account Services
 Credit Card Services
 Demat A/C
 Loan A/C Service
 Bill Services
 Other Services

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 BANKING IN INDIA

Banking in India originated in the first decade of 18th century with The General Bank of
India coming into existence in 1786. This was followed by Bank of Hindustan. Both these
banks are now defunct. The oldest bank in existence in India is12

The State Bank of India being established as "The Bank of Bengal"in Calcuttain June1806. A
couple of decades later, foreign banks like Credit Lyonn a is started their Calcutta operations
in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to
the trade of the British Empire, and due to which banking activity took roots there and
prospered. The first fully Indian owned bank was the Allahabad Bank , which was established
in 1865.By the 1900s, the market expanded with the establishment of banks such as Punjab
National Bank ,in 1895 in Lahore and Bank of India, in 1906, in Mumbai- both of which
were founded under private ownership. The Reserve Bank of India formally took on the
responsibility of regulating the Indian banking sector from 1935.After India's independence
in 1947, the Reserve Bank was nationalized and given broader powers.

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 RESERVE BANK OF INDIA:
ESTABLISHMENT:

The bank was established in 1.april.1935 accordance with provision of RBI act
1934.the central office of RBI was established in Calcutta but was permanently moved to
Mumbai in 1937. The central officer where government sits and where policies are formed.

Though it was privately owned. Since nationalisation in 1949, the RBI is fully owed
by GO.

GUIDELINES OF OWNERSHIP & GOVERNANCE IN PVT SECTOR

BANKS.

Banks are “special” as they not only accept and deploy large amount of
uncollatoralised public funds in fiduciary capacity, but also they leverage such funds through
credit creation.

1. The existing legal framework and significant current practices in particular cover
thefollowing aspects:

i. The composition of Board of Directors comprising members with

demonstrable professional and other experience in specific sectors like agriculture,
rural economy,co-operation, SSI, law, etc., approval of Reserve Bank of India for
appointment of CEO as well as terms and conditions thereof, and powers for
removal of managerial personnel, CEO and directors, etc. in the interest of
depositors are governed byvarious sections of the B.R. Act, 1949.
ii. Guidelines for acknowledgement of transfer/allotment of shares in private
sector banks were issued in the interest of transparency by RBI on February 3,
2004.
iii. Foreign investment in the banking sector is governed by Press Note dated March5,
2004 issued by the Government of India, Ministry of Commerce and Industries.

2. AGAINST THIS BACKGROUND, it is considered necessary to lay down a

comprehensive framework of policy in a transparent manner relating to ownership and
governance in the Indian private sector banks as described below.

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 3.THE BROAD PRINCIPLES underlying the framework of policy relating to
ownership and governance of private sector banks would have to ensure that

(i) The ultimate ownership and control of private sector banks is well diversified.While
diversified ownership minimises the risk of misuse or imprudent use of leveraged funds, it is
no substitute for effective regulation.The pursuit of the goal of diversified ownership will
take account of these basic objectives, in a systematic manner and the process will be spread
over time as appropriate.

(ii) Private sector banks have minimum capital/net worth for optimal operationsand
systemic stability

(iii) The policy and the processes are transparent and fair.

3. SHAREHOLDING

(i) The RBI guidelines on acknowledgement for acquisition or transfer of shares issued on
February 3, 2004 will be applicable for any acquisition of shares of 5 per cent and above of
the paid up capital of the private sector bank.

(ii) In the interest of diversified ownership of banks, the objective will be to ensurethat no
single entity or group of related entities has shareholding or control, directlyor indirectly, in
any bank in excess of 10 per cent of the paid up capital of the private sector bank.

4. DIRECTORS AND CORPORATE GOVERNANCE

(i) The recommendations of the Ganguly Committee on corporate governance in banks have
highlighted the role envisaged for the Board of Directors.

(ii) As a matter of desirable practice, not more than one member of a family or a close
relative (as defined under Section 6 of the Companies Act, 1956) or an associate (partner,
employee, director, etc.) should be on the Board of a bank.

(iii) Guidelines have been provided in respect of 'Fit and Proper' criteria for
directorsof banks by RBI circular dated June 25, 2004

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5. FOREIGN INVESTMENT IN PRIVATE SECTOR BANKS

In terms of the Government of India press note the aggregate foreign investment in private
banks from all sources (FDI, FII, NRI) cannot exceed 74 per cent. At all times, at least 26 per
cent of the paid up capital of the private sector banks will have to be held by resident Indians.

5.1 FOREIGN DIRECT INVESTMENT (FDI) (OTHER THAN BY FOREIGN BANKS

OR FOREIGN BANK GROUP)

i. The policy already articulated in guidelines for determining ‘fit and proper’ status of
shareholding of 5 per cent and above will be equally applicable for FDI.

ii. To enable assessment of ‘fit and proper’ the information on ownership/beneficial

ownership as well as other relevant aspects will be extensive.

5.2 FOREIGN INSTITUTIONAL INVESTORS (FIIS)

Currently there is a limit of 10 per cent for individual FII investment with the aggregate
limit for all FIIs restricted to 24 per cent which can be raised to 49 per cent with the approval
of Board/General Body. This dispensation will continue.

5.3 NON-RESIDENT INDIANS (NRIS)

Currently there is a limit of 5 per cent for individual NRI portfolio investment with
the aggregate limit for all NRIs restricted to 10 per cent which can be raised to 24 per cent
with the approval of Board/General Body. Further, the policy guidelines on
acknowledgement for acquisition/transfer will be applied.

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GUIDELINES ON FAIR PRACTICES CODE

 Loan application forms shall be comprehensive to include information about rate of

interest (fixed/floating) and manner of charging (monthly/quarterly/half yearly/ rest),
process fees and other charges, penal interest rates, pre-paymentoptions and any other
matter which affects the interest of the borrower, so that ameaningful comparison
with that of other banks can be made and informeddecision can be taken by the
borrower.
 Acknowledgement should also state the amount of process fees paid or to be paid and
the extent to which such fees shall be refunded in the event of rejectionof any
application for loan.

 In the case of rejection of any loan application, lenders should convey in writingthe
specific reasons thereof.
 Lenders should ensure timely disbursement of loans sanctioned.
 Stipulation of margin and security should be based on due diligence and
creditworthiness of borrowers.
 Lenders should keep the borrowers apprised of the state of their accounts from time to
time and shall give notice of any change in the terms and conditions including interest
rates and charges are effected only prospectively.
 Lenders should give reasonable notice to borrowers before taking decision
torecall / accelerate payment or performance under the agreement or seekingadditiona
l securities.

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 BANKING EVOLUTION AND REGULATORY FRAMEWORK

Financial Sector Reforms set in motion in 1991 have greatly changed the face of
Indian Banking. The banking industry has moved gradually from a regulated environment to
a deregulated market economy. The market developments kindled by liberalization and
globalization have resulted in changes in the intermediation role of banks.

The pace of transformation has been more significant in recent times with technology
acting as a catalyst.While the banking system has done fairly well in adjusting to the new
market dynamics, greater challengeslie ahead. Financial sector would be opened up for
greater international competitionunder WTO.Banks will also have to scope with challenges
posed by technological innovations in banking. Banks need to prepare for the changes.The
last decade has seen many positive developments in the Indian Banking Sector.
The policymakers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and
related government and financial sector regulatory entities, have made several notable efforts
to improve regulation in the sector .The sector now compares favorably with banking sectors
in the region on metrics like growth, profitability and non-performing assets (NPAs).This is
reflected in their market valuation

1. INTERNAL HINDRANCES TO BANKING INDUSTRY

The research focuses on emphasizing the need of decisively and quickly to build
and enabling, rather than a limiting, banking sector in India. The major challenges ahead
for bank management are as follows:

 First, cost management, a key to sustainability of bank profits as well as

their long-term viability.

 Second, recovery management, which is a key to the stability of the banking sector.

 Third, technological intensity of banking, an area where India happens to be a world

leader in information technology, but its usage by our banking system is
somewhat muted. It is wise for Indian banks to exploit this globally state-of-art
expertise, domestically available, to their fullest advantage.

 Fourth, risk management, Banks can, on their part,

formulate ‘early warning indicators’ suited to their own requirements, business
profile and risk appetite in order to better monitor and manage risks

 Fifth, governance because the quality of corporate governance in the

banks becomes critical
asc o m p e t i t i o n i n t e n s i f i e s , b a n k s s t r i v e t o r e t a i n t h e i r c l i e n t b a s e ,
a n d r e g u l a t o r s m o v e o u t o f controls and micro-regulation

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 RESEARCH METHODOLOGY:-

The first stage included the introduction of Indian Banks and how they work in India.

Ichoose five criteria Growth, Credit quality, Strength, Profitability,Efficiency /Profita

bility. The next stage involved determining the objectives of the study, drafting a question
will be designed keeping in mind the target audience and objectives of the study. It will non-
disguised in nature and will include a few open-ended questions.

DATA COLLECTIONS

The data from such organization has also been collected.

PRIMARY DATA

The primary data will be collected through the questionnaire designed. In the process
of data collection we went to the respective bank to get the questionnaire filled.
The preparation of the project report required me to visit the various other companies like
Punjab National Bank, HDFC bank, etc .in order to collect data.There is no primary data for
Indian banking system.

SECONDARY DATA

The Preparation of the project report also required data from various journals,newspap
ers ( like The Economic Times, Times of India etc.) books ( like Working Capital
Management written by Suresh Mishra and Financial Service written by M YKhan
etc.)Innovation in Banking and Insurance written by Romeo S.Mascarenhas

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 SCOPE OF BANKING SECTOR

Banking business has a history of over 200 years. From the times of the Bank of Bengal
(1806) the sector has been witnessing qualitative and quantitative changes. Main players
during the pre-independence period were Allahabad Bank, Punjab National Bank and Bank
of India. With 1935 regulation the Reserve Bank of India was proclaimed the Central Bank of
India and was vested with controlling powers over the commercial banks. The drastic
development taken place during the first 25 years since independence was Nationalization of
many private banks. With this, the central government became major policy maker for these
nationalized banks with economic liberalization measures many private and foreign banking
companies were allowed to operate in the country. Favorable economic climate and a variety
of other factors such as demand for wide range of financial products from various sections of
the society led to mutually beneficial growth to the banking sector and economic growth
process. This was coincided by technology development in the banking operations.

Today most of the Indian sites have networked banking facility as well as internet
banking facility. A customer is empowered to operate his account from any part of country.
UTI Bank, ICICI,HDFC Bank and Bank of Punjab are the main winners of the race

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GLOBAL AND LOCAL SCENARIO OF BANKING SECTOR
INDIAN BANKING SYSTEM: THE CURRENT STATE & ROAD
AHEAD

INTRODUCTION

Recent time has witnessed the world economy develop serious difficulties in terms of
lapse of banking & financial institutions and plunging demand. Prospects became very
uncertain causing recession in major economies. However, amidst all this chaos India’s
banking sector has been amongst the few to maintain resilience.

A progressively growing balance sheet, higher pace of credit expansion, expanding

profitability and productivity akin to banks in developed markets, lower incidence of
nonperforming assets and focus on financial inclusion have contributed to making Indian
banking vibrant and strong. Indian banks have begun to revise their growth approach and re-
evaluate the prospects on hand to keep the economy rolling. The way forward for the Indian
banks is to innovate to take advantage of the new business opportunities and at the same time
ensure continuous assessment of risks.

A rigorous evaluation of the health of commercial banks, recently undertaken by the

Committee on Financial Sector Assessment (CFSA) also shows that the commercial banks
are robust and versatile. The single-factor stress tests undertaken by the CFSA divulge that
the banking system can endure considerable shocks arising from large possible changes in
credit quality, interest rate and liquidity conditions. These stress tests for credit, market and
liquidity risk show that Indian banks are by and large resilient.

Thus, it has become far more imperative to contemplate the role of the Banking
Industry in fostering the long term growth of the economy. With the purview of economic
stability and growth, greater attention is required on both political and regulatory
commitment to long term development programme. FICCI conducted a survey on the Indian
Banking Industry to assess the competitive advantage offered by the banking sector, as well
as the policies and structures that are required to further the pace of growth. The results of our
survey are given in the following sections.

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GENERAL BANKING SCENARIO

The pace of development for the Indian banking industry has been tremendous over
the past decade. As the world reels from the global financial meltdown, India’s banking
sector has been one of the very few to actually maintain resilience while continuing to
provide growth opportunities, a feat unlikely to be matched by other developed markets
around the world. FICCI conducted a survey on the Indian Banking Industry to assess the
competitive advantage offered by the banking sector, as well as the policies and structures
required to further stimulate the pace of growth.

The predicament of the banks in the developed countries owing to excessive leverage
and lax regulatory system has time and again been compared with somewhat unscathed
Indian Banking Sector. An attempt has been made to understand the general sentiment with
regards to the performance, the challenges and the opportunities ahead for the Indian Banking
Sector.

Most of the respondents were positive with regard to the growth rate attainable by the
Indian banking industry for the year 2009-10 and 2014-15, with 53.33% of the view that
growth would be between 15-20% for the year 2009-10 and greater than 20% for 2014-15.

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 On being asked what is the major strength of the Indian banking industry, which
makes it resilient in the current economic climate; 93.75% respondents feel the regulatory
system to be the major strength, 75% economic growth, 68.75% relative insulation from
external market, 56.25% credit quality, 25% technological advancement and 43.75% our risk
assessment systems.

Change is the only constant feature in this dynamic world and banking is not an
exception. The changes staring in the face of bankers relates to the fundamental way of
banking-which is going through rapid transformation in the world of today. Adjust, adapt and
change should be the key mantra. The major challenge faced by banks today is the ever rising
customer expectation as well as risk management and maintaining growth rate. Following are
the results of the biggest challenge faced by the banking industry as declared by our
respondents (on a mode scale of 1 to 7 with 1 being the biggest challenge):

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 They also asked their respondents to rate India on certain essential banking
parameters (Regulatory Systems, Risk Assessment Systems, Technological System and
Credit Quality) in comparison with other countries i.e. China, Japan, Brazil, Russia, Hong
Kong, Singapore, UK and USA.

The recent financial crisis has drawn attention to under-regulation of banks (mainly
investment banks) in the US. Though, the Indian story is quite different. Regulatory systems
of Indian banks were rated better than China, Brazil, Russia, and UK; at par with Japan,
Singapore and Hong Kong where as all our respondents feel that we are above par or at par
with USA. On comparing the results with their previous survey where the respondents had
rated Indian Regulatory system below par the US and UK system, they see that post the
financial crisis Indian Banks are more confident on the Indian Regulatory Framework.

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 The global meltdown started as a banking crisis triggered by the credit quality. Indian
banks seem to have paced up in terms of Credit Quality. Credit quality of banks has been
rated above par than China, Brazil, Russia, UK and USA but at par with Hong Kong and
Singapore and 85.72% of the respondents feel that we are at least at par with Japan. Thus,
they see that the resilience the Indian Banks showed at the time of financial crisis has led to
an attitudinal shift of our respondents with the past survey indicating Credit quality of

Indianbanks being below par than that of US and UK.

As technology ingrains itself in all aspects of a bank’s functioning, the challenge lies
in exploiting the potential for profiting from investments made in technology. A lot needs to
be done on the technological front to keep in pace with the global economies, as is evident
from the survey results. Technology systems of Indian banks have been rated more advanced
than Brazil and Russia but below par with China, Japan, Hong Kong, Singapore, UK and
USA. They find no change on introspection of their past surveys which also highlighted the
need for Indian banks to pace up in adoption of advanced technology.

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GLOBAL EXPANSION OF INDIAN BANKING

The idea of creating bigger banks to take on competition sounds attractive but one must
realize even the biggest among Indian banks are small by global standards. The lack of global
scale for Indian banks came into sharp focus during the recent financial crisis which saw
several international banks reneging on their funding commitments to Indian companies, but
local banks could not step into the breach because of balance sheet limitations.

In this light, 93.75% of all respondents to their survey are considering expanding their
operations in the future. They further asked participants on the methods that they consider
suitable to meet their expansion needs. They divide them into organic means of growth that
comes out of an increase in the bank’s own business activity, and inorganic means that
includes mergers or takeovers.

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 SWOT ANALYSIS

The banking sector is also taken as a proxy for the economy as a whole. The
performance of bank should therefore, reflect “Trends in the Indian EconomyThe
deregulation of the interest rate, participation of banks in project financing has changed in the
environment of banks.

The performance of banking industry is done through SWOT Analysis. It mainly helps to
know the strengths and Weakness of the industry and to improve will be known through
converting the opportunities into strengths. It also helps for the competitive environment
among the banks.

A. STRENGTHS
 All these Private banks have professional, dedicated and well-trained manpower
 In contrast to their Public Sector counterparts, Efficiency is maintained at the highest
level
 Most of these banks are fully computerized and techno-savvy

B. WEAKNESS
 Although highly networked, the number of branches is limited.
 The employee turnover appears to be on higher side.

C. OPPORTUNITIES
 Being in private sector, these banks enjoy high level of condition facilitating them for
faster decision making.
 With full computerization, they can offer cost-effective services like
ATMs,Electronic Fund Transfer, etc.

D) THREATS
 Expansion of foreign banks in the post WTO era poses severe competition.
 Frequent announcements of takeover / Mergers & Acquisitions by PSBs as well
as new Private sector banks disturb the very functioning of old Private Sector
Banks.
RBI / GOI relaxation of FDI investment norms cause worry among the management

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 INDIAN BANKING INDUSTRY

In India, given the relatively underdeveloped capital market and with little internal
resources,firms and economic entities depend, largely, on financial intermediaries to meet
their fundrequirements. In terms of supply of credit, financial intermediaries can broadly be
categorized as institutional and non-institutional. The major institutional suppliers of credit in
India are banksand non-bank financial institutions (that is, development financial institutions
or DFIs), other financial institutions (FIs), and non-banking finance companies (NBFCs). The
non-institutionalor unorganized sources of credit include indigenous bankers and money-
lenders. Informationabout the unorganized sector is limited and not readily available.An
important feature of the credit market is its term structure:(a) Short-term credit(b) Medium-
term credit(c) Long-term credit.While banks and NBFCs predominantly cater for short-term
needs, FIs provide mostly mediumand long-term funds.

LOAN ADMINISTRATION AND SANCTION PROCESS

APPRAISAL, ASSESSMENT AND SANCTION FUNCTIONS

1. APPRAISAL
A. PRELIMINARY APPRAISAL

 Sound credit appraisal involves analysis of the viability of operations of a business and
the capacity of the promoters to run it profitably and repay the bank the dues as and when
they fall
 Towards this end the preliminary appraisal will examine the following aspects of a
proposal.
 Industry related risk factors,
 Credit risk rating,
 List of defaulters,
 Caution lists,
 Acceptability of the promoters,
 Further, if the proposal is to finance a project, the following aspects have to be examined:
 Debt/equity gearing proposed and whether acceptable
 Promoters’ ability to access capital market for debt/equity support

25
 Required Documents for Process of Loan
a) Application for requirement of loan
b) Copy of Memorandum & Article of Association
c) Copy of resolution regarding the requirement of credit facilities
d) Brief history of company, its customers & supplies, previous track records, orders In
hand. Also provide some information about the directors of the company
e) Copy of PAN/TAN number of company
f) Copy of last Electricity bill of company
g) Copy of GST/CST number
h) Copy of Excise number
i) Photo I.D. of all the directors
j) Address proof of all the directors
k) Bio-data form of all the directors duly filled & notarized
l) Financial statements of associate concern for the last 3 years.

B. DETAILED APPRAISAL

 The financial analysis carried out on the basis of the company’s audited balance
sheets and profit and loss accounts for the last three years should help to establish the
current viability.
 In addition to the financials, the following aspects should also be examined:
 The method of depreciation followed by the company-whether the company is
following straight line method or written down value method and whether the
company has changed the method of depreciation in the past and, if so, the reason
therefore;
 Whether the company has revalued any of its fixed assets any time in the past and the
present status of the revaluation reserve, if any created for the purpose;
 Record of major defaults, if any, in repayment in the past and history of past sickness,
 If any;
 The nature and purpose of the contingent liabilities, together with comments thereon;
 Dividend policy;
 Apart from financial ratios, other ratios relevant to the project;

26
  Trends in sales and profitability, past deviations in sales and profit projections, and
estimates/projections of sales values;
 Production capacity & use: past and projected;
o Estimated requirement of working capital finance with reference to acceptable
buildup of inventory/ receivables/ other current assets;
 Projected levels: whether acceptable; and
 Compliance with lending norms and other mandatory guidelines as applicable

 PROJECT FINANCING:
If the proposal involves financing a new project, the commercial, economic and

Financial viability and other aspects are to be examined as indicated below:

 Statutory clearances from various Government Depts. / Agencies

 Licenses/permits/approvals/clearances/NOCs/Collaboration agreements, as applicable
 Details of sourcing of energy requirements, power, fuel etc.
 Pollution control clearance
 Cost of project and source of finance
 Build-up of fixed assets (requirement of funds for investments in fixed assets to be
critically examined with regard to production factors, improvement in quality of
products, economies of scale etc.)
 Arrangements proposed for raising debt and equity
 Capital structure (position of Authorized, Issued/ Paid-up Capital,
RedeemablePreference Shares, etc.)
 Debt component i.e., debentures, Term Loans, deferred payment facilities, unsecured
Loans/ deposits. All unsecured Loans/ deposits raised by the company for financing a
project should be subordinate to the Term Loans of the banks/ financial institutions.
 Feasibility of arrangements to access capital market
 Feasibility of the projections/ estimates of sales, cost of production and profits
covering the period of repayment
 Break Even Point in Terms of sales value and percentage of installed capacity under a
Normal production year

 Cash flows and fund flows

27
  Proposed amortization schedule
 Whether profitability is adequate to meet stipulated repayments with reference to
Debt Service Coverage Ratio, Return on Investment
 Industry profile & prospects
 Management quality, competence, track record
 Company’s structure & systems
For the purpose of inter-firm comparison and other information, where necessary, source data
from Stock Exchange Directory, financial journals/ publications, professional entities like
CRIS-INFAC, CMIE, etc. with emphasis on following aspects:

o Market share of the units under comparison

o Unique features
o Profitability factors
o Financing pattern of the business
o Inventory/Receivable levels
o Capacity utilization
o Production efficiency and costs
o Bank borrowings patterns
o Financial ratios & other relevant ratios
o Capital Market Perceptions
o Current price
o 52week high and low of the share price
o P/E ratio or P/E Multiple
o Yield (%)- half yearly and yearly

Also examine and comment on the status of approvals from other Term lenders, market view
(if anything adverse), and project implementation schedule.The balance amount proposed to
be raised from other sources, viz., debentures, public equity etc., should also be fully tied up.

28
C. PRESENT RELATIONSHIP WITH BANK:

 Compile for existing customers, profile of present exposures:

 Credit facilities now granted
 Conduct of the existing account
 Utilization of limits - FB & NFB
 Occurrence of irregularities, if any
 Frequency of irregularity i.e., number of times and total number of days the account
was irregular during the last twelve months
 Repayment of Term commitments
 Compliance with requirements regarding submission of stock statements, Financial
 Follow-up Reports, renewal data, etc.
 Stock turnover, realization of book debts
 Value of account with break-up of income earned
 Pro-rata share of non-fund and foreign exchange business
 Concessions extended and value thereof
 Compliance with other Terms and conditions
 Action taken on Comments/observations contained in RBI Inspection Reports: CO
Inspection & Audit Reports

D. CREDIT RISK RATING: Draw up rating for (i) Working Capital and (ii) Term Finance.

E. OPINION REPORTS: Compile opinion reports on the company, partners/ promoters and

The proposed guarantors.

F. EXISTING CHARGES ON ASSETS OF THE UNIT: If a company, report on search of

charges with

ROC.

29
G. STRUCTURE OF FACILITIES AND TERMS OF SANCTION:

Fix Terms and conditions for exposures proposed - facility wise and overall:

 Limit for each facility – sub-limits

 Security - Primary & Collateral, Guarantee
 Margins - For each facility as applicable
 Rate of interest
 Rate of commission/exchange/other fees
 Concessional facilities and value thereof
 Repayment Terms, where applicable
 ECGC cover where applicable
 Other standard covenants

H. REVIEW OF THE PROPOSAL:

Review of the proposal should be done covering (i) strengths and weaknesses of the exposure
proposed (ii) risk factors and steps proposed to mitigate them

(ii) Deviations, if any, proposed from usual norms of the Bank and the reasons therefore

I. PROPOSAL FOR SANCTION:

Prepare a draft proposal in prescribed format with required backup details and with
recommendations for sanction.

J. ASSISTANCE TO ASSESSMENT:

Interact with the assessor, provide additional inputs arising from the assessment, incorporate
these and required modifications in the draft proposal and generate an integrated final
proposal for sanction.

30
2. ASSESSMENT:

Indicative List of Activities Involved in Assessment Function is given below:

 Review the draft proposal together with the back-up details/notes, and the borrower’s
application, financial statements and other reports/documents examined by the
appraiser.
 Interact with the borrower and the appraiser.
 Carry out pre-sanction visit to the applicant company and their project/factory site.
 Peruse the financial analysis (Balance Sheet/ Operating Statement/ Ratio Analysis/
 Fund Flow Statement/ Working Capital assessment/Project cost & sources/ Break
Even analysis/Debt Service/Security Cover, etc.) to see if this is prima facie in order.
If any deficiencies are seen, arrange with the appraiser for the analysis on the correct
lines.
 Examine critically the following aspects of the proposed exposure.

o Bank’s lending policy and other guidelines issued by the Bank from time to
time
o RBI guidelines
o Background of promoters/ senior management
o Inter-firm comparison
o Technology in use in the company
o Market conditions
o Projected performance of the borrower vis-à-vis past estimates and
performance
o Viability of the project
o Strengths and Weaknesses of the borrower entity.
o Proposed structure of facilities.
o Adequacy/ correctness of limits/ sub limits, margins, moratorium and
repayment schedule
o Adequacy of proposed security cover o Credit risk rating
o Pricing and other charges and concessions, if any, proposed for the facilities

31
 o Risk factors of the proposal and steps proposed to mitigate the risk
o Deviations proposed from the norms of the Bank and justifications therefor

 To the extent the inputs/comments are inadequate or require modification, arrange for
additional inputs/ modifications to be incorporated in the proposal, with any required
modification to the initial recommendation by the Appraiser
 Arrange with the Appraiser to draw up the proposal in the final form.
 Recommendation for sanction: Recapitulate briefly the conclusions of the appraisal
and state whether the proposal is economically viable. Recount briefly the value of the
company’s (and the Group’s) connections. State whether, all considered, the proposal
is a fair banking risk. Finally, give recommendations for grant of the requisite fund-
based and non-fund based credit facilities.

3. SANCTION:

Indicative list of activities involved in the sanction function is given below:

 Peruse the proposal to see if the report prima facie presents the proposal in a
comprehensive manner as required. If any critical information is not provided in the
proposal, remit it back to the Assessor for supply of the required data/clarifications.

 Examine critically the following aspects of the proposed exposure in the light of
corresponding instructions in force:
 Bank’s lending policy and other relevant guidelines
 RBI guidelines
 Borrower’s status in the industry
 Industry prospects
 Experience of the Bank with other units in similar industry
 Overall strength of the borrower
 Projected level of operations
 Risk factors critical to the exposure and adequacy of safeguards proposed
 There against

32
  Value of the existing connection with the borrower
 Credit risk rating
 Security, pricing, charges and concessions proposed for the exposure and
covenants
o Stipulated vis-à-vis the risk perception.

 Accord sanction of the proposal on the Terms proposed or by stipulating modified or

additional conditions/ safeguards, or Defer decision on the proposal and return it for
additional data/clarifications, or Reject the proposal, if it is not acceptable, setting out
the reasons.

33
 CASE STUDY

HDFC BANK

ORGANIZATION PROFILE

FORMATION OF THE COMPANY

The Housing Development Finance Corporation Limited (HDFC) was amongst the
first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up
a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry
in 1994. The bank was incorporated in August 1994 in the name of 'HDFCBank Limited',
with its registered office in Mumbai, India. HDFC Bank commenced operations as a
Scheduled Commercial Bank in January 1995.

PROMOTER

HDFC is India's premier housing finance company and enjoys an impeccable

track record in India as well as in international markets. Since its inception in 1977,
theCorporation has maintained a consistent and healthy growth in its operations to remainthe
market leader in mortgages. Its outstanding loan portfolio covers well over a milliondwelling
units. HDFC has developed significant expertise in retail mortgage loans todifferent market
segments and also has a large corporate client base for its housingrelated credit facilities.
With its experience in the financial markets, a strong marketreputation, large shareholder
base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the
Indian environment.

BUSINESS FOCUS

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to

buildsound customer franchises across distinct businesses so as to be the preferred provider
of banking services for target retail and wholesale customer segments, and to achievehealthy
growth in profitability, consistent with the bank's risk appetite. The bank iscommitted to
maintain the highest level of ethical standards, professional integrity,corporate governance
and regulatory compliance. HDFC Bank's business philosophy is based on four core values –
Operational Excellence, Customer Focus, ProductLeadership and People.

34
CAPITAL STRUCTURE

The authorized capital of HDFC Bank is Rs550 crore (Rs5.5 billion). The paid-upcapital is
Rs424.6 crore (Rs.4.2 billion). The HDFC Group holds 19.4% of the bank'sequity and about
17.6% of the equity is held by the ADS Depository (in respect of the bank's American
Depository Shares (ADS) Issue). Roughly 28% of the equity is held byForeign Institutional
Investors (FIIs) and the bank has about 570,000 shareholders. Theshares are listed on the
Stock Exchange, Mumbai and the National Stock Exchange. The bank's American
Depository Shares are listed on the New York Stock Exchange (NYSE)under the symbol
'HDB'.

TIMES BANK AMALGAMATION

In a milestone transaction in the Indian banking industry, Times Bank Limited

(another new private sector bank promoted by Bennett, Colemoross-sell and
leveragealternative delivery channels.

DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

network of over 1229 branches spread over 444 cities across India. All branches are linked on
anonline real-time basis. Customers in over 120 locations are also serviced throughTelephone
Banking. The Bank's expansion plans take into account the need to have a presence in all
major industrial and commercial centers where its corporate customersare located as well as
the need to build a strong retail customer base for both depositsand loan products. Being a
clearing/settlement bank to various leading stock exchanges,the Bank has branches in the
centers where the NSE/BSE has a strong and activemember base. The Bank also has a
network of about over 2526 networked ATMs acrossthese cities. Moreover, HDFC Bank's
ATM network can be accessed by all
domestic andinternational Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and America
nExpress Credit/Charge cardholders.

35
TECHNOLOGY

HDFC Bank operates in a highly automated environment in terms of informationtechn

ology and communication systems. All the bank's branches have onlineconnectivity, which e
nables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access
is also provided to retail customers through the branchnetwork and Automated Teller
Machines (ATMs). The Bank has made substantial effortsand investments in acquiring
the best technology available internationally, to build theinfrastructure for a world class bank.
The Bank's business is supported by scalable androbust systems which ensure that our clients
always get the finest services we offer. TheBank has prioritized its engagement in technology
and the internet as one of its keygoals and has already made significant progress in web-
enabling its core businesses. Ineach of its businesses, the Bank has succeeded in level

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to

buildsound customer franchises across distinct businesses so as to be the preferred provider
of banking services for target retail and wholesale customer segments,and to achievehealthy
growth in profitability, consistent with the bank's risk appetite. The bank iscommitted
to maintain the highest level of ethical standards, professional integrity,corporate governance
and regulatory compliance. HDFC Bank's business philosophy is based on four core values-
Operational Excellence, Customer Focus, Product Leadershipand People.

PRODUCT SCOPE:

HDFC Bank offers a bunch of products and services to meet the every need of
the people. The company cares for both, individuals as well as corporate and small and
medium enterprises. For individuals, the company has a range accounts, investment,
and pension scheme, different types of loans and cards that assist the customers. The
customers can choose the suitable one from a range of products which will suit their life-
stage and needs. For organizations the company has a host of customized solutions
thatrangefromFunded services, Non-funded services, Value addition services, Mutual fund
etc.
Theseaffordable plans apart from providing long term value to the employees help inenhancin
ggoodwill of the company. The products of the company are categorized into various sections

36
which are as follows:· Accounts and deposits.· Loans.· Investments and Insurance. For eg.
and payment services.· Cards.· Customer centre.

PRODUCTS AND SERVICES AT A GLANCE

1. PERSONAL BANKING.
A. ACCOUNTS & DEPOSITS
 Regular Savings Account-
 Savings Plus Account-
 SavingsMax Account-
 Senior Citizens Account-
 No Frills Account- Institutional Savings Account
 Payroll Salary Account-
 Classic Salary Account-
 Regular Salary Account-
 Premium Salary Account-
 Defence Salary Account-
 Kid's Advantage Account-
 Pension Saving Bank Account-
 Family Savings Account-
 Kisan No Frills Savings Account-
 Kisan Club Savings Account-
 Plus Current Account-
 Trade Current Account-
 Premium Current Account-
 Regular Current Account-
 Apex Current Account-
 Max Current Account-
 Reimbursement Current Account-
 Domestic Account-
 Regular Fixed Deposit-
 Super Saver Account-
 Sweep-in Account-
 HDFC Bank Preferred-

37
  Private Banking

B. LOANS

 Personal Loans-
 Home Loans
 Two Wheeler Loans-
 New Car Loans-
 Used Car Loans-
 Overdraft against Car –
 Express Loans-
 Loan against Securities-
 Loan against Property-
 Commercial Vehicle Finance-
 Working Capital Finance-
 Construction Equipment Finance-
 Offers & Deals-
 Customer Center

C. INVESTMENTS & INSURANCE

 Mutual Funds-
 Insurance-
 Bonds-
 Financial Planning-
 Knowledge Centre-
 Equities & Derivatives-
 Mudra Gold Bar

D. FOREX SERVICES

 Trade Finance-
 Travelers’ Cheques-

38
  Foreign Currency Cash-
 Foreign Currency Drafts-
 Foreign Currency Cheque Deposits
 Foreign Currency Remittances-
 Cash To Master –
 ForexPlus Card

E. PAYMENT SERVICES

 Prepaid Refill-
 Net Safe-
 Bill Pay-
 Direct Pay-
 Visa Money Transfer –
 E-Monies Electronic Funds Transfer –
 Excise & Service Tax Payment

F. ACCESS YOUR BANK

 Insta Alerts
 Mobile Banking-
 ATM-
 Phone Banking-
 Branch Network

G.CARDS

 Silver Credit Card-

 Gold Credit Card-
 Woman's Gold Credit Card-
 Platinum plus Credit Card-
 Titanium Credit Card-
 Value plus Credit Card-
 Health plus Credit Card
 HDFC Bank Idea Silver Card-
 HDFC Bank Idea Gold Card-

39
  Compare Cards-
 Transfer & Safe-
 Track your Credit Card

H. GET MORE FROM YOUR CARD

 My Rewards-
 InstaWonderz-
 Offers & Savings
 Add-On Cards-
 Credit Card Usage Guide-
 Easy EMI-
 Net safe-
 Smart Pay-
 Secure Plus-
 My City Benefit Card-
 Debit Cards-
 Easy ShopInternational Debit Card-
 Easy Shop Gold Debit Card-
 Easy ShopInternational Business Debit Card-
 Easy ShopWoman's Advantage Debit Card-
 Prepaid Cards-
 Forex Plus Card-
 Kisan Card

1. CUSTOMER CENTRE

 Offers & Deals

 Winners of Contests & Promotions

2. WHOLESALE BANKING

 Corporate
 Funded Services
 Non Funded Services

40
  Value Added Services
 Internet Banking

B. SMALL & MEDIUM ENTERPRISES

 Funded Services
 Non-Funded Services
 Specialized Services
 Internet Banking

C. FINANCIAL INSTITUTIONS & TRUSTS

 BanksFinancial Institutions
 Mutual Funds
 Stock Brokers

MILESTONES IN THE HISTORY

HDFC Bank began its operations in 1995 with a simple mission: to be a "World-
classIndian Bank". They realized that only a single-minded focus on product quality
andservice excellence would help us get there. Today, they are proud to say that they arewell
on our way towards that goal. It is extremely gratifying that their efforts towards providing
customer convenience have been appreciated both nationally and internationally.

MERGER

HDFC Bank and Centurion Bank of Punjab merger at share swap ratio of
1:29.TheBoards of HDFC Bank and Centurion Bank of Punjab met on 25 February, 2008
andapproved, subject to due diligence, the share swap ratio for the proposed merger of
Centurion Bank of Punjab with HDFC Bank. The Scheme of Amalgamation envisages ashare
exchange ratio of one share of HDFC Bank for twenty nine shares of CenturionBank of
Punjab.

41
 The combined entity would have a nationwide network of 1,148 branches (the
largestamongst private sector Banks) a strong deposit base of around Rs. 1,200 billion and
netadvances of around Rs. 850billion. The balance sheet size of the combined entity would be
over Rs. 1,500 billion.

Mr. Shailendra Bhandari, Managing Director and CEO, Centurion Bank of

Punjabsaid, “We are extremely pleased to receive the go ahead from our board to pursue
thisopportunity. A merger between the banks provides significant synergies to the
combinedentity. The proposed merger would further improve the franchise and customer pro
position offered by the individual banks.”

SUGGESTIONS:

Finally some recommendations for the company are as follows:-

To make people aware about the benefit of becoming HDFC Bank’s SalesExecutive,
following activities of advertisement should be done through
1. Print Media.
2. Hoarding & Banners.
3. Stalls in Trade Fares
4. Distribution of leaflets containing details information.

 The bank should provide life time valid ATM card to all its customers.
 Minimum balance for savings account should be reduced from Rs 5000 to Rs1000, so
that people who are not financially strong enough can maintain their account properly.
 The company should provide a pass book to all its customers
 Make people understand about the various benefits of its products.
 Company should organize the program in the society, so that people will beaware
about the company and different products of the bank
 Company should open more branches in different cities.

42
 PUNJAB NATIONAL BANK

ORIGIN

Punjab national bank was established in 1895 at Lahore, undivided India, Punjab Nati
onal Bank (PNB) has the distinction of being the first Indian bank to have beenstarted solely
with Indian capital. The bank was nationalized in July 1969 along with 13other banks. From
its modest beginning, the bank has grown in size and stature to become a front-line banking
institution in India at present.

PROFILE

With its presence virtually in all the important centers of the country, Punjab National
Bank offers a wide variety of banking services which include corporate
and personal banking, industrial finance, agricultural finance, financing of trade andinternatio
nal banking. Among the clients of the Bank are Indian conglomerates, mediumand small
industrial units, exporters, non-resident Indians and multinational companies.The large
presence and vast resource base have helped the Bank to build strong linkswith trade and
industry.Punjab National Bank is serving over 3.5 crore customers through
4540 Officesincluding 421 extension counters - largest amongst Nationalized Banks.Punjab
National Bank with 112 year tradition of sound and prudent banking is oneamong 300 global
companies and seven Indian companies which are expected to emergeas challengers to
World’s leading blue chip companies. While among top 1000 world banks, “The Banker”, the
leading magazine in London, has placed PNB at the 248th position, the bank features at
1308th position among Forbe’s Global 2000 list of globalgiants and fast growing
companies.At the same time, the bank has been conscious of its social responsibilities
byfinancing agriculture and allied activities and small scale industries (SSI). Consideringthe
importance of small scale industries bank has established 31 specialised branches tofinance
exclusively such industries.Strong correspondent banking relationship which Punjab National
Bank maintainswith over 200 leading international banks all over the world enhances its
capabilities tohandle transactions world-wide. Besides, bank has Rupee Drawing
Arrangements with15 exchange companies in the Gulf and one in Singapore. Bank is a
member of theSWIFT and over 150 branches of the bank are connected through its computer-
basedterminal at Mumbai. With its state-of-art dealing rooms and well-trained dealers,
the bank offers efficient forex dealing operations in India.The bank has been focusing on

43
expanding its operations outside India and hasidentified some of the emerging economies
which offer large business potential.
Bank has set up representative offices at Almaty: Kazakhistan, Shanghai: China and inLondo
n. Besides, Bank has opened a fully fledged Branch in Kabul, Afghanistan.Keeping in tune
with changing times and to provide its customers more efficientand speedy service, the Bank
has taken major initiative in the field of computerization.

All the Branches of the Bank have been computerized. The Bank has also
launchedaggressively the concept of "Any Time, Any Where Banking" through the
introductionof Centralized Banking Solution (CBS) and over 2409 offices have already been
broughtunder its ambit.PNB also offers Internet Banking services in the country for
Corporates as well asindividuals. Internet Banking services are available through all Branches
of the Bank networked under CBS. Providing 24 hours, 365 days banking right from the PC
of
theuser, Internet Banking offers world class banking facilities like anytime, anywhereaccess
to account, complete details of transactions, and statement
of account, onlineinformation of deposits, loans overdraft account etc. PNB has recently intro
ducedOnline Payment Facility for railway reservation through IRCTC Payment
GatewayProject and Online Utility Bill Payment Services which allows Internet Banking
accountholders to pay their telephone, mobile, electricity, insurance and other bills anytime
fromanywhere from their desktop.Another step taken by PNB in meeting the changing
aspirations of its clientele isthe launch of its Debit card, which is also an ATM card. It
enables the card holder to buygoods and services at over 99270 merchant establishments
across the country. Besides,the card can be used to withdraw cash at more than 25000 ATMs,
where the 'Maestro'logo is displayed, apart from the PNB's over 1094 ATMs and tie up
arrangements withother Banks.

VISION AND MISSION VISION

“To evolve and position the Bank as a world class progressive cost effective andcustomer
friendly institution providing comprehensive financial and related services;integrating
frontiers of technology and serving various segments of society especiallythe weaker section;
committed to excellence in serving the public and also excellence inserving the public and
also excelling in corporate values.”

44
MISSION

“To provide excellent professional services and improve its position as a leader in thefield of
financial and related services; build and maintain a team of motivated andcommitted
workforce with high work ethos; use latest technology aimed at customer satisfaction and act
as an effective catalyst for socio-economic development”

AWARDS & ACHIEVEMENTS of PUNJAB NATIONAL BANK

 "BEST IT TEAM OF THE YEAR AWARD"

One of India's "Most InnovativeCompanies".

 BEST IT USER IN BANKING & FINANCIALSERVICES INDUSTRY - 2004

By NASSCOM in partnership withEconomic Times

 GOLDEN PEACOCK AWARD

For Excellence in Corporate Governance -2005 by Institute of Directors

 NATIONAL AWARD FOR EXCELLENCE IN SSILENDING

Ranked 2nd for 4 consecutive years - 2002,2003, 2004 & 2005

 MONEY OUTLOOK AWARD – 2004

Runner up in 'Best Bank (public Sector) of the year Award' -2005

 SWOT ANALYSIS STRENGTHS:

 Strong growth in business
 Good branch network
 Highest CASA among PSU
 Highest NIMs compared to peers
 Fine growth in fee income last year
 De-risked investment portfolio
 Adequate Capital
 Proactive on technology front.

45
  WEAKNESS:
 Higher Delinquencies
 Higher provisions deterring growth in net profits
 No development on insurance venture
 Slower growth on international front
 Slow-down in treasury profits
 Its subsidiaries PNB Housing Finance & PNB Gilts are not impressive
 OPPORTUNITIES:
 Expansion on international front
 Ample opportunity to expand business, as the economy is doing well.
 Growth in Insurance and Mutual Fund business
 THREATS:
 Entry of foreign banks
 Sharp rise in interest rates can hamper economic growth

 Regulatory amendments➢

 Implementation of Basel II requires higher capital

 Downturn in Agriculture growth

PRODUCTS AND SERVICES:

 PRODUCTS
 Personal banking
 Corporate banking
 HomE loans
 About loan
 ATM/DEBIT cards
 Deposit interest rates

46
 SERVICES
 Locker facilities
 Depository services
 Senior citizen scheme

 RTGS/NEFT/SFMS:PNB
 Merchant banking
 Online tax accounting system
 Electronic fund transfer
 Electronic clearing service
 Offshore banking
 12 hours banking.

47
 CONCLUSION

The project involves valuation of major Indian Banks including ICICI Bank, SBI and HDFC
Bank. The methodology followed is Target Pricing, which including estimating growth rate
by regression on historical sales to forecast next year sales, earning and Profit and Loss
account. Then EPS is calculated which is multiplied to Historical P/E to forecast intrinsic
value of share. All shares are undervalued and expected to give positive risk adjusted returns
to investors. Since the intrinsic value is more than current market price for all the companies,
the share can be recommended to conservative investors.

As per the survey I knew about mergers that after demonitization impact that they have
merge all bank as one cooperate reason for that they can increase there profitability ratio &
they can decrease there expenses ratio as per the merger.

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VISIT LETTER

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 WEBLIOGRPHY

www.managementparadise.com

www.personnel.online.com

www.scribd.com

www.bussinessweak.com

www.indianbanking.co.in

Book name: 1.emfs

2. Innovation of banking and insurance

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