CHAPTER -1

INTRODUCTION

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 Indian banking is the lifeline of the nation and its people. Banking has
helped in developing the vital sectors of the economy and usher in a new dawn of progress on the
Indian horizon. The sector has translated the hopes and aspirations of millions of people into
reality. But to do so, it has had to control miles and miles of difficult terrain, suffer the indignities
of foreign rule and the pangs of partition. Today, Indian banks can confidently compete with
modern banks of the world.
This report is based on the Internship Program which I had under gone in
Indian Bank. The report intends to give Insights on

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 HAPTER - 2
INDUSTRY ANALYSIS

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 Bank plays a very important role in the economic development of any
country especially in developing countries like India. The banking industry goes as far back as
the 18th century BC during the time of the Babylonians. Merchants and traders deposited
commodities and raw materials such as grain and cattle as forms of currency. From there, a
variety of loans and withdrawals made available at the Babylonian facilities. In subsequent
centuries, the industry expanded as did the markets and types of currency as they became
available. Modern-day commercial banking practices can be traced back to Medieval Italian
cities where Italian bankers made loans to prices to finance their wars and lifestyle. The term
‘bank’ is derived from the Italian word ‘banco’ which means bench, as the Lombard Jews in
Italy kept benches in the market place, where they exchanged money and bills. If a banker
collapsed, his bench will be broken by the people; hence the name ‘bankrupt’. The word banco
also means an accumulation of either stock or money.
1. MEANING AND DEFINITION
1.1. Meaning
A bank is a financial institution that provides banking and other financial
services to their customers. A banking system also referred to as a system provided by the
bank which offers cash management services for customers reporting the transactions of their
accounts and portfolios, throughout the day.
1.2. Definition
The Banking Regulation Act 1949 defines business of banking as “accepting
for the purpose of lending or investment of deposits of money from the public, repayable on
demand or otherwise and withdraw able by cheque, draft, order or otherwise.”
2. HISTORY
Banking begins with the first prototype banks of merchants of the ancient
world, which made grain loan to farmers and traders who carried goods between cities. This
began around 2000 BC in Assyria and Babylonia. Later, in ancient Greece and during the
Roman Empire, lenders based in temples made loans and added two important innovations:
they accepted deposits and Changed money. Archaeology from this period in ancient China
and India also shows evidence of money lending activity.
The origins of modern banking can be traced to medieval and
early Renaissance Italy, to the rich cities in the north like Florenve Lucca siena, Vence
and Genoa. The Baradi and Peruzzi families dominated banking in 14th-century Florence,

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 establishing branches in many other parts of Europe. One of the most famous Italian banks was
the Medici Bank, set up by Giovanni di Bicci de’ Medici in 1397. The earliest known state
deposit bank, Banco di san Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.

Modern banking practices, including fractional reserve banking and the

issue of banknotes, emerged in the 17th and 18th centuries. Merchants started to store their
gold with the goldsmith of London, who possessed private vaults, and charged a fee for that
service. In exchange for each deposit of precious metal, the goldsmiths issued
receipts certifying the quantity and purity of the metal they held as a bailee; these receipts
could not be assigned, only the original depositor could collect the stored goods.

Gradually the goldsmiths began to lend the money out on behalf of

the depositor which led to the development of modern banking practices; promissory notes
(which evolved into banknotes) were issued for money deposited as a loan to the
goldsmith.[4] The goldsmith paid interest on these deposits. Since the promissory notes were
payable on demand, and the advances (loans) to the goldsmith's customers were repayable over
a longer time period, this was an early form of fractional reserve banking. The promissory
notes developed into an assignable instrument which could circulate as a safe and convenient
form of money backed by the goldsmith's promise to pay, allowing goldsmiths to advance
loans with little risk of default. Thus, the goldsmiths of London became the forerunners of
banking by creating new money based on credit.

The Bank of England was the first to begin the permanent issue of
banknotes, in 1695. The Royal Bank of Scotland established the first overdraft facility in
1728. By the beginning of the 19th century a banker’s clearing house was established in
London to allow multiple banks to clear transactions. The Rothschild pioneered international
finance on a large scale, financing the purchase of the Suez Canal for the British government.

3. INDUSTRY DOMINANT ECONOMIC TRAITS

Nowadays a bank is much more than “a financial institution that accepts

deposits and channels money into lending activities.” Its broad functions covers areas such
as credit intermediaries, bank related operations for the customers, electronic fund transfer,
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 cash management for corporate customers, maintaining endowment funds, keeping safe
deposit lockers, managing trust accounts, and underwriting securities.

3.1 Global banking

International Banking Federation
The International Banking Federation (IBFed) is the representative body
for a group of key national banking associations. Its main objective is to increase the
effectiveness of the financial services industry's response to multilateral and national
government issues affecting their common interests
The IB Fed's founding members are:
The American Bankers Association
The Australian Bankers' Association The Canadian Bankers Association
The European Banking Federation

Japanese Bankers Association Associate members are:

China Banking Association
Indian Banks Association
Korea Federation of Banks
The Association of Russian Banks
The Banking Association of South Africa

The International Banking Federation was formed in March 2004 to

represent the combined views of a group of national banking associations. The countries
represented by the Federation collectively represent more than 18,000 banks with 275,000
branches, including around 700 of the world’s top 1000 banks which alone manage
worldwide assets of over $31 trillion. The Federation represents every major financial
centre and functions as the key international forum for considering legislative, regulatory
and other issues of interest to the global banking industry.

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3.2 Need of the Banks
Before the establishment of banks, the financial activities were handled by
money lenders and individuals. At that time the interest rates were very high. Again there
were no security of public savings and no uniformity regarding loans. So as to overcome
such problems the organized banking sector was established, which was fully regulated by
the government. The organized banking sector works within the financial system to provide
loans, accept deposits and provide other services to their customers.
The following functions of the bank explain the need of the bank and its importance:
a) To provide the security to the savings of customers.
b) To control the supply of money and credit
c) To encourage public confidence in the working of the financial system, increase
d) savings speedily and efficiently.
e) To avoid focus of financial powers in the hands of a few individuals and
f) institutions.
g) To set equal norms and conditions (i.e. rate of interest, period of lending etc) to all
types of customers

4. SERVICES PROVIDED BY BANKING ORGANIZATIONS

Banking Regulation Act in India, 1949 defines banking as “Accepting” for
the purpose of lending or investment of deposits of money from the public, repayable on
demand and withdrawable by cheques, drafts, orders etc. as per the above definition a bank
essentially performs the following functions:-

• Accepting Deposits or savings functions from customers or public by providing bank

account, current account, fixed deposit account, recurring accounts etc.
• The payment transactions like lending money to the public. Bank provides an effective
credit delivery system for loanable transactions.
• Provide the facility of transferring of money from one place to another place. For
performing this operation, bank issues demand drafts, banker’s cheques, moneyorders etc.
for transferring the money. Bank also provides the facility of Telegraphic transfer or tele-
cash orders for quick transfer of money.
• A bank performs a trustworthy business for various purposes.

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 • A bank also provides the safe custody facility to the money and valuables of the general
public. Bank offers various types of deposit schemes for security of money. For keeping
valuables bank provides locker facility. The lockers are small compartments with dual
locking system built into strong cupboards. These are stored in the bank’s strong room and
are fully secured.
• Banks act on behalf of the Govt. to accept its tax and non-tax receipt. Most of the
government disbursements like pension payments and tax refunds also take place through
banks.

5. THE INDIAN BANKING SYSTEM:-

The Indian Banking System is already witnessing the sea changes as the
banking sector seeks new technology and its applications, More and more people are now
coming under the ambit of banking and thus under formal credit. Earlier this domain was the
preserve of very few organizations. Foreign banks with heavy investments in technology
started giving some “Out of the world” customer services.
5.1 Indian Banking History
Banking in India originated in the last decades of the 18th century. The
first banks were The General Bank of India, which started in 1786, and Bank of
Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in
India is the State Bank of India, which originated in the Bank of Calcutta in June 1806,
which almost immediately became the Bank of Bengal.
The East India Company set up Bank of Bombay in 1720 with the
objective of increasing trade. In 1786, the General Bank of India was floated, which
claimed limited liability on the shareholders. Subsequently, other banks, viz., the Carnatic
Bank (1788), the Madras Bank (1795), the British Bank (1795) and the Asiatic Bank
(1804) were established as private institutions.
The evolution of the modern commercial banking industry in India can be
traced to 1806 with the establishment of the Bank of Calcutta, later renamed to Bank of
Bengal in 1809. Three presidency banks were set up in Calcutta, Bombay and Madras. In
1860, the limited liability concept was introduced in banking, resulting in the
establishment of joint stock banks. In 1921, the three presidency banks were
amalgamated to form the Imperial Bank of India, which took on the role of a commercial

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 bank, a bankers’ bank and a banker to the Government. The establishment of the RBI as
the central bank of the country in 1935 ended the quasi-central banking role of the
Imperial Bank of India. In order to serve the economy in general and the rural sector in
particular, the All India Rural Credit Survey Committee recommended the creation of a
state-partnered and state sponsored bank taking over the Imperial Bank of India and
integrating with it, the former state-owned and state-associate banks. Accordingly, the
State Bank of India (“SBI”) was constituted in 1955. Subsequently in 1959, the State
Bank of India (Subsidiary Bank) Act was passed, enabling the SBI to take over eight
former state-associate banks as its subsidiaries. In 1969, 14 private banks were
nationalized followed by six private banks in 1980.
Until the 1980s, the Indian financial system was strictly controlled.
Interest rates were administered, formal and informal parameters governed asset
allocation, and strict controls limited entry into and expansion within the financial sector.
Bank profitability was low, non-performing assets were comparatively high, capital
adequacy was diminished, and operational flexibility was hindered.
The Government’s economic reform program, which began in 1991,
encompassed the financial sector. The first phase of the reform process began with the
implementation of the recommendations of the Committee on the Financial System, i.e.,
the Narasimham Committee I. This was followed by reports submitted in 1998 by other
Committees, such as the second Committee on Banking Sector Reform, i.e., the
Narasimham Committee II and the Tarapore Committee on Capital Account
Convertibility, and the second phase of reforms relating to capital adequacy
requirements, asset classification and provisioning, risk management and merger policies.
The deregulation of interest rates, the emergence of a liberalized domestic capital market,
and the entry of new private sector banks have progressively intensified the competition
among banks.

5.2 Milestones in Indian banking industry

1949: Enactment of Banking Regulation Act.

1955: Nationalization of State Bank of India.
1959: Nationalization of SBI subsidiaries.

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 1961: Insurance cover extended to deposits.
1969: Nationalization of 14 major Banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalization of six banks with deposits over 200 Cores.

5.3 Reform measures in indian banking

5.3.1 Interest rate liberalization

 Prior to the reforms, interest rates were a tool of cross-subsidization between different
sectors of the economy.
 Interest rate structure had grown increasingly complex with both lending and deposit
rates set by RBI.
 At present, RBI is only setting the interest rates for NRI deposits.

5.3.2 Statutory Pre-emptions

 Major problem faced by the banking system was on account of statutory pre-emption of
banks resources to finance Government’s budgetary resources to finance Government’s
budgetary needs.
 Removal of these constraints meant a planned reduction in statutory pre-emption.
 Effective CRR reduced from 15% in 1991 to 4.75% at present.
 SLR reduced from 38.5% in 1992 to 24% at present.

5.3.3 Priority sector lending

 Identified as one of the major reasons for the below average profitability of Indian
banks.
 The Narasimham Committee recommended a reduction from 40% to 10%
 While nominal targets have remained unchanged, the effective burden of priority sector
advances has been reduced by expanding the definition of priority sector lending

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5.3.4 Stabilization
 Due to directed lending practices and poor risk management skills, India's banks had
accrued a significant level of NPLs.
 Prior to any privatization, the balance sheets of PSBs had to be cleaned up through
capital injections.

5.3.5 Credit Controls

 Selective credit controls have been dispensed with and there is a greater freedom to
both banks and borrowers in matters relating to credit

5.3.6 Privatization
 In 1993 partial private shareholding of the SBI was allowed, which made it the first
SOB to raise, equity in the capital markets.
 After the 1994 amendment of the Banking Regulation Act, PSBs were allowed to offer
up to
 49% of their equity to the public
 This led to the partial privatization of 11 PSBs

5.3.6 Prudential Norms

 Starting with the guidelines on income recognition, asset classification, provisioning
and capital adequacy the RBI issued in 1992/93, there have been continuous efforts to
enhance the transparency and accountability of the banking sector introduced gradually
to meet the international standards
 Basle Accord capital standards were adopted in April 1992
 Income Recognition & Asset Classification norms of 90 days as per international
standards
 Prudential liquidity management guidelines and Operational risk management
guidelines for Systems and Control

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 5.3.7 Competition and Transparency
 Competition is sought to be fostered by permitting new private sector banks, and more
liberal entry of branches of foreign banks.

5.3.8 Supervision
 An independent Board for Financial Supervision under aegis of the RBI has been
established, and consistent with international practice, focus is also on offsite
inspections and on control systems internal to the banks.

5.3.9 Structural changes

 Before the start of the 1991 reforms, there was little effective competition in the Indian
banking system due to strict entry restrictions for new banks, which effectively shielded
the incumbents from competition
 The guidelines for licensing of new banks in the private sector were issued by RBI in
January 1993
 RBI granted licenses to 10 banks in the private sector during 1993 to 2000
 By March 2005, the new private sector banks and the foreign banks had a combined
share of almost 20% of total assets.

5.4 Future reforms in banking industry

 Licensing of New Banks in Private Sector
 Presence of Foreign Banks in India Holding Companies Structure for Indian Banks
 Compensation Policy
 Credit Information Companies
 Costs and risks in using technology to change the face of banking
 Migration to Advanced Approaches under Basel II
 Preparing Indian banks migrate to Basel III regime
 Indian banks transition to IFRS
 Improving efficiency parameters of Indian Banks
 Challenges to further strengthening inclusive growth
 Need for effective corporate governance in banks
 Review of laws governing Indian banking sector
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The Structure of Indian Banking

Diagram no1

RBI

Scheduled Banks/ Organized sector Unorganized sector

Commercial banks Cooperative banks

Foreign Regional
banks Rural Banks

40 196 Urban
cooperatives State
cooperatives
Private 52
Public sector 16
sector Banks
Banks
27
30

New
Old
8
State bank Other 22
of India and nationalized
associates banks

8 19 13
 The structure of the Indian banking system can be categorized in two
ways. The first divides the banks into three categories: the Reserve Bank of India,
commercial banks and cooperative banks. The second divides the banks into two
categories: scheduled banks and non-scheduled banks. In both of these systems of
categorization, the Reserve Bank of India, or RBI, is at the center of the banking structure.
It holds the reserve capital of all commercial and scheduled banks in the country.
1. RBI
RBI is the central Bank of India and controls the entire money issue,
circulation the entire money issue, circulation and control by its monetary policies and
lending policies by periodical updates or corrections to discipline the economy. It is also
known as the bank of last resort.
Establishment: The reserve bank of India was established on April 1, 1935 in accordance
with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the
Reserve Bank of India was initially established in Calcutta but was permanently moved to
Mumbai in 1937. Though originally privately owned, since nationalization in 1949, the
Reserve Bank is fully owned by the Government of India.

1.1 Main Functions

 Monetary Authority: Formulate implements and monitors the monetary policy.

 Regulator and supervisor of the financial system: Prescribes broad parameters
of banking operations within which the country‘s banking and financial system
functions.
 Manager of Foreign Exchange: Manages the Foreign Exchange Management
Act, 1999.
 Issuer of Currency: Issues and exchanges or destroys currency and coins not fit
for circulations.
 Development role: Performs a wide range of promotional functions to support
national objectives.
 Bankers to the Government: performs merchant banking function for the central
and the state governments; also acts as their banker.
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  Bankers to banks: maintains banking accounts of all scheduled banks.
 Formulating the monetary policy: controls the supply of money in the economy
by its control over interest rates in order to maintain price stability and achieve
high economic growth.

1.2 Components of Monetary policy:

1.2.1 Repo Rate

Repo rate is the rate of interest which is levied on Short-Term loans
taken by commercial banks from RBI. Whenever the banks have any shortage of funds
they can borrow it from RBI. A reduction in the repo rate will help banks to get money
at a cheaper rate. When the repo rate increases, borrowing from RBI becomes more
expensive.

1.2.2 Reverse Repo Rate

This is exact opposite of Repo rate. Reverse repo rate is the rate at
which commercial banks CHARGE on their surplus funds with RBI. RBI uses this tool
when it feels there is too much money floating in the banking system. Banks are always
happy to keep money with RBI since their money is in the safe hands with a good
interest. An increase in Reverse repo rate can cause the banks to transfer more funds to
RBI due to these attractive interest rates.

1.2.3 CRR Rate

Cash reserve Ratio (CRR) is the amount of cash funds that the
banks have to maintain with RBI. If RBI decides to increase the percent of this, the
available amount with the banks comes down. RBI is using this method (increase of
CRR rate), to drain out the excessive money from the banks.

1.2.4 SLR Rate

SLR (Statutory Liquidity Ratio) is the amount a commercial bank
needs to maintain in the form of cash, or gold or government approved securities
(Bonds) before providing credit to its customers. SLR is determined and maintained by

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 the RBI in order to control the expansion of bank credit. SLR is determined as the
percentage of total demand and time liabilities. Time Liabilities are the liabilities a
commercial bank is liable to pay to the customers after a specific time period. SLR is
used to control inflation and proper growth. Through SLR tuning, the money supply in
the system can be controlled efficiently.

1.2.5 Bank Rate

Bank rate is the rate of interest which is levied on Long Term loans
and Advances taken by commercial banks from RBI. Changes in the bank rate are often
used by central banks to control the money supply.

1.2.6 MSF Rate:-

MSF (Marginal Standing Facility Rate) is the rate at which banks
can borrow overnight from RBI. This was introduced in the monetary policy of RBI for
the year 2011-2012. Banks can borrow funds through MSF when there is a considerable
shortfall of liquidity. This measure has been introduced by RBI to regulate short-term
asset liability mismatches more effectively.

1.2.7 Base Rate:-

The Base Rate is the minimum interest rate of a Bank below which
it cannot lend, except for DRI advances, loans to bank's own employees and loan to
banks' depositors against their own deposits. (I.e. cases allowed by RBI).

2. SCHEDULED BANKS OR THE ORGANISED SECTOR:

The eligibility criteria exist for scheduled banks:
a) The first of which entails carrying on the business of banking in India.
b) All scheduled banks must maintain a reserve capital of 5 lakhs rupees in the Reserve
Bank of India.
c) These are registered under the second schedule of RBI Act, 1934.
Scheduled banks in India fall into two categories:

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2.1 COMMERCIAL BANKS
Commercial banks constitute those banks driven by profit. These banks exist
for no other reason than generating capital. Commercial banks in India have traditionally
focused on meeting the short-term financial needs of industry, trade and agriculture. They
may be categorized as Scheduled Commercial Banks (“SCBs”) and non-scheduled
commercial banks.
SCBs are banks that are listed in the second schedule to the RBI Act, and
may further be classified as public sector banks, private sector banks and foreign banks.
SCBs have a presence throughout India, with nearly 66.5 per cent of the bank branches
located in rural or semi-urban areas of the country. A large number of these branches
belong to the public sector banks.

2.1.1 Public Sector Banks

Public sector banks make up the largest category of banks in the Indian
banking system. There are 28 public sector banks in India. They include the SBI and its
seven associate banks and 19 nationalized banks and one other public sector.
Nationalized banks are governed by the Banking Companies (Acquisition and Transfer
of Undertakings) Acts of 1970 and 1980. The banks nationalized under the Banking
Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 are
referred to as “corresponding new banks”.

2.1.2 Private Sector Banks

After bank nationalization was completed in 1969 and 1980, the majority
of Indian banks were public sector banks. Some of the existing private sector banks,
which showed signs of an eventual default, were merged with state-owned banks. In
July 1993, as part of the banking reform process and as a measure to induce
competition in the banking sector, the RBI permitted entry by the private sector into
the banking system. This resulted in the emergence of nine private sector banks.
These banks are collectively known as the “New Private Sector Banks”. There are
eight New Private Sector Banks operating as on June 30, 2006. In addition, 19 private
sector banks existing prior to July 1993 were operating as on June 30, 2006. These
are collectively known as the “Old Private Sector Banks”. With 6,543 branches, as on

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 June 30, 2006, these banks accounted for 20.0 per cent of aggregate deposits and 20.3
per cent of the gross bank credit outstanding of the SCBs in India.

2.1.3 Foreign Banks

As on June 30, 2006, there were 29 foreign banks with 242 branches
operating in India and these banks accounted for 5.4 per cent of aggregate deposits
and 6.90 per cent of the gross bank credit outstanding of the SCBs in India.
The GoI permits foreign banks to operate through (i) branches; (ii) a
wholly owned subsidiary; or (iii) a subsidiary with aggregate foreign investment of up
to 74 per cent in a private bank. The foreign direct investment limit in private sector
banks is 74 per cent under the automatic route, including investment by FIIs.

2.1.4 Regional Rural Banks

Regional Rural Banks (“RRBs”) were established by the GoI, state
governments and sponsoring commercial banks with a view to develop the rural
economy. RRBs mainly provide credit to small farmers, artisans, small entrepreneurs
and agricultural labourers. There were 109 RRBs as on June 30, 2006, with 14,369
branches and they accounted for 3.20 per cent of aggregate deposits and 2.6 per cent
of the gross bank credit outstanding of the SCBs in India.

2.2 COOPERATIVE BANKS

Cooperative banks technically constitute cooperative institutions
with an elected managing committee, provisions for the protection of members' rights
and a set of communally developed and approved by laws and amendments.

Three tier structures exist in the cooperative banking:

a. State cooperative bank at the apex level.

b. Central cooperative banks at the district level.

c. Primary cooperative banks and the base or local level.

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3. UNORGANIZED SECTOR OR NON SHEDULED BANKS

The unorganized sector comprising individual or family owned indigenous

bankers or money lenders and non-banking financial companies (NBFCs). And are those
commercial banks, which are not included in the second schedule of RBI Act 1934.

5.5 Regulations for Indian banks

Currently in most jurisdictions commercial banks are regulated by
government entities and require a special bank license to operate. Usually the definition of
the business of banking for the purposes of regulation is extended to include acceptance of
deposits, even if they are not repayable to the customer's order—although money lending,
by itself, is generally not included in the definition. Unlike most other regulated industries,
the regulator is typically also a participant in the market, i.e. a government-owned (central)
bank. Central banks also typically have a monopoly on the business of issuing banknotes.
However, in some countries this is not the case. In UK, for example, the Financial Services
Authority licenses banks, and some commercial banks (such as the Bank of Scotland) issue
their own banknotes in addition to those issued by the Bank of England, the UK
government's central bank. Some types of financial institutions, such as building societies
and credit unions, may be partly or wholly exempted from bank license requirements, and
therefore regulated under separate rules. The requirements for the issue of a bank license
vary between jurisdictions but typically include:
a. Minimum capital
b. Minimum capital ratio
c. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or
senior officers
d. Approval of the bank's business plan as being sufficiently prudent and plausible.

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5.6 CHALLENGES TO INDIAN BANKING INDUSTRY

5.6.1 Proficiency :

Proficiency is required at banker's end to establish a balance between the

commercial and social considerations Bank need to access low cost funds and
simultaneously improve the efficiency and efficacy. Owing to cutthroat competition in the
industry, banks are facing pricing pressure, have to give thrust on retail assets.

5.6.2 Reducing customer loyalty:

Attractive offers by MNC and other nationalized banks, customers have

become more demanding and the loyalties are diffused. Value added offerings bound
customers to change their preferences and perspective. These are multiple choices; the
wallet share is reduced per bank with demand on flexibility and customization. Given the
relatively low switching costs; customer retention calls for customized service and hassle
free, flawless service deliverance.

5.6.3 Deregulation:

This continuous deregulation has given rise to extreme competition with

greater autonomy, operational flexibility, and decontrolled interest rate and liberalized
norms and policies for foreign exchange in banking market. The deregulation of the
industry coupled with decontrol in the interest rates has led to entry of a number of players
in the banking industry. Thereby reduced corporate credit off which has resulted in large
number of competitors battling for the same pie.

5.6.4 Dynamic rules:

The market place has been redefined with new rules. Banks are transforming
to universal banking, adding new channels with lucrative pricing and freebees to offer.
New channels squeezed spreads, demanding customers better service, marketing skills
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 heightened competition, defined new rules of the game pressure on efficiency. Need for
new orientation diffused customer loyalty. Bank has led to a series of innovative product
offerings catering to various customer segments, specifically retail credit.

5.6.5 Differing mindset:

These changes are creating challenges, as employees are made to adapt to

changing conditions. The employees are resisting change and the seller market mindset is
yet to be changed. These problems coupled with fear of uncertainty and control orientation.
Moreover banking industry is accepting the latest technology but utilization is far below
satisfactory level.

5.7.6 Miss placement:

Miss placement of personals will result in missed opportunities. Placing the

right skill at the right place will determine success. The focus of people will be doing work
but not providing solutions, on escalating problems rather than solving them and on
disposing customers instead of using the opportunity to cross sell.

5.7 FACTORS DETERMINING THE SUCCESS OF A BANK

Key success factors refer to those factors which are important to future
competitive successes of industry members. These factors include product attributes,
competitive capabilities, resources competencies, market achievements etc. it is very
important to the strategists to understand the landscape of industry in order to identify the
most important competitive success factors. Due to changes in driving forces and competitive
conditions, the success factors of one industry differ from other. Banking industry is broadly
divided in to two types of banks i.e. virtual banks and brick and mortar banks. The key
success factors of banking industry are discussed below.

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5.8.1 Quality of service
Service quality includes all the dimensions of quality which the consumers want.
Brick and mortar banks have the advantage to directly contact with the customers feel
satisfaction. On the other hand in virtual banks there is lack of person to person contact
which force consumers to resolve their problems over the phone or via email. In many
cases such contacts frustrate some customers

5.8.2 Technological upgradation

Latest technology plays a very important role in the banking industry it helps in
introducing innovate products according to the demand of consumers. Technology can be
used to lower the cost transaction and improve the quality of products. For example when
the bank realized that they can lower down their transaction cost by installing ATMs and
debit cards they did so. It saved the overhead cost and improved convenience for customer
by providing 24/7 service. Online banking is increasing tremendously due to rapid
technology change.

5.8.3 Attractive interest rates

Industry of virtual banking is attracted by low cost. Competition is such high that to
survive in industry low cost is very important. As virtual banks have no physical existence
of branches and ATM networks they have great advantage to offer their products at lower
rates than brick and mortar banks. Due to low overhead cost, virtual banks are charging
lower transaction cost which gives them a plus point.

5.8.4 Customer perception

Brand image plays an important role in selecting the product or bank. For example
City group and Bank of America are two major players in the industry with huge resources
and they have major market share as well. That’s why most of the people wish to be their
customers. On the other hand, virtual banks are not so must popular and have a low market
share, in this way, market share and brand awareness within banking industry is a major
concern for them

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 5.8.4 Size of the company
Size of the company is an important success factor. in banking industry size of the
bank refers to the total market share, total assets, total number of branches and ATM’s total
number of customers etc. brick and mortar bank have a good market share due to which
they can compete effectively. Contrary, virtual banks have relatively lower market share in
USA banking industry which is a major problem for them.

5.8.5 Accessibility
It is important to note that convenience attract consumers. For example if a bank
has wide network then it will be convenient for the customers to make transactions easily.
In this case virtual bans have advantage over brick and mortar banks. Internet only banks
can be accessed anywhere in the world through internet. Virtual banks have no ATM
network and no branches, requiring customers to use other banks ATM’s or buy using cash
back services with debit cards. The growth of the internet in the last few years, has forced
many brick-and-mortar banks to consider and develop online banking.

5.8.6 Level of innovation

Product innovation is one of the major success factors in the banking industry, since
all the banks are offering similar products therefore differentiation is very important for the
future survival. Banks are trying to come with different innovative products in order to
differentiate themselves from other banks.

5.8 CURRENT SCENARIO:

The industry is currently in a transition phase. On the one hand, the PSBs,
which are the mainstay of the Indian Banking system, are in the process of shedding their flab
in terms of excessive manpower, excessive non-Performing Assets (Npas) and excessive
governmental equity, while on the other hand the private sector banks are consolidating
themselves through mergers and acquisitions.
PSBs, which currently account for more than 78 percent of total banking
industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling
revenues from traditional sources, lack of modern technology and a massive workforce while

23
the new private sector banks are forging ahead and rewriting the traditional banking business
model by way of their sheer innovation and service. The PSBs are of course currently working
out challenging strategies even as 20 percent of their massive employee strength has dwindled
in the wake of the successful Voluntary Retirement Schemes (VRS) schemes.
The private players however cannot match the PSB‟s great reach, great size
and access to low cost deposits. Therefore one of the means for them to combat the PSBs has
been through the merger and acquisition (M& A) route. Over the last two years, the industry
has witnessed several such instances. For instance, Hdfc Bank’s merger with Times, Bank Icici
Bank’s acquisition of ITC Classic, Anagram Finance and Bank of Madura. Centurion Bank,
Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bank-
Global Trust Bank merger however opened a pandora‟s box and brought about the realization
that all was not well in the functioning of many of the private sector banks.
Private sector Banks have pioneered internet banking, phone banking,
anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and
combined various other services and integrated them into the mainstream banking arena, while
the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS
schemes. Also, following India‟s commitment to the W To agreement in respect of the services
sector, foreign banks, including both new and the existing ones, have been permitted to open
up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8
branches.
Initiative of government diluting their equity from 51 percent to 33 percent
in November 2000 has also opened up a new opportunity for the takeover of even the PSBs.
The FDI rules being more rationalized in Q1FY02 may also pave the way for foreign banks
taking the M& A route to acquire willing Indian partners.
Meanwhile the economic and corporate sector slowdown has led to an
increasing number of banks focusing on the retail segment. Many of them are also entering the
new vistas of Insurance. Banks with their phenomenal reach and a regular interface with the
retail investor are the best placed to enter into the insurance sector. Banks in India have been
allowed to provide fee-based insurance services without risk participation, invest in an
insurance company for providing infrastructure and services support and set up of a separate
joint venture insurance company with risk participation.

24
 2.1 Competitive forces are at work in the industry
5.6 Key players in Indian banking industry
Table 1

SBI and its

IDBI Bank City Union Bank Yes Bank Ltd
associates

Bank of
Canara Bank UCO Bank
Maharashtra HDFC Bank

Union Bank of Oriental Bank of Bank of Bahrain and

India Allahabad Bank Commerce Kuwait

United Bank of Axis Bank Andra Bank

Deutsche Bank
India

South Indian
Punjab National Catholic Syrian Development Credit Bank
Bank
Bank Bank

Jammu and Kashmir Bank

Bank of India Vijaya Bank
Syndicate bank

Tamilnad Mercantile Bank

ING Vysya Bank Corporation Bank Ltd
Indian Bank

Dhanlaxmi Punjab & Sind Bank

Kotak Bank Indian Overseas
Bank
Bank

Bank of Baroda - Karur Vysya Bank

Federal Bank IndusInd Bank
Corporate
Banking
Central Bank of Karnataka Bank
ICICI Bank
India Ltd

25
 CHAPTER -2
COMPANY PROFILE

26
INDIAN BANK

27
1. About Indian Bank :
Indian Bank is one of the indigenous banks of India that emerged as a
result of the Swadeshi Movement during the British Raj. A premier bank owned by
government of India. The bank was established on 15th of August, 1907. One of the prime
figures associated with the establishment of the bank was V. Krishnaswamy Iyer, a lawyer
from Madras (Now Chennai). The bank soon spread its wings outside India too, and opened its
branch in Colombo, Sri Lanka in the year 1932 and Rangoon, Burma in 1940. The bank was
further nationalized by the Government of India in the year 1969. Serving the nation with a
team of over 19429 dedicated staff as on 31.03.2014. Total Business crossed Rs.2, 86,633
Crores as on 31.03.2014. It had Core Banking Solution (CBS) in all 2250 branches as at March
31, 2014. The Bank has overseas branches in Singapore, Colombo including a Foreign
Currency Banking Unit at Colombo and Jaffna. The Bank has 240 overseas correspondent
banks in 70 countries. It has two subsidiary companies: Indbank Merchant Banking Services
Ltd and IndBank Housing Ltd. Operating Profit: Rs. 2,901 Crores as on 31.03.2014. Net Profit
: Rs.1,159 Crores as on 31.03.2014

Mission of Indian Bank:-

 Our mission is to be the common man’s bank. We seek to provide a comprehensive

range of financial
 Products and services to all our customers under one roof. Our business is divided into
four main areas:
 Retail, agriculture, corporate and commercial financial services and SME

The Vision of Indian Bank:-

“Taking banking technology to the common man”

Associate Banks:-

1. Kanagadurga Grameena Bank, Vijayawada

2. Venkateswara Grameena Bank, Chittoor
28
 3. Vallalar Grama Bank, Cuddalore
4. Adhiyaman Grama Bank, Dharmapuri

Subsidiaries:

1. Ind Bank Housing Limited;

2. Ind bank Merchant Banking Services Limited;
3. Ind fund Management Limited.

GLOBAL PRESENCE
The modest beginning made by the Indian Bank has come a long way since then,
with 1642 branches located nationwide within India and Overseas branches in Singapore
and Colombo as of April 2009 including a Foreign Currency Banking Unit at Colombo and
Jaffna. The bank also has 240 Overseas Correspondent banks in 70 countries, giving a
strong presence internationally. A 22,000 strong workforce of dedicated employees takes
pride in serving the Indian Bank.

Branch Network
Diagram no 2

BANKING ACTIVITIES
Indian Bank offers a wide variety of Banking Products and Services to its
customers, including various Deposit Schemes, Loan Options, Financial Services, Stock
29
 Investment Services and a number of specialized services such as Remittance, Collection, 7
Day Banking Branches, Cash Management and Electronic Funds Transfer.
As of April 2009, the bank has Core Banking Solution (CBS) implemented
in its 1642 branches and 66 extension counters. The bank has 755 connected Automatic
Teller Machines (ATMs) installed in 225 locations nationwide.
‘
SUBSIDIARY COMPANIES
Apart from its Regular Banking Services, the Indian Bank has also been offering
various other services through its 3 subsidiary companies, which are Indbank Merchant
Banking Services Ltd., IndBank Housing Ltd. and IndFund Management Ltd.

RURAL BANKING
Indian Bank has been a leader in bringing new initiatives for development of rural
banking and extending help to the farmers of India. The bank has received award from
Honorable Union Minister of Finance for Excellence in Agricultural Lending. Apart from
it, the bank also received the Best Performer Award for Micro-Finance activities in Tamil
Nadu and Union Territory of Puducherry from National Bank for Agriculture and Rural
Development (NABARD).

RATING OF INDIAN BANK

 “AAA/Stable" rating by M/s CRISIL Ltd and M/SCARERATING
 “AA+(Positive)” Rated by M/s ICRA Ltd
 “BBB” Rated with Stable outlook ( same as the sovereign rating )by M /s Standard &
Poor’s
 “BB+” Rated with Stable outlook by M/s Fitch Ratings Ltd.
 “Indian Bank is listed in, MSCI India IMI ‟index, which includes large+mid+small
capstocks.

A FRONT RUNNER IN SPECIALIZED BANKING

 97 Forex Authorised branches inclusive of 1 Specialised Overseas Branch at Chennai
exclusively for handling forex transactions arising out of Export, Import, Remittances and Non
Resident Indian business

30
 73 Special SME Branches extending finance exclusively to SSI units
 Established MSME CPUs at 9 key centers at Chennai, Mumbai, Kolkata, New Delhi,
Ahmedabad, Bangalore, Pune, Coimbatore and Kancheepuram.
 MoU entered with National Small Industries Corporation (NSIC ) to focus on MSME Segment

LEADERSHIP IN RURAL DEVELOPMENT

 Under Financial Inclusion Plan, Indian Bank has been allotted with 1523 villages with
population above 2000 ,all the 1523 villages have been provided with banking services as on
30thSeptember 2012 as below:
1425 villages through Smart card based Business Correspondent (BC) Model
53 villages through Brick and mortar branches /Banking Service Centres (BSCs)
45 villages through Mobile Branch/Van
 Pioneer in introducing Self Help Groups and Financial Inclusion Project in the country
 Best Performer Award for Micro-Finance activities in Tamil Nadu and Union Territory of
Puducherry from NABARD
 Award winner for Excellence in Agricultural Lending from Honorable Union Minister for
Finance
 Established 45 specialized exclusive Microfinance branches called "Microsate" across the
country to cater the needs of Urban poor through SHG (Self Help Group)/JLG (Joint Liability
Group) concepts
 Provision of technical assistance and project reports in Agriculture to entrepreneurs through
Agricultural Consultancy & Technical Services (ACTS)
 Harnessing ICT (Information and Communication Technology) for Rural Development and
Inclusive Banking

A PIONEER IN INTRODUCING THE LATEST TECHNOLOGY IN BANKING

 100% Core Banking Solution(CBS) Branches
 100% Business Computerization
 2172 Automated Teller Machines(ATM)
 24 x 7 Service through more than 99242 ATMs under shared network
 Internet and Tele Banking services to all Core Banking customers
 e-payment facility for Corporate customers
31
 Cash Management Services
 Depository Services
 Reuter Screen, Telerate, Reuter Monitors, Dealing System provided at Overseas Branch,
Chennai
 I B Gold Coin
 I B Prepaid Cards Launched (GIFT Card, International Travel Card)
 RTGS & NEFT remittance facilities now available at all CBS branches
 Strategic alliance with HDFC Standard Life Insurance Company

TWO RECENT PLANS OF LIC LINKED WITH INDIAN BANK:

 Pradhan Mantri Jan Dhan Yojana (PMJDY- Life cover with LIC)
 Pradhan Mantri Jeevan Jyothi Bima Yojana (PMJJBY)

CORPORATE AND SOCIAL RESPONSIBILITY

Indian bank have taken several community service measures such as:

 In association with Indian Overseas Bank and NABARD, established a Rural Development
Training Center in July 2005 at Karaikudi, Sivaganga District in Tamil Nadu with the objective
of educating and disseminating technical knowhow on agriculture/non-farm sector activities to
farmers, SHGs and rural artisans.
 Indian bank have organized over 325 blood donation camps since 1980. We have also been the
mobilisers for the highest number of emergency blood donors among all institutions in the
state of TamilNadu. We have adopted thalassaemic children who require blood at frequent
intervals. We have also donated Rs. 15 million to Adayar Cancer Hospital.
 Bank have initiated activities such as health camp, preseason campaign, eye camp, bird flu
awareness campaign and animal health camp, which are being conducted in villages by
branches in association with various state governments, insurance companies and NGOs,
among others.
 Bank have been awarding cash incentives to 10 plus 2 rank holders in all the 13 lead districts
in Tamil Nadu/Andhra Pradesh and in the Union Territory of Puducherry.

32
RECENT RECOGNITIONS AND AWARDS

 Indian Bank has attained the first rank and has been conferred with the National Award for
Excellence in Lending to Micro Enterprises for FY 2012. Shri T M Bhasin, Chairman and
Managing Director, has received the coveted National award from the august hands of Hon’ble
President of India, Shri Pranab Mukherjee on 03rd April 2013 at Vigyan Bhawan,
New Delhi.
 INDIAN BANK received the "Master Card Innovation Award - PREPAID CARD
PROGRAM" for the innovative prepaid card sales targeting Corporate entities on 16.03.2013
from M/s
Master Card International Indian Bank has been declared as Runner-up in the NFS ATM
Operational Excellence Award 2012 under Public Sector Bank category.

 Our Chairman and Managing Director Sri T.M.Bhasin receiving Skoch Digital Inclusion
Award 2012 in a function held at New Delhi on 18.09.2012.

 Our Chairman and Managing Director receiving the Financial Inclusion Award of the year
2012 from Shri Montek Singh Ahluwalia, Hon’ble Deputy Chairman, Planning Commission
In the presence of Dr C Rangarajan, Hon’ble Chairman, Economic Advisory Council to the
Prime Minister in a function held at New Delhi on 27th March 2012.

 Our CMD Shri. T M Bhasin receiving Golden Peacock Innovative Product/Service Award –
For the year 2011 in recognition of its contribution to promotion of Self Help Groups (SHG) at
the World Congress on Total Quality held in Bengaluru on 21st January 2012.

 Shri T M Bhasin Chairman and Managing Director of Indian Bank receiving Financial Express
- Ernst & Young "Best Public Sector Bank Award (Runners Up) during the "FE - BEST
BANK AWARDS 2010-11" on 17.09.2011 at Mumbai, FROM HON'BLE UNION
MINISTER, FINANCE, SHRI PRANAB MUKHERJEE. (Photo:2) Shri T M Bhasin with
Union Finance Minister Shri.
Pranab Mukherjee and Chief Minister of Maharastra Shri Prithviraj Chavan. (Photo:3) Shri.
T M Bhasin with other award winnders.

33
 Shri T M Bhasin, Chairman & Managing Director, Indian Bank receives the award for
"BEST PUBLIC SECTOR BANK UNDER THE ASSET QUALITY CATEGORY" at the Dun
and
Brad street Polaris software banking awards 2011 on August 30 2011 at Mumbai

 Government of TamilNadu has conferred the Best Performing Bank Award to Indian Bank
For the outstanding achievement under Self Help Group (SHG).

 INDIAN BANK was declared as a Winner in BEST BANKs category and Best Education
Loan category in the Banking Survey conducted by OUTLOOK MONEY Award 2010 on
the basis of its performance during the year 2009-10

 Indian Bank Conferred with SKOCH Financial Inclusion Award 2011

SHARE HOLDING PATERN

Diagram no 3

Bank paid Rs. 4.20 per Equity share as Dividend for the year 2014-15

34
 Diagram no 4

Diagram no 5

2. PRODUCTS

RETAIL BANKING

Retail banking is one of the core businesses. Retail banking strategy is to provide a comprehensive
range of personalized services to retail customers through increased automation and improved
customer service, as well as a streamlined branch network focused on sales. Our retail banking
services include:
35
 a. Retail advances, such as mortgage, education and consumer lending;
b. Electronic banking, such as internet banking, phone banking and mobile banking;
c. Global ATM-cum-Debit card; and
d. International credit card.

LOANS
The following are principal retail loan products:

a. Housing Finance
b. Education Loan
c. Vehicle Loans
d. Personal Loans
e. Professional Loans
f. Mortgage and Improvement Loans
g. Trade Finance
h. Loans to Educational Institutions
i. IPO and ESOP Loans
OTHER LOAN SCHEMES
CORPORATE BANKING

Products for corporate customers include term loans and advances for the creation or improvement
of assets and also working capital funding. We also offer fee-based services, such as cash
management and remittance services.

Loans and advances

Following range of loan and advance products to assist our corporate customers in meeting
their financial needs:
a. Term Loans
b. Cash Credit and Other Working Capital Facilities
c. Letters of Credit
d. Guarantees

36
 e. Loans against Future Rent Receivables
f. Loans against Shares and Securities

Other Corporate Products and Services

a. Foreign Currency Loans
b. Export Credit
c. Import Finance
d. Exchange Houses

AGRICULTURAL AND PRIORITY SECTOR FINANCIAL SERVICES

Products aimed at agricultural customers

a. Kisan Credit Card (KCC)
b. Sugar Premium Loan
c. Golden Harvest Scheme
d. Produce Marketing Loan
e. Financing for setting up of Agri clinics and Agri business centers
f. Farm Mechanization
g. Rural Internet Kiosk

Along with the standard corporate services described above, we offer the following specialized
products to our SME customers:
a. “My Own Shop” Loan – for customers wishing to purchase commercial space and new or
second hand shops necessary for running their business.
b. “IB-Aayushmaan” Loan – loans for the construction, renovation or upgrade of gyms or
fitness centers and the purchase of fitness equipment.
c. “IB-Shanti Niketan” Loan – loans for the extension or renovation of hostels for working
women, men or students.
d. “Annapoorna and Aroghya” Loan – loans for the establishment, expansion or renovation of
small to mid-size hotels, restaurants, bakeries and other service oriented enterprises.
e. “IB BPO” Finance – for customers wishing to establish, renovate or upgrade BPO centres.

37
Some of the other schemes offered by our Bank are as follows:
a. Vidhya Shobha Scheme
b. Gramin Mahila Sowbhagya Scheme
c. Grihalakshmi
d. Janashree Bima Yojana
e. Universal Health Care Policy for below Poverty Line Families
Diagram no 6

Advances global

125000
120000
115000
advances
110000
105000
100000
30.06.2013 30.06.2014 30.06.2015

DEPOSITS
Deposits are broadly classified into demand deposits, savings deposits and time (or term) deposits
as follows:
a. Demand deposits, which are non-interest bearing;
b. Savings deposits, which are deposits that accrue interest at a fixed rate set by the RBI
(currently 3.5%) and upon which cheques can be drawn; and
c. Term deposits, which are deposits on which interest is paid, either on maturity or at
stipulated intervals depending upon the deposit scheme under which the money is placed.
Term deposits include:

i. Fixed deposits on which a fixed rate of interest is paid at fixed, regular intervals;

38
 ii. Re-investment deposits, under which the interest is compounded quarterly and paid
on maturity, along with the principal amount of the deposit; and
iii. Recurring deposits, under which a fixed amount is deposited at regular intervals for a
fixed term and the repayment of principal and interest is made at the end of the term.
Table no 2

Sector wise deployment of advances

Table no 3

d. Fixed Deposits

39
e. Facility Deposit
f. Reinvestment Plan Deposits
g. Ind Double – Centenary Certificate Scheme and Centenary Tax Saving Certificate
h. Recurring Deposit
i. Special Recurring Deposit
j. Savings Bank
k. Vikas Savings Khata
l. Current Account
m. Capital Gains Scheme 1988
n. Power Account
o. Special Deposit Scheme for Senior Citizens
p. Sweep Facility under Current Account and Savings Account
i. Premium Current Account:
ii. SB Platinum:

GLOBAL DEPOSITS
Diagram no 7

40
 CURRENT ACCOUNT SAVINGS ACCOUNT
Diagram no8

CASA (domestic)
CURRENT ACCOUNT SAVINGS ACCOUNT

42294
33463 36496

6223 6326 7159

30.06.2013 30.06.2014 30.06.2015

OTHER SERVICES
a. Wealth management services
Treasury operations
a. FOREIGN EXCHANGE OPERATIONS
General banking services
a. Credit and Debit Cards
b. Cash Management and Remittances
c. Collection Services
d. Depository Services

41
 e. Government Business
f. Collection of Taxes
g. Distribution of deposit products of the Government of India
h. Ministerial Accounts
i. Payment of Pension
j. Non-Resident Indian Financial Services
k. IB Swarna Mudra Scheme
l. Merchant Banking Services
Distribution of third party products
a. Insurance
b. Mutual Funds
TOTAL BUSINESS OF THE FIRM
Business Crossed the Milestone Target of ` 3,00,000 crore
Diagram no 9

Compounded Average Growth Rate for 5 yrs. is 13.6%

SWOT ANALYSIS
STRENGTH

1. One of the leading PSBs with the Government holding of 81.51% and with a Market Cap
of Rs.9720 crore.
2. Pan India presence with 2389 branches and 2248 ATMs
42
3. 3 overseas branches at Singapore, Colombo and Jaffna.
4. 3 RRBs and 2 Subsidaries.
5. Servicing 3.86 crore Bank Accounts Pan India
6. The traditional banking functions would give way to a system geared to meet all the
financial needs of the customer.
7. We could see emergence of highly varied financial products, which are tailored to meet
specific needs of the customers in the retail as well as corporate segments.
8. The advent of new technologies could see the emergence of new financial players doing
financial intermediation. For example, we could see utility service providers offering say,
bill payment services or supermarkets or retailers doing basic lending operations. The
conventional definition of banking might undergo changes.

9. Retail lending will receive greater focus. Bank would compete with one another to provide
full range of financial services to this segment. Bank would use multiple delivery channels
to suit the requirements and tastes of customers. While some customers might value
relationship banking (conventional branch banking), others might prefer convenience
banking (e-banking).

10. Structure and ownership pattern would undergo changes. There would be greater presence
of international players in the Indian financial system. Similarly, some of the Indian banks
would become global players. Government is taking steps to reduce its holdings in Public
sector banks to 33%. However the indications are that their PSB character may still be
retained.

11. Mergers and acquisitions would gather momentum as managements will strive to meet the
expectations of stakeholders. This could see the emergence of 4-5 world class Indian
Banks. As Banks seek niche areas, we could see emergence of some national banks of
global scale and a number of regional players.

43
 12. The directed lending would be business driven. With SME sector expected to play a greater
role in the economy, Banks will give greater overall focus in this area. Changes could be
expected in the delivery channels used for lending to small borrowers and agriculturalists
and unorganized sectors (micro credit). Use of intermediaries or franchise agents could
emerge as means to reduce transaction costs.

WEAKNESS

1. Less presence in India as it has competition in urban areas as well as rural areas.
2. Limited advertising in comparison with leading banks.
3. Low number of ATM’s and branches as compared to other big bank brands.
4. One of the concerns is quality of bank lending. Most significant challenge before banks is
the maintenance of rigorous credit standards, especially in an environment of increased
competition for new and existing clients. Experience has shown us that the worst loans are
often made in the best of times
5. Human Resources Development would be another key factor defining the characteristics of
a successful banking institution. Employing and retaining skilled workers and specialists,
re-training the existing workforce and promoting a culture of continuous learning would be
a challenge for the banking institutions.
6. In the ultimate analysis, successful institutions will be those which continue to leverage the
advancements in technology in re-engineering processes and delivery modes and offering
state-of-the-art products and services providing complete financial solutions for different
types of customers.
7.

OPPORTUNITY
1. The financial system is the lifeline of the economy. The changes in the economy get
mirrored in the performance of the financial system, more so of the banking industry. The
Committee, therefore felt, it would be desirable to look at the direction of growth of the
economy while drawing the emerging contours of the financial system. The “ India Vision
2020" prepared by the Planning Commission, Government of India, is an important
document, which is likely to guide the policy makers, in the years to come.

44
2. Small and Medium Enterprises (SME) sector would emerge as a major contributor to
employment generation in the country. Small Scale sector had received policy support from
the Government in the past considering the employment generation and favourable capital-
output ratio. This segment had, however, remained vulnerable in many ways. Globalization
and opening up of the economy to international competition has added to the woes of this
sector making bankers wary of supporting the sector. It is expected that the SME sector
will emerge as a vibrant sector, contributing significantly to the GDP growth and exports.

3. India’s share in International trade has remained well below 1%. Being not an export led
economy (exports remaining below 15% of the GDP), we have remained rather insulated
from global economic shocks. This profile will undergo a change, as we plan for 8-9%
growth in GDP. Planning Commission report visualizes a more globalised economy. Our
international trade is expected to constitute 35% of the GDP.

4. India in 2020 is of a nation bustling with energy, entrepreneurship and innovation. In other
words, we hope to see a market-driven, productive and highly competitive economy. To
realize the above objective, we need a financial system, which is inherently strong,
functionally diverse and displays efficiency and flexibility. The banking system is, by far,
the most dominant segment of the financial sector, accounting for as it does, over 80% of
the funds flowing through the financial sector. It should, therefore, be our endeavor to
develop a more resilient, competitive and dynamic financial system with best practices that
supports and contributes positively to the growth of the economy.

5. The ability of the financial system in its present structure to make available investible
resources to the potential investors in the forms and tenors that will be required by them in
the coming years, that is, as equity, long term debt and medium and short-term debt would
be critical to the achievement of plan objectives. The gap in demand and supply of
resources in different segments of the financial markets has to be met and for this, smooth
flow of funds between various types of financial institutions and instruments would need to
be facilitated.

45
6. Government’s policy documents list investment in infrastructure as a major area which
needs to be focused. Financing of infrastructure projects is a specialized activity and would
continue to be of critical importance in the future. After all, a sound and efficient
infrastructure is a sine qua non for sustainable economic development.

7. Infrastructure services have generally been provided by the public sector all over the world
in the past as these services have an element of public good in them. In the recent past, this
picture has changed and private financing of infrastructure has made substantial progress.
This shift towards greater role of commercial funding in infrastructure projects is expected
to become more prominent in coming years.

8. Government has announced a policy to encourage greater flow of FDI into the banking
sector. The recent amendment bill introduced in Parliament to remove the 10% ceiling on
the voting rights of shareholders of banking companies is a move in this direction. The
working group expects this to have an impact on the capital structure of the banks in India
in the coming years.

9. The banking Industry’s business also to be driven by forces of globalization. This may be
further accentuated with the realisation of full convertibility of the rupee on capital account
and consequent free flow of capital across the borders. An increase in the income levels of
the people would naturally lead to changes in the spending pattern also. This could result in
larger investments in the areas like entertainment and leisure, education, healthcare etc and
naturally, these would attract greater participation of the banking system.

10. On the basis of the projection made by the Draft 10th Five Year Plan on relevant macro
indicators such as GDP and extending the trend for a further period of three years, it is
estimated that GDP at current market prices during 2009-10 would be Rs.61,40,000 crore.
Taking into account the on-going reform measures, expected Basel II needs, and financial
dis-intermediation, the pace of expansion in the balance sheets of banks is likely to
decelerate.

46
 11. International trade is an area where India’s presence is expected to show appreciable
increase. With the growth in IT sector and other IT Enabled Services, there is tremendous
potential for business opportunities. This again will offer enormous scope to Banks in
India to increase their forex business and international presence.

12. Globalization would provide opportunities for Indian corporate entities to expand their
business in other countries. Banks in India wanting to increase their international presence
could naturally be expected to follow these corporates and other trade flows in and out of
India.

THREATS
1. Deceleration in credit, stress due to higher provisioning on delinquent loans coupled with
higher growth in the interest expenses.
2. In FY15 growth in bank credit and deposits had slowed down with growth in credit being
at 9.5% per cent compared with 13.9% per cent in FY14 especially due to lower demand
from industry.
3. The growth in deposit was 11.4 per cent against 14.1 per cent in FY14 affected by higher
inflation over the years.
4. Growth in agriculture is estimated at 1.1 per cent in 2014-15 from 3.7 per cent in 2013-14.
Industrial sector is estimated to grow at 5.9 per cent in the FY 2014-15, as compared to 4.5
per cent in the year-ago. The bank has more branches in rural areas so more credit is given
to agriculture sector.
5. Exports have declined and the deceleration in imports owes substantially to the sharp
decline in international oil prices.
6. Increase in the amount of nonperforming assets
7. Increasing competion in the sector.
8. On the basis of the projection made by the Draft 10th Five Year Plan On the liability side,
there may be large augmentation to capital base. Reserves are likely to increase
substantially. Banks will rely more on borrowed funds. Hence, the pace of accretion to
deposits may slow down.

47
 CHAPTER - 3
ORGANIZATION STUDY

48
1. ORGANIZATION CHART OF THE BANK
Diagram no 10

BOARD OF DIRECTORS

CHAIRMAN AND
MANAGING DIRECTOR

EXECUTIVE DIRECTOR

HEAD OFFICE,
CHENNAI

DOMESTIC OVERSEAS INTRNATIONAL

AND RRBS OPERATIONS

INDIAN
CIRCLE OFFICES
SUBSIDIARIES AND
RRBS

DOMESTIC BRANCH
DOMESTIC OVERSEAS FOREIGN BRANCHES
BANKING
BUSSINESS

49
BRANCH ORGANIZATION STUCTURE

Diagram no 11

CHIEF MANAGER

SENIOR MANAGER

MANAGER

ASSISTANT MANAGER ON
ASSISTANT MANAGER
PROBATION
SPECIAL
ASSISTANT

CLERK CLERK CLERK

SUBSTAFF

50
 2. ROLE OF EMPLOYEES
1. Job Role of Branch Managers
II. The Branch Manager is personally responsible/ accountable for the following functions:
A. Achieving targets fixed on various business areas as per the annual performance budget/
business plan / MOU of the branch with the active co-operation of the staff.
B. The thrust areas would be to
a. Improve the core deposit of the branch.
b. Achieve a proper deposit mix to maximize profitability.
c. Maintain close liaison and sustained rapport with officials of Government Semi
Government / corporate entities / institutions / courts / individuals to improve the
business.
d. Maintain a record of contacts made and results thereof.
e. Arrange for deposit mobilization campaign at regular intervals.
f. Know the competitors' activities in and around the command area.
C. Maintain a high level of customer satisfaction
D. Efficient management of credit portfolio of the branch
E. Proper personnel management and industrial relations
F. Effective co-ordination for Inspection and proper and timely rectification of errors.
G. The Branch Manager is 'Man on the Spot' and to understand the entire operations of the
branch.

In case of VLBs and ELBs

a. Submission of monthly DO letters in time
b. participate in Zonal Committee (Credit), Zonal Committee (Administration)
III. Taking charge of branches
Branch Managers up to Scale lll should take complete charge of the branch after verifying all the
securities, assets charged to the Bank etc., and should send the Relieving Manager's Certificate to
the immediate controlling authorities without fail. The Chief Managers heading
Very Large Branches should take charge of the branch after perusing latest inspection reports/
statutory auditor's report/concurrent auditors report, etc. In case of any abnormal irregularities
found after his taking charge, the same should be immediately brought to the notice of higher
authorities and effective steps for regularization should be taken. Assistant General Managers

51
heading Exceptionally Large branches may immediately takeover of a branch based on latest
inspection reports. They may ascertain from the Chief Manager (Credit) about the various advance
accounts and initiate regularization process in case of abnormal irregularities immediately after
duly informing the higher authorities.

IV. Special Assignments

Branch Manager is the Driving Force for the Branch administration, Business Growth
and Profitability. As the Leader of the team and Functional Head of the Branch, it is entirely up to
him/her as to how the various responsibilities are allocated among the staff members in the branch
so that he/she has sufficient time for carrying out his/her Marketing/Development functions.
Where a Branch Manager is satisfied over the marketing skills of certain staff members, they could
be assigned such responsibility as well so as to support the Branch Manager's marketing efforts.
(i) Role of Branch Manager in Marketing
(ii) Role of Branch Manager in SME Financing
(iii) Role of Branch Manager in Rural Development
(iv) Conducting test check by Branch Manager on certain delegated work

2. Job Role of Assistant Branch Managers (ABM)

General
 The Asst. Branch Manager is the second Officer in command of a branch.
 He shall work in close co-ordination with the Branch Manager and be ready at any time
to take charge of the branch in the absence of the Branch Manager.
 He should be familiar with various operations of the branch viz., deposits, advances,
foreign exchange business etc.
 He will be responsible and answerable to the Branch Manager for proper functioning of
internal routine of the branch and its smooth functioning.

Though the Asst. Branch Manager is under the superintendence of and to obey the instructions
of the Branch Manager, he has a direct and personal responsibility to the CO in regard to the
proper conduct of the Bank's business. It is his duty to report to the CO, any departure from the

52
rules and regulations of the Bank which he considers detrimental to the Bank's interest and any
defects in the Bank's security of which the CO is unaware.
 To assist the Branch Manager
a. in compiling data to be incorporated in the fresh/renewal proposal;
b. in inspecting godowns/assets charged to the bank;
c. in ensuring proper documentation and safe custody of all the security documents;
d. in periodically monitoring through the conduct of important advance accounts;
e. in preparation of Performance Budged Business Plan
f. By taking over any duty or assignment as the Branch Manager may assign to him.
 Assuming emergency charge of the branch
When occasion arises for the Asst. Branch Manager or any other member of the
supervising staff to assume emergency charge of a branch during the temporary absence of the
Branch Manager, If for any unforeseen reason, a temporary emergency charge is prolonged for a
period of one month or over, the submission of Manager's Relieving Certificate by the temporary
incumbent, will become necessary.

1. Job Role of Asst. Managers/Managers at branches

General
 The Branch Manager/Asst. Branch Manager has the authority to allocate the supervisory
work in the branch among the Managers/Asst. Managers of the branch.
 Manager/Asst. Manager should ensure that a satisfactory quality of supervision is
maintained.
 Assistant Manager/Manager should assist the Branch Manager in his Deposit Mobilization
and recovery efforts.
 An officer may be placed in-charge of one or more sections in the office depending upon the
volume of work involved.
 An Officer placed in-charge of a section is responsible for
a. efficient customer service in his section;
b. proper maintenance of books and registers;
c. checking and authentication of vouchers;
b. checking of entries in the books, ledgers and registers;

53
 c. dispatch of statements of accounts/custody of savings bank pass books;
d. balancing/tallying of books allotted to him periodically;
e. correct calculation of interest, commission etc. and checking thereof;
f. replying the customers on enquiries of routine nature;
g. dispatching all cheques/bills/instruments taken for collection immediately to the
drawee centre;
h. follow up of long pending items in bills section and take timely steps for their
realisation;
i. timely despatch of due date notices to customers;
j. timely credit of periodical interest in deposit accounts;
k. collection of locker rents in time.

 Attending to correspondence Maintenance and custody of files, documents etc.

 Replying to inspection/audit reports
 Reference to be made to the Manager - Advances/expenditure proposals
 Personnel Administration
 Proper regulation of foreign exchange department
 Co-ordination Among Various Sections
 Communication to Higher Authorities on matters affecting the Bank's Interest
 Participation in Development Work

2. Job allocation at branches for Officers

 Effective management of any organization is measured in terms of the delegation of the

various functions among all its functionaries. In a financial organization like banks the
delegation assumes more importance in view of the necessity to take decision quickly and
correctly.
 Field level functionaries are from time to time advised of the delegated powers in respect of
the various functional areas. However, it has to be understood that delegation does not
mean demarcating the power to exercise alone. The delegation should also be in respect of
the functional aspects particularly at the branches. The importance of well-defined area of

54
 functions of an officer in a branch assumes greater significance with the aspect of
accountability for various lapses to be identified.
 With a view to create a healthy and proper functioning of the branches, all the work among
all the officers should be properly allocated by means of a written office order and the
allocations made as suggested should also be made rotational among all the officers so as to
make all officers to have exposures to all areas of the branch functioning.
 The office order as suggested above should be preserved and made available to the
Inspecting officials.
 Inspecting officials should verify whether the office order is in vogue at the branch and in
its absence bring that to the knowledge of the Inspection Department immediately by
means of special report.
 The Inspecting officers have to append a copy of such office order to their report. Further,
in case any serious lapses are noticed during the course of the inspection the name of the
officers directly responsible for the same should be mentioned without fail.

3. DUTIES OF SPECIAL ASSISTANTS

Special Assistants will be accountable and responsible for running of the department/section
under them and their duties will involve looking after and checking the work of other clerk or
clerks and sub-staff and will include:
1) Passing independently, manually or online, cash, cheques, drafts, other negotiable
instruments, vouchers etc. upto Rs.35000/- and clearing and transfer cheques vouchers etc.
(whether credits or debits) upto and including Rs.1,50,000/- Passing of drafts upto
Rs.2000/- without advice. Passing of cheques drawn by illiterate persons within their
passing powers. Passing will include verification of signatures and scrutiny as to the
correctness of endorsements on and other particulars of such instruments. There shall be no
limits for verification of signatures, passing of authenticated credit vouchers/entries and for
verifying authenticated vouchers in the ledgers, books, computer print-outs etc.
2) Accept, verify and post cash/transfer/clearing cheques and other instruments, as the case
may be, in appropriate books of accounts/ledgers, either manually or online and give due
acknowledgements.
3) Signing vouchers, cheques, drafts, mail transfers, pay orders, advices such as nonpayment
advices, inter branch fate calling advices, bill schedules, demand notices, statements

55
 certificates etc. He shall also sign drafts, pay orders, TPOs and interbranch advices,
term/call deposit receipts etc. singly upto Rs.7500/- and beyond Rs.7500/- as second
signatory jointly with an officer signing as first signatory.
4) Checking all vouchers, advices, statements, cheques draft etc., bills and books of accounts
including current savings and other ledgers, cash, postal and revenue stamps, franking
machine balances, exchange, discount, brokerage calculations and initialing by way of
authenticating them for accuracy/correctness.
5) Checking, manually or online, current, savings and other accounts.
6) Checking the coding and decoding of telegrams (excluding check symbols or ciphers)
including custody of bank’s code book. ‘Checking’ would mean verifying that the material
checked is in order in all the respects and include initialing the same for authentication.
7) Discharging, endorsing cheques, bills etc.
8) To verify, examine and recommend payment of TA bills of the staff.
9)
a) To check progressive balance book.
b) To check bills in hand physically, books of accounts, advices etc.
c) Checking of all miscellaneous statements and returns and signing them as second
signatory.
d) Periodical checking of the books, registers, files and records.
e) To assist the Manager in handling loan and advances work at the office i.e. preparation
of loan proposals, documents, checking of stock report, calculation of DP, preparation of
financial report in reply to some queries by other institution and such other work relating to
loans. It is clarified that Special Assistants posted in Semi-urban and rural branches may be
required to recommend credit proposals on merits for consideration of Incumbent Incharge
of the office concerned.
f) To keep custody of loan documents and securities jointly with the Manager/Sub Manager
or Assistant Manager.
g) Custody of stamps and stamped agreements.
h) To act as an Asstt. Custodian of Safe Deposit Vault.
i) To work as an assistant to the Inspector.
10)

56
 a) To check compliance of standing instructions by the customer and custody of Standing
Instructions Register.
b) To check maintenance of Stop Payment Register and allied work and custody of Stop
Payment Register.
c) To check current, SF and other ledgers and to issue cheque books to the customer and
custody of the specimen signature binders and account operating forms.
d) Custody of inoperative ledgers along with their A.O.F. and specimen signatures(except
in A & B class offices) and security forms jointly with an officer.
11) Custody of all inward parcels jointly with another officer.
12) Perform, when required in a computerized set up, system control functions, either jointly
with an officer or independently, upon specific authorization in this regard.
13) Briefly explain, the features of Bank’s various products and services to customers, to
reply their queries and to refer interested customers to appropriate personnel.
14) To undertake higher responsibilities as and when called upon to do so under
administrative exigencies in case of posting in rural branches as second man provided he is
not debarred from officiating/promotion as officer. For the purpose of efficient and
effective functioning of the section or department the special assistant shall ensure that all
acts, things and steps necessary therefore are taken by himself or by the clerks placed under
him and shall ensure that, wherever necessary:
a) Reminders are sent on time and followed up.
b) Pass sheets/books are filled up and issued promptly.
c) Deposits are renewed on due dates or reminders sent to the parties. d) Standing
instructions are complied with.
e) Bills are accepted and due dates diarised/advised and followed up.
f) Interest, commissions and service charges are collected.
g) Proceeds of bills are received or remitted promptly.
h) Confirmation of balance of accounts of the customers and its follow up.
i) All securities relating to the department/section of which the special assistant is Incharge
are secured and/or kept in proper custody and properly handed to the authorized person at
the close of the day.
j) Balances promptly taken, tallied and reported and followed up and also returns
submitted.

57
 k) Advices and/or duplicate advices/summaries are issued/responded promptly, whenever
called for.
l) Checking the proper recording of entries and all relevant particulars in regard to accounts
opened under due authorization.

4. Duties of clerical staff

 All members of the clerical staff who do not get any special pay as on 30th April 2010 on
regular basis shall be designated as Single Window Operator ‘A’. The following duties
shall form part of their normal duties:
 Acknowledgments of inward mail received.
 Receipt of cheques, drafts, dividend warrants, pay orders and other like instruments other
than bills and giving acknowledgments in the counterfoil.
 Delivery of cheque books subject to authorization by competent authority. Issue of cash
receipts.
 Issue of E.S.I. stamps wherever applicable or may become applicable.
 Recounting of currency notes by cash department staff.
 Ensuring the proper contents in covers and envelopes including registered ones before
dispatch.
 All clerks shall also perform all duties and functions of their cadre, either online or
manually, which does not involve any passing or supervisory function of an officer of
the bank. He will, wherever and whenever required, function as a single window operator
where he will also receive and pay cash.
 In addition, his duties will include –
i. Passing and cash payment of all cheques/withdrawal forms/bankers’ cheques etc.
upto and including Rs.10,000/-
ii. Passing independently clearing and transfer cheques, vouchers, etc. (whether credits
or debits) upto and including Rs.15,000/-
iii. Receipts of cash and issuance of pre-signed drafts / gift cheques / travellers cheques /
pay orders / bank orders, etc. upto and including Rs.15,000/-
5. Duties of subordinate staff

58
 All the normal and routine duties of the subordinate staff cadre and for performance of
which no special pay shall be payable. In addition they shall also be required to do the
following duties.
 To take money orders, to buy stamps etc., which involves carrying of cash not Rs.5,000/-
and to carry insured letters., etc. to post office.
 To stitch currency note bundles.
 To stitch and seal parcels and packets containing currency notes;
 To transit cash from the bank to an office outside or vice versa, if unaccompanied by a
watchman / Armed Guard.

CEO AND DIRECTORS OF INDIAN BANK

Diagram no12

Shri Mahesh Kumar Jain

Executive Director (with
additional charge of MD & CEO)

Shri N. Srinivasa Rao Sri B. P. Vijayendra

Government Director RBI Nominee Director

Shri. Deepak D Samant Shri P V Krishna Rao

Officer Employee Director Workmen Employee Director

Shri. Vinod Kumar Nagar Shri. Sriram Ramchandran

Shareholder Director Shareholder Director

59
3. FUNCTIONAL CLASSIFICATION
Diagram no13

CHAIRMAN

MD AND CEO

EXECUTIVE DIRECTORS

ADMINISTRATIV
ADMINISTRATIVE HEADS E HEADS AT OVERSEAS
AT HEAD OFFICE ZONAL OFFICES BRANCHES (3)
(30)

GENERAL MANAGER
HEAD OF ZONAL BRANCH
DEPARMENT/GROUP OF MANAGER MANAGER
DEPARTMENTS

ASSISTANT
• CUSTOMER SERVICE BRANCH
BRANCH
• ACCCOUNTS DEPARTMENT MANAGER
MANAGER
• HUMAN RESOURCE
SMANAGEMENT (HRM)
• RISK MANAGEMENT OFFICERS
ASSISTANT
• FOREX BUSINESS BRANCH
• REMITTANCES MANAGER
• TECHNOLOGY INITIATIVES
• MANAGEMENT OFFICERS AWARD STAFF
INFORMATION SYSTEM
• INFORMATION SYSTEMS
SECURITY
• PREMISES AWARD STAFF
• INTERNALCONTROLS
• COMPLIANCE
• VIGILANCE
• SECURITY
• MARKETING
60
 1. CUSTOMER SERVICE

Bank is a member of the Banking Codes and Standards Board of India (BCSBI)
having adopted the Codes of Commitment to customers/MSE for implementation in letter and in
spirit.
Customers’ Day was celebrated uniformly at all the Branches on 11.09.2014 as part of Bank's
Founding Day celebrations. Large number of Customers participated in the Customers’
Day/Customer meets and had given valuable suggestions for improvement of customer Service.
All the feasible suggestions have been implemented.

 A Customer Satisfaction Survey was conducted at all our Zones during October-December
2014 by randomly selecting 10 branches in each Zone and 25 customers from each Branch
by engaging independent persons viz., MBA students and our Marketing/Relationship
officers.
 9432 customers in 382 Branches were surveyed and rated on various aspects of Banking.
The survey findings were analysed and placed to the Board and suggestions/grievances
pointed out attended/resolved.
 No awards have been passed by the Banking Ombudsman against the Bank during the year
excepting a few minor directions for operational issues.
 All Regulatory/Mandatory meetings relating to Customer Service have been held as per
schedule.
 As per the directions of Government of India, Bank has launched the Standardised Public
Grievance Redressal System w.e.f 18.02.2013 using in-house developed software. The
system has integrated all the grievance redressal avenues like manual complaints, e-mail
complaints, telephonic complaints etc. into a common digital platform ensuring speedy
resolution of grievances

1. HUMAN RESOURCE SMANAGEMENT (HRM)

 Manpower planning and Recruitment strategy:

As part of succession planning, the Bank has undertaken recruitment of
manpower in various categories in line with emerging business and taking into consideration
the superannuation, branch expansion and business growth. During the year, Bank recruited
61
 943 Probationary Officers and 178 Specialist Officers in different functional areas based on the
requirements of the functional heads besides reckoning the vacancies arising due to attrition.
1415 clerks, 13 Sub-Staff and 30Armed Guards joined the service of the Bank during the year.

 Manpower Position
The position of manpower in the Bank as on 31.03.2015 is as follows:
Table -4

Of which
CATEGORY TOTAL SC ST MALE FEMALE
OFFICERS 9274 1971 745 7229 2045
CLERKS 9449 2068 387 5740 3709
SUB STAFF 1499 499 69 1415 84
TOTAL 20222 4538 1201 14384 5838

 E-learning
As part of HR initiatives, Bank has launched an e-learning portal for imparting training to
employees. The web portalcan be accessed through CBS Help Desk. There are 30 course libraries
with 355 modules in various banking topics.
 Industrial Relations
The Top Management of the Bank periodically interacts with the leaders of Employees’ Unions
and Officers’ Associations for enabling harmonious industrial relations.
 Implementation ofHRTechnology
SAP
SAP HR software is being put to use as a decision support system in areas such as promotion,
transfer, and placement. To extend technological advancement to the entire workforce and achieve
a paperless processing of HR related issues, a cohesive web-site for Human Resources
Management through Intranet has been hosted.
 StaffWelfare Measures
The Central Welfare Committee of the Bank constantly reviews the welfare schemes available to
the employees and improvements are being made based on their recommendations.

62
2. RISK MANAGEMENT:
The Bank has complied with all the guidelines of the Reserve Bank of
India on creation of Risk Management architecture. An independent Risk Management
Department is functioning for effective Enterprise-Wide Risk Management. All the risks, the
Bank is exposed to, are managed through following three committees viz.
• CreditRiskManagementCommittee (CRMC)
• Asset and Liabilities Management Committee (ALCO)
• OperationalRiskManagementCommittee (ORMC)
These committees work within the overall guidelines and policies
approved by the Board and Risk Management Committee of the Board.

 Credit Risk:
Risk Management Systems are in place to identify and analyze the risks at
the early stage and manage them by setting and monitoring prudential limits besides taking
other corrective measures to face the changing risk environment.

 Limit Framework:
In order to limit the magnitude of credit risk and concentration risk, a limit
framework has been laid down for following type of exposures:
• Single and group borrower
• Sensitive sector
• Unsecured
• Interbank
• Country-wise
• Internal rating -wise
• Geographical
• Termloan
These exposure limits were monitored on regular basis and placed to
various apex level committees of the Board.
 Asset Liability Management:
Asset Liability Management allows the Bank to measure and monitor risk
exposures which may arise from both liquidity risk and interest rate risk on its balance sheet.

63
This allows the Bank to provide suitable strategies for asset liability management. The asset
liability management framework consists of the following key components.
• Liquidity riskmanagement;
• Interest rate riskmanagement;
• Balance sheet and Basel III liquidity ratios;
• StressTesting and scenario analysis and
• Contingency funding plan.
Asset Liability Management is the function of Asset Liability
Management Committee (ALCO). It operates under the guidance and supervision of the Board
and/or Sub-Committee of Board on AL Mand Risk Management. It meets at regular interval to
review the interest rate scenario, product pricing for both deposits and advances, maturity
profile of the incremental assets and liabilities, demand for Bank funds, cash flows of the
Bank, profit planning and overall Balance Sheet Management.
 Market Risk Management:
Bank defines Market risk as the possibility of loss caused by changes in
the market variables. The objective of market risk management is to assist the business units in
maximizing the risk adjusted rate of return by providing analytics driven inputs regarding
market risk exposures, portfolio performance vis-à-vis risk exposures and comparable
benchmarks. Following risks are managed under Market Risk.

 Interest Rate Risk

 Exchange Rate Risk
 Equity Price Risk
The market risk may also arise from changes in commodity prices and
volatility. However, Bank does not have any exposure to commodity related markets.
 Operational Risk:
Operational risk is now on the focus of intense interest among industry
participants, regulators and other stake holders. The Bank has put in place Operational Risk
Management Frame work (ORMF) and Operational Risk Management systems (ORMS) to
ensure effective governance, risk capture and assessment and quantification of operational risk
exposure. Operational risk is well managed by using appropriate qualitative & quantitative
methods and established internal control systems in day to day management processes and

64
 adopting various risk mitigating strategies. The risk perceptions in various products / processes
are critically analysed and corrective actions if required, are initiated.
 Internal Capital Adequacy Assessment (ICAAP) framework:
Under Pillar II of Basel framework, i.e., ICAAP, the Bank identifies,
measures and manages the risks that are either not fully captured or not at all captured under
Pillar I and if necessary, makes an additional provision of capital for such risks. The Capital
assessment for the next three years is also carried out based on planned business projections.
Internal Capital adequacy of the Bank was assessed on quarterly basis and placed to the various
apex level committees.

Risk ManagementApproaches adopted by the Bank:

 Bank has presently adopted Standardised Approach for Credit Risk, Standardised Duration
Approach for Market Risk and Basic Indicator Approach for Operational Risk. Software is
in place for accurate computation of credit risk capital charge.
 Bank has been progressing as per the roadmap laid down for moving over to the advanced
approaches under BASEL framework

3. ACCCOUNTS DEPARTMENT

The accounts and investment department does the following very important functions .

 INVESTMENTS
This section performs the vital functions of maintenance of balance with
reserve bank of India , SLR, CRR maintenance based on the data collected from different
centers and a & l data collected from regions, investment in central government securities, state
government securities , trading operations in debt, equity and money market . Due to consistent
and active participation in debt market operations bank is able to earn sizable profits.

 BALANCE SHEET SECTION

Balance sheet section as the name itself suggests is responsible for the
preparation and presentation of the balance sheet of the bank every year. This involves
collection of data from all the regions, foreign offices and consolidating them with ho data to
arrive at the final balance sheet. The consolidated data and other details are subjected to
65
 scrutiny by the statutory auditors as on 31st march of every year before a final shape is given to
the balance sheet

 HO DAY BOOK
The daybooks of all the departments of the central office are consolidated
here and the day book of central office as a whole is maintained by this department.
 OTHER SERVICES
Other services include follow up of insurance claims, holiday lists ,
maintenance of SFVM data, maintenance of long pending DDS, BPOS, sundry deposit entries
transferred to our department. etc.,
 ACCOUNTING CONVENTION
The financial statements are prepared by following the going concern
concept on historical cost convention unless otherwise stated. They conform to generally
accepted accounting principles in India, which comprises statutory provisions, regulatory /
Reserve Bank of India guidelines, accounting standards / guidance notes issued by the Institute
of Chartered Accountants of India and the practices prevalent in the Banking Industry in India,
in respect of foreign branches as per statutory provisions and practices prevailing in the
respective countries.
4. FOREX BUSINESS
Turnover in foreign exchange business of the Bank amounted to `27, 443
crore during the year. Of this, export and other inward remittances amounted to `11, 960 crore,
while imports and other outward remittances amounted to ` 15 ,483 crore. Total turnover in the
interbank forex market amounted to ` 3 ,54 ,290 crore during the year.

International Operations
 The Bank has three foreign branches located at Singapore, Colombo and Jaffna. Total
Deposits and Advances (gross) of the foreign branches as on March 31 2015 was `7 ,367.73
crore and `5, 984.70 crore respectively.
 Singapore branch established in 1941 has carved a niche by offering a variety of banking
services using the latest technology and enjoys enormous goodwill and customer loyalty.
The branch is presently maintaining its business in two accounting units - Domestic

66
 Banking Unit (DBU) for Singapore Dollar business and Asian Currency Unit (ACU) for
business in currencies other than Singapore Dollar.
 Colombo branch established in the year 1932 has active market presence extending trade
finance. The Foreign Currency Banking Unit (FCBU), Colombo is engaged in offshore
banking operations.
 Jaffna branch established in 2011 plays a crucial role in the economic development of
Jaffna Region.

5. REMITTANCES
 Enterprise Remittances Scheme from Singapore offers instant credit to customer accounts
in India with rupee equivalent of the foreign remittances within minutes of receipt at
Singapore Branch and an SMS message is forwarded to the remitter at Singapore informing
the credit. The facility is available on all days of the week.
 Other remittance facilities offered by the Bank for NRIs include "Xpress Money", "Money
Gram", "Western Union Money Transfer", besides normal SWIFT based Money Transfer.
 Electronic Funds Transfer arrangements have been launched with 8 Exchange Houses viz.,
M/s. UAE Exchange Centre LLC-Abu Dhabi, UAE Exchange Centre WLL - Kuwait,
Oman UAE Exchange Centre & Co LLC - Oman, Al Zaman Exchange WLL - Qatar,
GCCExchange - Dubai, Belhasa Global Exchange - Dubai, Al Dar For Exchange - Qatar,
Al Ghurair Exchange LLP - Dubai. Remittance arrangement with M/s Al RajhiBank, Saudi
Arabia has already been launched and running successfully.

6. TECHNOLOGYINITIATIVES
 Information &Communication Technology
The Bank has exploited the innovations and advancements in Technology for achieving the
business objectives and offers a wide variety of tech-savvy products in tune with the
customers’ needs. The Bank has re-christened the tag line as “Your Tech-Friendly Bank”.
The IT strategy of the Bank has been aligned with thebusiness goals of the Bank. The
Bank’s IT initiatives aim toprovide hassle free, convenient and safe transaction facilities to
further enhance the Customer Service and meet customers’ expectations.
 Core Banking Solution

67
_ Bank implemented 100 per cent CBS in 2008 and Technology has now positioned itself
as a critical business enabler, pervading new frontiers and encompassing all aspects of
Banking activities.
_ 108 branches, 5 digital branches and one Mobile van with ATMwere dedicated at the
august hands of Hon’ble Union Finance Minister on 21 08 2014, a unique event in the
history of the Bank.
_ 46 Banking Service Centres (BSC) are operational in various parts of the country to
increase outreach under Financial Inclusion.
 ATMs:
• 2 ,344ATMs (Including 599 offsiteATMs) are in operation.
• Deployed 8 Cash Deposit Machines (BNA’s) of which 6 BNA’s are enabled with
Cash recycling functionality i.e. functionality to receive &dispense cash to the
customers.
• 5 Mobile ATMs attached to branches.
• Usage of Bank’s ATMs by Regional Rural Banks sponsored by the Bank and
issuing of ATM cards to customers.
• RuPay Debit Cards issued to customers of all 3 RBBs.
• Voice interface provided inATMs for guiding the users.
• ATM card-base of the bank is 159 .73 lakhs including ‘Maestro’&‘Master card’and
‘RuPay’ cards
• All the Maestro and MasterCard debit cards can be used in Bank’s ATMs as well as
other Bank’s ATMs for balance enquiry and cash withdrawal. Bank’s Maestro cards
can be used in the MasterCard branded POS terminals internationally.

GROWTH IN NUMBER OF ATMS

Diagram no14

68
 Internet Banking:
Bank has introduced self service delivery channels through Net Banking, which facilitates
banking through internet, funds transfer, tax and utility bills payments, at customers’
convenience. Net banking facility is provided for both individuals and corporate customers
with 24*7 accessibility.
 Mobile Banking:
Mobile Banking provides a unique opportunity for providing financial & non-financial
transactions in a secured way to the customers by using their own hand phones. Mobile
Banking services reaches to every common man as the services are available 24 x 7 to
access the banking services at his/her convenience.
Diagram no14

69
7. MANAGEMENTINFORMATIONSYSTEM
To derive full benefit of automation through 100 percent CBS, the MIS
department has been providing various reports/data for furnishing to different agencies and
departments. To facilitate the same, a new MIS portal has been developed with facility to
generate tailor made reports.
8. INFORMATION SYSTEMS SECURITY
 Separate Information System Security Department isfunctional.
 IS audit of Core Banking Solutions software, Network infrastructure of the Bank, Internet
Banking and ATM network is being done by external agency, every year to strengthen
Information Security.
 Guidelines issued to observe Computer Security on an ongoing basis.
 Security Operation Center (SOC) established for monitoring all the existing and proposed
security devices on a 24x7 basis. Under this project, Firewalls, Network Intrusion
Prevention System (NIPS), Host Intrusion Detection System (HIDS) are deployed in CDC
and DR Site.
9. PREMISES
 As part of the green initiative, all payments to vendors, suppliers etc. are made through
electronic channels viz., direct credit/NEFT/RTGS (only under exceptional circumstances,
a payment by way of cheque is made).
 Bank owns 146 properties in India and 2 properties in Singapore.
 Bank has put in place uniform policies for Premises, Expenditure, Purchases, Contracts,
Printing and Stationery, Air conditioning, Automobiles, Telephone/Cell phone and has
adopted the same at all branches/zones.

10. INTERNALCONTROLS
 During the year, Risk Based Internal Audit was carried out in 1779 branches. Information
system Audit covered 1766 branches and 1084ATMs.
 568 branches were covered under concurrent audit, covering 67 per cent of total domestic
deposits and 76 per cent of domestic advances as on 31.03.2015. Overall, 70 per cent of
domestic business was covered under Concurrent Audit.
11. COMPLIANCE:

70
 The Bank’s Compliance Policy has been duly approved by the Board. In
accordance with the Reserve Bank of India guidelines, an independent Compliance Department
headed by a Deputy General Manager has been set up in the Bank. The Department monitors
adherence to various statutory and regulatory guidelines governing the Bank's functioning such
as:
 Various legislations such as Banking Regulation Act, Reserve Bank of India Act, Foreign
Exchange Management Act, Prevention of Money Laundering Act etc.
 Regulatory guidelines issued by Reserve Bank of India, Securities and Exchange Board of
India, Insurance Regulatory and Development Agency etc.
 Voluntary standards and codes prescribed by industry associations such as Indian Banks'
Association, Foreign Exchange Dealers' Association of India, Fixed Income Money Market
Dealers Association etc.
 Bank's internal policies, codes of conduct, guidelines etc. issued by way of Circulars,
Manuals etc.
12. VIGILANCE
 The department is guided by Central VigilanceCommission’s (CVC) guidelines on
vigilance administration. It is the single point of contact for consultations with CVC. It is
also the nodal department to liaise with RBI / CBI in respect of frauds.
 The department is functioning in a proactive manner, focused on increasing the fraud
deterrence quotient within the Bank and disposing of all vigilance cases in line with the
Central Vigilance Commission's guidelines. As part of its anti-fraud initiatives, vigilance
audit of branches have been strengthened by increasing its scope and coverage. 221
branches were subjected to vigilance audit during the year 2014-15.
 Investigation of complaints and frauds are undertaken
13. SECURITY
 Bank has a well-established security machinery to supplement the Operational Risk
Management system.
 Modern security systems have been put in place, to protect Bank’s assets including
personnel, information and property. Security arrangements were continuously reviewed
and enhanced as and when necessitated. As a result of persistent efforts, the number of
crimes against the Bank were considerably restrained. The standard of security awareness
amongst staff was maintained at a satisfactory level.

71
  Latest security gadgets viz., burglar and fire alarm with auto dialer, CCTV systems in
consonance with the present day requirements have been provided to all branches. ATMs
including Mobile ATMs have been provided with security systems.All newATMs have
been grouted.
 All Currency Chests have been installed with Biometric Access control system and are
provided with Cash Vans And Armed Guards.
 Automatic Fire Extinguishers have been installed in server rooms of all branches.
14. MARKETING
 Bank was the Platinum Sponsor for Aircel Chennai Open 2015.
 Bank had established Special Loan Desk in three branches viz., Mogappair, Porur and
Tambaram (West) for the benefit of salaried class professionals who on account of paucity
of time are unable to visit the Bank for their financial requirements. The Desks functioned
from 4 to 7 pm from June to August 2014 and garnered good publicity in the market.
 E-mail marketing campaign was conducted during June 2014 for promoting Arogya
Raksha Health Insurance policy and Credit Card.
 Bank had made contribution on the occasion of Deepavali to Udhavum Ullangal, a
Registered Public Charitable Trust, engaged in meeting the needs of the underprivileged,
the distressed, the sick and the differently abled.
 Bank now has an Official Caller Tune, and the same is now being placed across various
communication channels like official phones lines, official mobile lines, IVR Call Centre,
etc.

4. FINANCIAL ANALYSIS OF PREVIOUS YEARS’ STATEMENT OF

ACCOUNTS
Year on year growth of Indian bank
Table – 5

72
Diagram no16 Diagram no17

73
 Performance measurement parameters
Table – 6

Diagram no18 Diagram no19

ASSET QUALITY
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Table - 7

Table - 8

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 5. COMMITTEES OF THE BOARD

Committees of the Board of Directors:

1. Audit Committee;
2. Shareholders’/Investors’ Grievance Committee;
3. Management Committee;
4. Customer Service Committee;
5. Risk Management Committee;
6. Technology Committee;
7. Vigilance Committee; and
8. Special Committee (Monitoring of Large Value Frauds).
The Board of Directors has not constituted any remuneration committee as the remuneration of
Directors is determined by the Government and is guided by the guidelines of the Government in
this regard.

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 CHAPTER – 4

CONCLUSION

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 Banking in India originated in the last decades of the 18th
century. The first banks were The General Bank of India, which started in 1786, and
Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in
existence in India is the State Bank of India, which originated in the Bank of
Calcutta in June 1806, which almost immediately became the Bank of Bengal.

The major highlights of Indian Bank's performance during

FY2014-15 are as follows: Global Business of the Bank reached ` 2,98,056.96 crore
during the year, registering a growth of 3.99 per cent. Total Deposits grew by ` 6
,950.45 crore, or 4.28 per cent to ` 1,69,225.27 crore. Gross Advances at
`1,28,831.69 crore, registered an increase of `4 ,473.04 crore (3.60 per cent) as on
31.03.2015. Overall Credit-Deposit ratio was at 76.13 percent. Priority Sector
Advances at `47,336.60 crore, grew by `6 ,062.32 crore (14.69 per cent) as on
31.03.2015 and was 40.42 per cent ofANBC Agriculture Credit grew by ` 4,514.04
crore (23.55 per cent) to `23,678.97 crore and accounted for 20.22 per cent
ofAdjusted Net Bank Credit (ANBC). In accordance with the priorities accorded by
theGovernment of India, the Bank’s Advances to SC/STs reached `2,149.41 crore as
of 31 March 2015, st constituting 5.06 per cent of total Priority SectorAdvances. Net
Interest Margin was at 2.50 per cent in FY2014-15. Operating Profit increased to `3,
013.71 crore as against `2 ,900.60 crore in FY 2013-14, registering a growth of 3.90
per cent. Net Profit for FY 2014-15 was at `1, 005.17 crore as
compared to `1 ,158.95 crore for 2013-14. Return onAverageAssets was at 0.54 per
cent. Capital Adequacy Ratio (BASEL III) was at 12.86 per cent as compared to
12.64 per cent as of March 2014. Return on Net worth for FY 2014-15 was at 8.34
per cent, as compared to 10.22 per cent in FY2013-14. Gross NPAwas at 4.40 per
cent as against 3.67 per cent in March 2014 while Net NPAwas at 2.50 per cent as
against 2.26 per cent in March 2014.
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REFERENCES

79
1. http://www.indian-bank.com/
2. https://en.wikipedia.org/wiki/Indian_Bank
3. Indian Banking Industry and Information Technology – 2010 by B R Nanda
4. Modern Banking: Theory and Practice – 22 Aug 2014 by D. Muraleedharan
5.

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