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The term bank is generally understood as an institution that holds a banking license granted
by the Bank regulatory authority and is provided rights to conduct the most fundamental
banking services. All banks come under the Intermediaries categories functioning as a
bridge between the savers and the users.
Bank is a commercial institution licensed as a receiver of deposits. It is a financial institution
that accepts deposits and channels the money into lending activities. It provides banking
services for profit. The essential function of a bank is to provide services related to
the storing of deposits and extending of credit. A bank generates profits from transaction
fees on financial services and on the interest it charges for lending.
1.6(B). BANKING SERVICES
Although the nature of services offered by a bank depends upon the type of the bank and the
country, the primary services provided include
• Taking deposits from the general public and issuing checking and savings
• Accounts, keeping money safe while also allowing withdrawals when needed
• Providing loans to individuals, businesses & Corporate
• Encashing cheques
• Facilitating money transactions such as wire transfers and cashiers checks
(Inter Bank, Intra Bank, Inter/Intra country etc…)
• Issuing credit cards, ATM, and debit cards
• Storing valuables, particularly in a safe deposit box
• Facilitation of standing orders and direct debits, so that payments for bills can be
made automatically
Indian Banking System is fairly complex because of the presence of a variety of banks and a
phenomenal number of branches. (Possibly; in terms of sheer branch network, Indian
banking system could be reckoned as the largest in the world. Incidentally, SBI
is the largest bank in terms of number of branches/ personnel. As for the structure, the
Ministry of Finance is the super-regulator with RBI operating under its guidance. RBI is
the regulator of the banking system in India. It is responsible for bank licensing, as well
as branch licensing, issuing directives and supervising the functioning of banks.
It is empowered with punitive powers that can be exercised against errant banks.
Besides the RBI, there are agencies such as the Deposit Insurance, Corporation &
Guarantee Corporation of India (DICGC) and the Banking Ombudsman that have
Jurisdiction over banks in select matters
Categories of banks in India include: Public Sector Banks, Private Sector Banks,
Foreign Banks, Cooperative Banks, Local Area Banks and Regional Rural Banks. Examples
of Public sector banks are SBI & its associates and nationalized banks such as Canara Bank,
UCO Bank, Syndicate Bank, etc. Old generation Private sector banks include: Karur Vysya
Bank, Federal Bank, Catholic Syrian Bank, etc. & those incorporated after 1992 are
branded as “New Private Sector Banks. E.g.: HDFC Bank, ICICI Bank and Indusind Bank.
Foreign banks are those that are incorporated outside India but carry on their operations in
India under license from the RBI [E.g.: Citibank, Standard Chartered, HSBC Bank, etc.
While the above categories of banks are treated as ‘commercial banks’, there are also other
banks in India such as Cooperative Banks, Local Area Banks and Regional Rural Banks. The
regulatory framework could vary in detail from one category of banks to another.
1.6(D). KINDS OF BANKS
Financial requirements in a modern economy are of a diverse nature, distinctive variety and
large magnitude. Hence, different types of banks have been instituted to cater to the varying
needs of the community.
Banks in the organized sector may, however, be classified in to the following major
forms:
1. Commercial banks
2. Specialized banks
3. Co-operative banks
4. Central bank
-: COMMERCIAL BANKS:-
Commercial banks are joint stock companies dealing in money and credit. In India,
however there is a mixed banking system, prior to July 1969, the entire commercial
Banks-73 scheduled and 26 non-scheduled banks, except the state bank of India and its
Subsidiaries-were under the control of private sector. On July 19, 1969, however, 14 major
commercial banks with deposits of over 50 Croers were nationalized. In April 1980, another
six commercial banks of high standing were taken over by the government.
At present, there are 20 nationalized banks plus the state bank of India and its 7 subsidiaries
constituting public sector banking which controls over 90 per cent of the banking
business in the country.
-: SPECIALIZED BANKS:-
There are specialized forms of banks catering to some special needs with this
Unique nature of activities. There are thus,
1. Foreign exchange banks,
2. Industrial banks,
3. Development banks,
4. Land development banks,
5. Exim bank.
-:CO-OPERATIVE BANKS:-
Co-operative banks are a group of financial institutions organized under the provisions
of the Co-operative societies Act of the states.
The main objective of co-operative banks is to provide cheap credits to their
members. They are based on the principle of self-reliance and mutual co-operation. Co-
operative banking system in India has the shape of a pyramid a three tier structure,
constituted by
Chart-2
-: CENTRAL BANK:-
A central bank is the apex financial institution in the banking and financial system of a
country. It is regarded as the highest monetary authority in the country. It acts as the leader
of the money market. It supervises, control and regulates the activities of the commercial
banks. It is a service oriented financial institution.
India’s central bank is the reserve bank of India established in 1935.a central bank is usually
state owned but it may also be a private organization. For instance, the reserve bank of
India (RBI), was started as a shareholders’ organization in 1935, however, it was
nationalized after independence, in 1949.it is free from parliamentary.
1.6(E). INDIAN BANKING INDUSTRIES
In India the banks are being segregated in different groups. Each group has their own
benefits and limitations in operating in India. Each has their own dedicated target market.
Few of them only work in rural sector while others in both rural as well as urban. Many even
are only catering in cities. Some are of Indian origin and some are foreign players.
Table-1
MAJOR BANKS IN INDIA
Banks should have a comprehensive risk scoring/rating system that serves as a single point
indicator of diverse risk factors of counter party and for taking credit decisions in a
consistent manner. T o facilitate this, a substantial degree of standardization is required in
ratings across borrowers. The risk rating system should be designed to reveal the overall
risk of lending, critical input for setting pricing and non-price terms of loans as
also present meaningful information for review and management of loan portfolio.
This risk rating, in short, should reflect the underlying credit risk of the loan book.
The rating exercise should also facilitate the credit granting authorities some comfort in its
knowledge of loan quality at any moment of time. The risk rating system should be
drawn up in a structured manner, incorporating, inter alia, financial analysis,
projections and sensitivity, industrial and management risks. The banks may use any number
of financial ratios and operational parameters and collaterals as also qualitative aspects of
management and industry characteristics that have bearings on the creditworthiness
of borrowers. Banks can also weigh the ratios on the basis of the years to which
they represent for giving importance to near term developments. Within the
rating framework, banks can also prescribe certain level of standards or critical parameters,
beyond which no proposals should be entertained. Banks may also consider separate
rating framework for large corporate/small borrowers, traders, etc. that exhibit varying
nature and degree of risk. Forex exposures assumed by corporate who have no natural hedges
have significantly altered the risk profile of banks. Banks should, therefore, factor
the unhedged market risk exposures of borrowers also in the rating framework. The
overall score for risk is to be placed on a numerical scale ranging between 1-6, 1-
8, etc. On the basis of credit quality. For each numerical category, a quantitative
definition of the borrower, the loan’s underlying quality, and an analytic representation of
the underlying financials of the borrower should be presented. Further, as a
prudent risk management policy, each bank should prescribe the minimum rating below
which no exposures would be undertaken. Any flexibility in the minimum standards
and conditions for relaxation and authority, therefore, should be clearly articulated in the
Loan Policy. The credit risk assessment exercise should be repeated biannually (or even at
shorter intervals for low quality customers) and should be delinked invariably from the
regular renewal exercise.
The updating of the credit ratings should be undertaken normally at quarterly intervals or at
least at half-yearly intervals, in order to gauge the quality of the portfolio at periodic
intervals. Variations in the ratings of borrowers over time indicate changes in credit quality
and expected loan losses from the credit portfolio. Thus, if the rating system is to be
meaningful, the credit quality reports should signal changes in expected loan losses. In order
to ensure the consistency and accuracy of internal ratings, the responsibility for setting or
confirming such ratings should vest with the Loan Review function and examined by an
Independent Loan Review Group. The banks should undertake comprehensive study
on migration (upward – lower to higher and downward – higher to lower) of borrowers
in the ratings to add accuracy in expected loan loss calculations.
5.2 FINDINGS
It can be distilled from data that syndicate bank has good market share
as compared to its competitors considering the amount of resources deployed by them in
the market.
The credibility of syndicate bank is good in comparison to its
competitors as GOI (Government of India) is a major share holder in the company.
Syndicate bank will improve loan processing times by turning the
linear process into a virtual process. The flexibility of a virtual process allows employees
to work on any part of the loan process at any time, increasing productivity and reducing
costs.
Loan officer of syndicate Bank consider the current ratio and the
debt/equity ratio the most significant in determining whether to grant a loan and the
amount to lend. Bank prefer a high current ratio since it reduces their risk
The SMEs are not aware of the credit schemes offered by the
commercial banks and nodal agencies.
The delays in sanctioning of the loan and the neglecting attitude of
the bank officials are the main causes behind the bad perception of SMEs towards the
banks.
The network of syndicate in Hyderabad is lagging behind a little than
its competitors like ICICI bank and HDFC bank.
5.3 SUGGESTIONS
Based on the data collected through the questionnaire and interactions with the students
the following recommendations are made for consideration:
Before approving the loan concerned officer should check the
Besides opening more branches it should also look for opening some
bank, which makes this bank more reliable than other private banks, this thing can be used
in the favors of syndicate bank by making people aware about this fact and winning their
faith.
Banks should also provide consultancy services and
professional guidance at the time of setting up for considering the long-term and short-term
are taking much time in sanctioning the loan. Hence it is suggested that the funding
CONCLUSION
The financial services sector and capital markets have a significant influence on how
economies develop, principally through their role in allocating financial capital
between different economic activities, as well as through their own operations,
not only do banks manage their own financial and sustainability performance, they
are in a position to influence Socio-economic and environmental performance in
client organizations and through their lending strategies.
Banks are the oldest lending institutions in Indian scenario. They are
providing all facilities to all citizens for their own purposes by their terms. Syndicate
Banks play an important role in the industrial economy of India. Bank loans are the primary
source of funds for private limited companies. Though lending is the primary activity of the
bank, they are very cautious in granting the loans to their clients because their funds are
collected from the general public in the form of deposits that can be withdrawn at a short
notice at any time.
Lending always invokes some amount of risk. The banker should evaluate the
borrowers’ credit history i.e. track records which reveal the morale of lenders. The basis for
analysis and decision-making is financial information. Financial information is needed to
predict, compare and evaluate the firms earning ability in all respects. The financial
information is reported through the financial statement, other accounting reports and ratio
analysis.
My project speaks about the banking system India, different type’s banks and its
services. Its gives better idea about the major banking sectors and its operations in India. It
contains company profile of syndicate bank, its products chart, organizational chart and
lending procedure. It also tells about the different types of financial ratio and its uses.
This study would help manager to find out the market response of corporate
loans and its credit risk before its launch. It helps them to know the different types of
financial ratios and its uses. It provides a feedback to the company about their product. It
provides the information about the company’s stand in the market. It helps the manager to
apply the various activities, which is useful to increase the market share of its product. It
helps the manager to know about the preference and choice of the customers so that they can
plan out their future analysis and strategies on that basis.
5.6 REFERENCES
Books and magazine
• Bank Management & Financial Services, Seventh Edition, pp. 521-642, McGraw Hill
International Edition.
• Selvam, M., Vanitha, S., & Babu (2004), “ A study on financial health of cement
industry-“Z score analysis”, The Management Accountant, July, Vol.39, No.7,
pp591-593
• Bagechi S K (2004), “ Accounting Ratios For Risk Evaluation”, The Management
Accountant, July, Vol.39, No.7, pp571-573
• Krishna Chaitanya V (2005), “Measuring Financial Distress of IDBI Using Altman Z
–Score Model”, The ICFAI Journal of Bank Management, August, Vol. IV , No.3 ,
pp7-17
• Trend and progress of banking in India.
• Wikipedia.org
• Iloveindia.com
• Idbibank.com
• Scribd.com
SCOPE OF THE STUDY
Lending always invokes some amount of risk. The banker should evaluate the borrowers’
credit history i.e. track records which reveal the morale of lenders. The basis for analysis and
decision-making is financial information. Financial information is needed to predict,
compare and evaluate the firms earning ability in all respects. The financial information is
reported through the financial statement, and other accounting reports. It contains a wealth of
information that if properly analyzed and interpreted can provide valuable insights of
purposes, which range from a simple analysis of short-term liquidity position of the firm to
comprehensive assessment of the strengths and weakness of the firm in various areas. In
other words, financial statements are mirrors; which reflect the financial position and
operating strengths and weaknesses of the concern. These statements are useful to
management, bankers and other interested parties. The company should be careful while
supplying the information to the stakeholders, especially Bankers. Hence, the present study
seeks to make an in-depth analysis of ratio of a company from a banker’s perspective