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The methodology involves the following steps:

1) Collection of Data :

• The data with respect to the share prices was collected using the following sources:


• The data with respect to Economic, Sector & Company analysis was collected from
following sources:




• The data with respect to technical & fundamental analysis was collected from various
text books.

2) Computation of Various parameters - It involves the computation of following parameters:

1) Ratio

2) Technical Charts

3) Other tables & graphs.

For computations some software’s like amibroker, Microsoft Excel, etc are used.

3) Analysis - on the basis of computations involved in step2. Economic, Sector & Company
analysis is performed. Technical analysis is also done.

Every project involves certain objectives to be attained, those that help in proceeding towards
right direction. This project being no exception, have the following-

1. The basic purpose of the project is to assess the significance of Equity research Analysis for
taking investment decision i.e. to assess :
- Shares of which Sectors to be acquired?
- Which Companies to be acquired in a sector?
- When to acquire a particular stock?
- Whether to hold the particular stock or to dispose it off and at what specific time.

2. To analyze different factors that affects share price.

3. To learn the techniques of Fundamental Analysis and how to apply them.

4. To learn the techniques of Technical Analysis and their application.

5. To have an insight into the Securities Market.


Fundamental analysis is the examination of the underlying forces that affect the well being of the
economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and
profit from future price movements. At the company level, fundamental analysis may involve
examination of financial data, management, business concept and competition. At the industry level, there
might be an examination of supply and demand forces for the products offered. For the national economy,
fundamental analysis might focus on economic data to assess the present and future growth of the
economy. To forecast future stock prices, fundamental analysis combines economic, industry, and
company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal
to the current stock price, fundamental analysts believe that the stock is either over or under valued and
the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of
the random walkers and believe that markets are weak-form efficient. By believing that prices do not
accurately reflect all available information, fundamental analysts look to capitalize on perceived price

General Steps to Fundamental Evaluation

Even though there is no one clear-cut method, a breakdown is presented below in the order an investor
might proceed. There are two approaches an investor can use for fundamental analysis:-

• Top-Down approach

1. Economic Analysis
2. Industry Analysis
3. Company Analysis
This method starts with the overall economy and then works down from industry groups to specific
companies. As part of the analysis process, it is important to remember that all information is relative.
Industry groups are compared against other industry groups and companies against other companies.
Usually, companies are compared with others in the same group. For example, a telecom operator (Bharti
Airtel) would be compared to another telecom operator (MTNL), not to an oil company.

• Bottom-Up approach:-

1. Company Analysis
2. Industry Analysis
3. Economic Analysis

This is reverse of top down approach.

Economic Analysis

First and foremost in a top-down approach would be an overall evaluation of the general economy. The
economy is like the tide and the various industry groups and individual companies are like boats. When
the economy expands, most industry groups and companies benefit and grow. When the economy
declines, most sectors and companies usually suffer. Many economists link economic expansion and
contraction to the level of interest rates. Interest rates are seen as a leading indicator for the stock market
as well.

Group Selection

If the prognosis is for an expanding economy, then certain groups are likely to benefit more than others.
An investor can narrow the field to those groups that are best suited to benefit from the current or future
economic environment. If most companies are expected to benefit from an expansion, then risk in equities
would be relatively low and an aggressive growth-oriented strategy might be advisable. A growth strategy
might involve the purchase of technology, biotech, semiconductor and cyclical stocks. If the economy is
forecast to contract, an investor may opt for a more conservative strategy and seek out stable income-
oriented companies. A defensive strategy might involve the purchase of consumer staples, utilities and
energy-related stocks.

Industry Analysis

To assess an industry group's potential, an investor would want to consider the overall growth rate,
market size, and importance to the economy. While the individual company is still important, its industry
group is likely to exert just as much, or more, influence on the stock price. When stocks move, they
usually move as groups; there are very few lone guns out there. Many times it is more important to be in
the right industry than in the right stock.
Narrow within the group

Once the industry group is chosen, an investor would need to narrow the list of companies before
proceeding to a more detailed analysis. Investors are usually interested in finding the leaders and the
innovators within a group. The first task is to identify the current business and competitive environment
within a group as well as the future trends. How do the companies rank according to market share,
product position and competitive advantage? Who is the current leader and how will changes within the
sector affect the current balance of power? What are the barriers to entry? Success depends on an edge, be
it marketing, technology, market share or innovation. A comparative analysis of the competition within a
sector will help identify those companies with an edge and those most likely to keep it.

Company Analysis

With a shortlist of companies, an investor might analyze the resources and capabilities within each
company to identify those companies that are capable of creating and maintaining a competitive
advantage. The analysis could focus on selecting companies with a sensible business plan, solid
management and sound financials.

Business Plan

The business plan, model or concept forms the bedrock upon which all else is built. If the plan, model or
concepts stink, there is little hope for the business. For a new business, the questions may be these: Does
its business make sense? Is it feasible? Is there a market? Can a profit be made? For an established
business, the questions may be: Is the company's direction clearly defined? Is the company a leader in the
market? Can the company maintain leadership?


In order to execute a business plan, a company requires top-quality management. Investors might look at
management to assess their capabilities, strengths and weaknesses. Even the best-laid plans in the most
dynamic industries can go to waste with bad management (AMD in semiconductors). Alternatively, even
strong management can make for extraordinary success in a mature industry (Alcoa in aluminum). Some
of the questions to ask might include: How talented is the management team? Do they have a track
record? How long have they worked together? Can management deliver on its promises? If management
is a problem, it is sometimes best to move on.

Financial Analysis

the tools and ratios that tell us about the companies and their comparison are

1. Earnings per share (EPS) ratio

Even comparing the earnings of one company to another really doesn’t make any sense, if we think
about it. Earnings will tell us nothing about how many shares the company has. Because we do not
know how many shares a company has, we do not know how many parts that companies earnings
have to be divided into. If the company has more shares, the earnings will be divided into more parts.

For example, companies A and B both earn Rs.100, but company A has 10 shares outstanding, so
each share holder has in effect earned Rs.10.

On the other hand, if company B has 50 shares outstanding and they too have earned Rs.100 then
each shareholder has earned Rs.2. So we see it is important to know what is the total number of
outstanding shares are as well as the earnings.

Thus it makes more sense to look at earnings per share (EPS), as a comparison tool. We calculate
earnings per share by taking the net earnings and divide by the outstanding shares.

EPS = Net Earnings / Outstanding Shares

So looking at the EPS ratio, we should go buy Company A with an EPS of 10, right? EPS is not the
only basis of comparing two companies, but it is one of the methods used.

Note that there are three types of EPS numbers:

Trailing EPS – last year’s numbers and the only actual EPS

Current EPS – this year’s numbers, which are still projections

Forward EPS – future numbers, which are obviously projections

EPS doesn’t tell we whether it’s a good stock to buy or what the market thinks of it. For that information,
we need to look at some other ratios next....

2. Price to earning (P/E) ratio

If there is one number that people look at than more any other number, it is the “Price to Earning Ratio
(P/E)”. The P/E is a ratio that investors throw around with confidence as if it told the complete story. Of
course, it doesn’t tell the whole story (if it did, we wouldn’t need all the other numbers.)

The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most
popular stock analysis ratio, although it is not the only one we should consider.

we calculate the P/E by taking the share price and dividing it by the company’s EPS (Earnings Per Share
that we saw above)

P/E = Stock Price / EPS

For example: A company with a share price of Rs.40 and an EPS of 8 would have a P/E of: (40 / 8) = 5
What does P/E tell us?

Some investors read a high P/E as an “overpriced stock”.

However, it can also indicate the market has high hopes for this stock’s future and has bid up the price.

Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could mean that the
market has just overlooked the stock. Many investors made their fortunes spotting these overlooked but
fundamentally strong stocks before the rest of the market discovered their true worth.

In conclusion, the P/E tells us what the market thinks of a stock. It tells us whether the market likes or
dislikes the stock.

3. PEG (Price to future growth ratio!)

The market is usually more concerned about the future than the present, it is always looking for some way
to figure out what is going to happen in the companies future.

A ratio that will help you look at future earnings growth is called the PEG ratio.

we calculate the PEG by taking the P/E and dividing it by the projected growth in earnings.

PEG = (P/E) / (projected growth in earnings)

For example, a stock with a P/E of 30 and projected earning growth next year of 15% would have a PEG
of 30 / 15 = 2.

What does the “2” mean?

Technically speaking: The lower the PEG number, the less we pay for each unit of future earnings
growth. So even a stock with a high P/E, but high projected earning growth may be a good value.

So, to put it very simply, we are interested in stocks with a low PEG value.

Just for the sake of understanding, consider this situation, we have a stock with a low P/E. Since the stock
is has a low P/E, we start do wonder why the stock has a low P/E. Is it that the stock market does not like
the stock? Or is it that the stock market has overlooked a stock that is actually fundamentally very strong
and of good value?

To figure this out, we look at the PEG ratio. Now, if the PEG ratio is big (or close to the P/E ratio), we
can understand that this is probably because the “projected growth earnings” are low. This is the kind of
stock that the stock market thinks is of not much value.

On the other hand, if the PEG ratio is small (or very small as compared to the P/E ratio, then you know
that it is a valuable stock) you know that the projected earnings must be high. You know that this is the
kind of fundamentally strong stock that the market has overlooked for some reason.

we must understand that the PEG ratio relies on the projected % earnings. These earnings are not always
accurate and so the PEG ratio is not always accurate.

4. Debt to equity ratio:

The debt to equity ratio (D/E) is a financial ratio indicating the relative proportion of equity and debt used
to finance a company's assets. This ratio is also known as Risk, Gearing or Leverage. It is equal to total
debt divided by shareholders' equity. The two components are often taken from the firm's balance sheet or
statement of financial position (so-called book value), but the ratio may also be calculated using market
values for both, if the company's debt and equity are publicly traded, or using a combination of book
value for debt and market value for equity.

5. Dividend payout ratio: Dividend payout ratio is the fraction of net income a firm pays to its
stockholders in dividends.

Dividend payout ratio= Dividends/ Net Income for the same period

6.Quick ratio:

In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near
cash or quick assets to immediately extinguish or retire its current liabilities. Quick assets include those
current assets that presumably can be quickly converted to cash at close to their book values. Such items
are cash, cash equivalents such as marketable securities, and some accounts receivable. This ratio
indicates a firm's capacity to maintain operations as usual with current cash or near cash reserves in bad
periods. As such, this ratio implies a liquidation approach and does not recognize the revolving nature of
current assets and liabilities. The ratio compares a company's cash and short-term investments to the
financial liabilities the company is expected to incur within a year's time.

7. Current ratio:

The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its
debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed
as follows:

For example, if WXY Company's current assets are $50,000,000 and its current liabilities are
$40,000,000, then its current ratio would be $50,000,000 divided by $40,000,000, which equals 1.25. It
means that for every dollar the company owes it has $1.25 available in current assets. A current ratio of
assets to liabilities of 2:1 is usually considered to be acceptable (ie., your assets are twice your liabilities).

The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands.
Acceptable current ratios vary from industry to industry. If a company's current assets are in this range,
then it is generally considered to have good short-term financial strength. If current liabilities exceed
current assets (the current ratio is below 1), then the company may have problems meeting its short-term
obligations. If the current ratio is too high, then the company may not be efficiently using its current

Strengths of Fundamental Analysis

1. Long term trends

Fundamental analysis is good for long-term investments based on long-term trends, very long-term. The
ability to identify and predict long-term economic, demographic, technological or consumer.

2. Value spotting

Sound fundamental analysis will help identify companies that represent a good value. Some of the most
legendary investors think long-term and value. Graham and Dodd, Warren Buffett and John Neff are seen
as the champions of value investing. Fundamental analysis can help uncover companies with valuable
assets, a strong balance sheet, stable earnings, and staying power.

3. Business Acumen

One of the most obvious, but less tangible, rewards of fundamental analysis is the development of a
thorough understanding of the business. After such painstaking research and analysis, an investor will be
familiar with the key revenue and profit drivers behind a company. Earnings and earnings expectations
can be potent drivers of equity prices. Even some technicians will agree to that. A good understanding can
help investors avoid companies that are prone to shortfalls and identify those that continue to deliver. In
addition to understanding the business, fundamental analysis allows investors to develop an
understanding of the key value drivers and companies within an industry. A stock's price is heavily
influenced by its industry group. By studying these groups, investors can better position themselves to
identify opportunities that are high-risk (tech), low-risk (utilities), growth oriented (computer), value
driven (oil), non-cyclical (consumer staples), cyclical (transportation) or income-oriented (high yield).

4. Knowing Who's Who

Stocks move as a group. By understanding a company's business, investors can better position themselves
to categorize stocks within their relevant industry group. Business can change rapidly and with it the
revenue mix of a company. This happened too many of the pure Internet retailers, which were not really
Internet companies, but plain retailers. Knowing a company's business and being able to place it in a
group can make a huge difference in relative valuations.

Weakness of Fundamental Analysis

1. Time Constraints

Fundamental analysis may offer excellent insights, but it can be extraordinarily time-consuming. Time-
consuming models often produce valuations that are contradictory to the current price prevailing on Wall
Street. When this happens, the analyst basically claims that the whole street has got it wrong. This is not
to say that there are not misunderstood companies out there, but it is quite brash to imply that the market
price, and hence Wall Street, is wrong.

2. Industry/Company Specific

Valuation techniques vary depending on the industry group and specifics of each company. For this
reason, a different technique and model is required for different industries and different companies. This
can get quite time-consuming, which can limit the amount of research that can be performed. A
subscription-based model may work great for an Internet Service Provider (ISP), but is not likely to be the
best model to value an oil company.

3. Subjectivity

Fair value is based on assumptions. Any changes to growth or multiplier assumptions can greatly alter the
ultimate valuation. Fundamental analysts are generally aware of this and use sensitivity analysis to
present a base-case valuation, a best-case valuation and a worst-case valuation. However, even on a
worst-case valuation, most models are almost always bullish, the only question is how much so.

4. Analyst Bias

The majority of the information that goes into the analysis comes from the company itself. Companies
employ investor relations managers specifically to handle the analyst community and release information.
As Mark Twain said, "there are lies, damn lies, and statistics." When it comes to massaging the data or
spinning the announcement, CFOs and investor relations managers are professionals. Only buy-side
analysts tend to venture past the company statistics. Buy-side analysts work for mutual funds and money
managers. They read the reports written by the sell-side analysts who work for the big brokers (CIBC,
Merrill Lynch, Robertson Stephens, CS First Boston, Paine Weber, and DLJ to name a few). These
brokers are also involved in underwriting and investment banking for the companies. Even though there
are restrictions in place to prevent a conflict of interest, brokers have an ongoing relationship with the
company under analysis. When reading these reports, it is important to take into consideration any biases
a sell-side analyst may have. The buy-side analyst, on the other hand, is analyzing the company purely
from an investment standpoint for a portfolio manager. If there is a relationship with the company, it is
usually on different terms. In some cases this may be as a large shareholder.

5. Definition of Fair Value

When market valuations extend beyond historical norms, there is pressure to adjust growth and multiplier
assumptions to compensate. If Wall Street values a stock at 50 times earnings and the current assumption
is 30 times, the analyst would be pressured to revise this assumption higher. There is an old Wall Street
adage: the value of any asset (stock) is only what someone is willing to pay for it (current price). Just as
stock prices fluctuate, so too do growth and multiplier assumptions. Are we to believe Wall Street and the
stock price or the analyst and market assumptions?

It used to be that free cash flow or earnings were used with a multiplier to arrive at a fair value. In 1999,
the S&P 500 typically sold for 28 time’s free cash flow. However, because so many companies were and
are losing money, it has become popular to value a business as a multiple of its revenues. This would
seem to be OK, except that the multiple was higher than the PE of many stocks! Some companies were
considered bargains at 30 times revenues.


Fundamental analysis can be valuable, but it should be approached with caution. If you are reading
research written by a sell-side analyst, it is important to be familiar with the analyst behind the report. We
all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and
the research can still be of great value. Learn what the ratings mean and the track record of an analyst
before jumping off the deep end. Corporate statements and press releases offer good information, but they
should be read with a healthy degree of skepticism to separate the facts from the spin. Press releases don't
happen by accident; they are an important PR tool for companies. Investors should become skilled readers
to weed out the important information and ignore the hype.


Technical Analysis is the forecasting of future financial price movements based on an examination of past
price movements. Like weather forecasting, technical analysis does not result in absolute predictions
about the future. Instead, technical analysis can help investors anticipate what is "likely" to happen to
prices over time. Technical analysis uses a wide variety of charts that show over time.

Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where
the price is influenced by the forces of supply and demand. Price refers to any combination of the open,
high, low, or closes for a given security over a specific time frame. The time frame can be based on
intraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly
price data and last a few hours or many years. In addition, some technical analysts include volume or
open interest figures with their study of price action.

Basis of Technical Analysis

At the turn of the century, the Dow Theory laid the foundations for what was later to become modern
technical analysis. Dow Theory was not presented as one complete amalgamation, but rather pieced
together from the writings of Charles Dow over several years. Of the many theorems put forth by Dow,
three stand out:
1. Price Discounts Everything

This theorem is similar to the strong and semi-strong forms of market efficiency. Technical analysts
believe that the current price fully reflects all information. Because all information is already reflected in
the price, it represents the fair value, and should form the basis for analysis. After all, the market price
reflects the sum knowledge of all participants, including traders, investors, portfolio managers, buy-side
analysts, sell-side analysts, market strategist, technical analysts, fundamental analysts and many others. It
would be folly to disagree with the price set by such an impressive array of people with impeccable
credentials. Technical analysis utilizes the information captured by the price to interpret what the market
is saying with the purpose of forming a view on the future.

2. Prices Movements are not Totally Random

Most technicians agree that prices trend. However, most technicians also acknowledge that there are
periods when prices do not trend. If prices were always random, it would be extremely difficult to make
money using technical analysis. In his book, Schwager on Futures: Technical Analysis, Jack Schwager

"One way of viewing it is that markets may witness extended periods of random fluctuation, interspersed
with shorter periods of nonrandom behavior. The goal of the chartist is to identify those periods (i.e.
major trends)."

A technician believes that it is possible to identify a trend, invest or trade based on the trend and make
money as the trend unfolds. Because technical analysis can be applied to many different time frames, it is
possible to spot both short-term and long-term trends. The IBM chart illustrates Schwager's view on the
nature of the trend. The broad trend is up, but it is also interspersed with trading ranges. In between the
trading ranges is smaller uptrend within the larger uptrend. The uptrend is renewed when the stock breaks
above the trading range. A downtrend begins when the stock breaks below the low of the previous trading

3. "What" is More Important than "Why"

In his book, The Psychology of Technical Analysis, Tony Plummer paraphrases Oscar Wilde by stating,
"A technical analyst knows the price of everything, but the value of nothing". Technicians, as technical
analysts are called, are only concerned with two things:

1. What is the current price?

2. What is the history of the price movement?
The price is the end result of the battle between the forces of supply and demand for the company's stock.
The objective of analysis is to forecast the direction of the future price. By focusing on price and only
price, technical analysis represents a direct approach. Fundamentalists are concerned with why the price
is what it is. For technicians, the why portion of the equation is too broad and many times the
fundamental reasons given are highly suspect. Technicians believe it is best to concentrate on what and
never mind why. Why did the price go up? It is simple, more buyers (demand) than sellers (supply). After
all, the value of any asset is only what someone is willing to pay for it. Who needs to know why?

General Steps to Technical Evaluation

Many technicians employ a top-down approach that begins with broad-based macro analysis. The larger
parts are then broken down to base the final step on a more focused/micro perspective. Such an analysis
might involve three steps:
1. Broad market analysis through the major indices such as the S&P 500, SENSEX and NSE.
2. Sector analysis to identify the strongest and weakest groups within the broader market.
3. Individual stock analysis to identify the strongest and weakest stocks within select groups.

The beauty of technical analysis lies in its versatility. Because the principles of technical analysis are
universally applicable, each of the analysis steps above can be performed using the same theoretical
background. You don't need an economics degree to analyze a market index chart. You don't need to be a
CPA to analyze a stock chart. Charts are charts. It does not matter if the time frame is 2 days or 2 years. It
does not matter if it is a stock, market index or commodity. The technical principles of support,
resistance, trend, trading range and other aspects can be applied to any chart. While this may sound easy,
technical analysis is by no means easy. Success requires serious study, dedication and an open mind.

Chart Analysis

Technical analysis can be as complex or as simple as you want it.

Overall Trend: The first step is to identify the overall trend. This can be accomplished with trend lines,
moving averages or peak/trough analysis. As long as the price remains above its uptrend line, selected
moving averages or previous lows, the trend will be considered bullish.

Support: Areas of congestion or previous lows below the current price mark support levels. A break
below support would be considered bearish.

Resistance: Areas of congestion and previous highs above the current price mark the resistance levels. A
break above resistance would be considered bullish.

Momentum: Momentum is usually measured with an oscillator such as MACD. If MACD is above its 9-
day EMA (exponential moving average) or positive, then momentum will be considered bullish, or at
least improving.

Buying/Selling Pressure: For stocks and indices with volume figures available, an indicator that uses
volume is used to measure buying or selling pressure. When Money Flow is above zero, buying pressure
is dominant. Selling pressure is dominant when it is below zero.

Relative Strength: The price relative is a line formed by dividing the security by a benchmark. For stocks
it is usually the price of the stock divided by the S&P 500. The plot of this line over a period of time will
tell us if the stock is outperforming (rising) or under performing (falling) the major index.

The final step is to synthesize the above analysis to ascertain the following:

 Strength of the current trend.

 Maturity or stage of current trend.
 Reward to risk ratio of a new position.
 Potential entry levels for new long position.

Strengths of Technical Analysis

1. Focus on Price

If the objective is to predict the future price, then it makes sense to focus on price movements. Price
movements usually precede fundamental developments. By focusing on price action, technicians are
automatically focusing on the future. The market is thought of as a leading indicator and generally leads
the economy by 6 to 9 months. To keep pace with the market, it makes sense to look directly at the price
movements. More often than not, change is a subtle beast. Even though the market is prone to sudden
knee-jerk reactions, hints usually develop before significant moves. A technician will refer to periods of
accumulation as evidence of an impending advance and periods of distribution as evidence of an
impending decline.

2. Supply, Demand, and Price Action

Many technicians use the open, high, low and close when analyzing the price action of a security. There is
information to be gleaned from each bit of information. Separately, these will not be able to tell much.
However, taken together, the open, high, low and close reflect forces of supply and demand.

3. Support/Resistance

Simple chart analysis can help identify support and resistance levels. These are usually marked by periods
of congestion (trading range) where the prices move within a confined range for an extended period,
telling us that the forces of supply and demand are deadlocked. When prices move out of the trading
range, it signals that either supply or demand has started to get the upper hand. If prices move above the
upper band of the trading range, then demand is winning. If prices move below the lower band, then
supply is winning.

4. Pictorial Price History

Even if you are a tried and true fundamental analyst, a price chart can offer plenty of valuable
information. The price chart is an easy to read historical account of a security's price movement over a
period of time. Charts are much easier to read than a table of numbers. On most stock charts, volume bars
are displayed at the bottom. With this historical picture, it is easy to identify the following:

 Reactions prior to and after important events.

 Past and present volatility.
 Historical volume or trading levels.
 Relative strength of a stock versus the overall market.

5. Assist with Entry Point

Technical analysis can help with timing a proper entry point. Some analysts use fundamental analysis to
decide what to buy and technical analysis to decide when to buy. It is no secret that timing can play an
important role in performance. Technical analysis can help spot demand (support) and supply (resistance)
levels as well as breakouts. Simply waiting for a breakout above resistance or buying near support levels
can improve returns.

It is also important to know a stock's price history. If a stock you thought was great for the last 2 years has
traded flat for those two years, it would appear that Wall Street has a different opinion. If a stock has
already advanced significantly, it may be prudent to wait for a pullback. Or, if the stock is trending lower,
it might pay to wait for buying interest and a trend reversal.

Weakness of Technical Analysis

1. Analyst Bias

Just as with fundamental analysis, technical analysis is subjective and our personal biases can be reflected
in the analysis. It is important to be aware of these biases when analyzing a chart. If the analyst is a
perpetual bull, then a bullish bias will overshadow the analysis. On the other hand, if the analyst is a
disgruntled eternal bear, then the analysis will probably have a bearish tilt.

2. Open to Interpretation

Furthering the bias argument is the fact that technical analysis is open to interpretation. Even though there
are standards, many times two technicians will look at the same chart and paint two different scenarios or
see different patterns. Both will be able to come up with logical support and resistance levels as well as
key breaks to justify their position. While this can be frustrating, it should be pointed out that technical
analysis is more like an art than a science, somewhat like economics. Is the cup half-empty or half-full? It
is in the eye of the beholder.

3. Too Late

Technical analysis has been criticized for being too late. By the time the trend is identified, a substantial
portion of the move has already taken place. After such a large move, the reward to risk ratio is not great.
Lateness is a particular criticism of Dow Theory.

4. Always Another Level

Even after a new trend has been identified, there is always another "important" level close at hand.
Technicians have been accused of sitting on the fence and never taking an unqualified stance. Even if
they are bullish, there is always some indicator or some level that will qualify their opinion.

5. Trader's Remorse

Not all technical signals and patterns work. When you begin to study technical analysis, you will come
across an array of patterns and indicators with rules to match. For instance: A sell signal is given when
the neckline of a head and shoulders pattern is broken. Even though this is a rule, it is not steadfast and
can be subject to other factors such as volume and momentum. In that same vein, what works for one
particular stock may not work for another. A 50-day moving average may work great to identify support
and resistance for IBM, but a 70-day moving average may work better for Yahoo. Even though many
principles of technical analysis are universal, each security will have its own idiosyncrasies.


Technical analysts consider the market to be 80% psychological and 20% logical. Fundamental analysts
consider the market to be 20% psychological and 80% logical. Psychological or logical may be open for
debate, but there is no questioning the current price of a security. After all, it is available for all to see and
nobody doubts its legitimacy. The price set by the market reflects the sum knowledge of all participants,
and we are not dealing with lightweights here. These participants have considered (discounted)
everything under the sun and settled on a price to buy or sell. These are the forces of supply and demand
at work. By examining price action to determine which force is prevailing, technical analysis focuses
directly on the bottom line: What is the price? Where has it been? Where is it going?

Even though there are some universal principles and rules that can be applied, it must be remembered that
technical analysis is more an art form than a science. As an art form, it is subject to interpretation.
However, it is also flexible in its approach and each investor should use only that which suits his or her
style. Developing a style takes time, effort and dedication, but rewards can be significant.

Indian Economy Overview

India's economy is on the fulcrum of an ever increasing growth curve. With positive indicators such as a
stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a
rapidly expanding FDI inflows, India has emerged as the second fastest growing major economy in the

The economy has been growing at an average growth rate of 8.8 per cent in the last four fiscal years
(2003-04 to 2006-07), with the 2006-07 growth rate of 9.6 per cent being the highest in the last 18 years.
Significantly, the industrial and service sectors have been contributing a major part of this growth,
suggesting the structural transformation underway in the Indian economy.

For example, industrial and services sectors have logged in a 10.63 and 11.18 per cent growth rate in
2006-07 respectively, against 8.02 per and 11.01 cent in 2005-06. Similarly, manufacturing grew by 8.98
per cent and 12 per cent in 2005-06 and 2006-07 and transport, storage and communication recorded a
growth of 14.65 and per cent 16.64 per cent, respectively.

Another significant feature of the growth process has been the consistently increasing savings and
investment rate. While the gross saving rate as a proportion of GDP has increased from 23.5 per cent in
2001-02 to 34.8 per cent in 2006-07, the investment rate-reflected as the gross capital formation as a
proportion of GDP-has increased from 22.8 per cent in 2001-02 to 35.9 per cent in 2006-07.

During April-December 2007-08, gross fixed capital formation has accelerated to 32.6 per cent of GDP,
from 30.5 per cent of GDP in the corresponding period in 2006-07.

The 2007-08 Fiscal Year

The growth process continues apace. On the back of 9.6 per cent growth April–December 2006–07, GDP
grew by 8.9 per cent during April–December 2007–08.

• According to the third advance estimates of crop production by the agriculture ministry, food
grain output grew by 4.6 per cent in 2007–08, nearly four times the average annual growth of 1.2
per cent between 1990 and 2007.
• Overall industrial production grew by 8.3 per cent during 2007–08. Significantly, manufacturing
sector grew at the rate of 8.7 per cent.
• Services grew by 10.4 per cent in April–December 2007, on the back of 11.4 per cent during the
corresponding period in 2006–07.
• Manufacturing grew by 8.7 per cent during April–February 2007–08, on the back of 12.5 per cent
growth during 2006–07.
• Core infrastructure sector continued its growth rate recording 5.6 per cent growth in 2007-08.
• While exports grew by 23.02 per cent during 2007–08, imports increased by 27.01 per cent in the
same period.
• Money Supply (M3) has grown by a robust 20.7 per cent growth (year-on-year) as of end-March
2008, compared to 21.5 per cent last year.
• Fiscal and revenue deficit decreased by 13.5 per cent and 33.3 per cent, respectively, during
April–February 2007–08 over corresponding period last year.
With such a robust growth rates, the revised estimates of the Central Statistical Organisation (CSO)
expects the economy to grow by 9 per cent in 2007–08, higher than the earlier projection of 8.7 per cent.
This is in tune with the high average real GDP growth of 8.7 per cent per annum during the five-year
period, 2003–04 to 2007–08. Further, this would the third consecutive year, when the economy has grown
by 9 per cent and above.

Per Capita Income

Along this significant acceleration in the growth rate of Indian economy, India's per capita income has
increased at a rapid pace, exceeding an earlier forecast made by Goldman Sachs BRIC report which
estimated India's per capita to touch US$ 800 by 2010 and US$ 1149 by 2015.

Per capita income has increased from US$ 460 in 2000-01 to almost double to US$ 797 by the end of
2006-07. In 2007-08, India's per capita income is estimated to be over US$ 825.07, according to the
advance estimates of the Central Statistical Organisation (CSO). Further, India's per capita income is
expected to increase to US$ 2000 by 2016-17 and US$ 4000 by 2025. This growth rate will,
consequently, propel India into the middle-income category.

Some Highlights

Reflecting the favourable prospect of growth rate of Indian economy, the orders received Indian
companies have increased by a whopping 68.6 per cent to US$ 32.48 billion during January-October 2007
compared to US$ 19.26 billion in the same period last year.

• India is among the five countries sharing 50 per cent of the world production (or GDP).
• FDI inflows have jumped by almost three times to US$ 15.7 billion in 2006-07 as against US$
5.5 billion in 2005-06.
• The aggregate income of the top 500 companies rose by 28.4 per cent in 2006-07 to total US$
469.51 billion.
• India's National Stock Exchange (NSE) ranks first in the stock futures and second in index futures
trade in the world.
• Twenty Indian firms have made it to the list of Boston Consulting Group's 100 New Global
Challenger Giants list.
• According to a study by the McKinsey Global Institute (MGI), India's consumer market will be
the world's fifth largest (from twelfth) in the world by 2025.
• The number of companies incorporated has increased at an annual average of 55,000 companies
in the last two years to 865,000, from 712,000 companies at the end of 2005.
• Four Indians and seven Indian microfinance companies make it to the Forbes list of Top10
world's wealthiest CEOs World's Top 50 Microfinance Institutions, respectively.
• India has the most number of private equity (PE) funds operating amongst the BRIC markets.
• Mumbai has been ranked tenth among the world's biggest centres of commerce in terms of the
financial flow volumes by a survey compiled by MasterCard Worldwide.

Another significant aspect has been the broad-based nature of the growth process. While new economy
industries like Information Technology and biotechnology have been growing around 30 per cent,
significantly old economy sectors like steel have also been major contributors in the Indian growth
process. For example, India has moved up two places to become the fifth largest steel producer in the

And with its manufacturing and service sectors on a searing growth path, Lehman Brothers Asia estimates
India to grow by as much as 10 per cent every year in the next decade
Economic Survey highlights 2007-08

A report on the state of India's economy with suggested policy prescriptions in areas ranging from
government finances to external trade was tabled in the Parliament, by Finance Minister P Chidambaram.

The Economic Survey for 2007-08, authored by the Chief Economic Advisor Arvind Virmani, comes

he backdrop of India's growth slowing down this fiscal after posting a 9.6 per cent expansion in 2006-07
and fears of US recession.

The Economic Survey has:

• Set a target of 9 per cent GDP growth during the 11th Plan (2007-2012)
• Projected that inflation would stand at 4.4 per cent during the current fiscal
• Forecast a lower agriculture growth at 2.6 per cent in 2007-08 as against 3.8 per cent in 2006-07,
and a slow down in manufacturing sector growth at 9.4 per cent in the current fiscal from 12 per
cent in FY07.

Other highlights of the Economic Survey:

• Current inflation level is positive

• Inflation projected at 4.4 per cent in 2007-08; Inflation led by food items
• Rupee up 9.8 per cent vs. Dollar, since April '07
• Economy slows down to 8.7 per cent in 2007-08, compared to 9.6 per cent in previous fiscal
• Government projects lower agriculture growth at 2.6 per cent in 2007-08 from 3.8 per cent in
• Manufacturing sector to grow at 9.4 per cent in current financial year, lower from 12 per cent in
• Government sets target of 9 per cent GDP growth during 11th Five Year Plan (2007-2012)
• Outlook for exports in 2008-09 may not be as bright due to global slowdown and exchange rate
• Foreign reserves at US$ 290.8, up by US$ 91.6 billion from a year ago
• Total foodgrains production marginally high at 219.3 million tons in 2007-08 from 217.3 million
tons last year
• The agriculture, forestry and fishing sector is estimated to grow at 2.6 per cent during 2007-08, as
against the previous year's growth of 3.8 per cent
• Talent shortage leading to high attrition and rising wages, contributing to cost-push inflation
• The Economic Survey favours liberalising debt and currency markets; removal of constraints on
agriculture and urban land supply
• Export growth at 20.3 per cent in 2007
• Number of telephone connections at 272.88 million as on December 31, 2007; tele-density at 23.9
per cent
• The government has set an ambitious target of providing 200 million telephone connections in the
rural areas by the end of 2012
• The rate of growth of per capita income has sharply climbed to 7.2 per cent p.a. - implying that
average income can virtually double in a decade
• India April-Nov '07 FDI at US$ 11.14 billion; Raise FDI in insurance, retail
• Food procurement, distribution spend up in FY07-08
• Greater debt and equity issues in primary market
India: The Growth Outlook

Some slowdown in the pace of expansion of the US economy is likely and this may lead
to slower growth in developing economies as a result of lower rate of export
expansion. This is however likely to be offset by continued growth in domestic
markets and the relatively mild nature of the slowdown. The Indian economy is
much less dependent on the external markets than the Chinese economy, for
example. Thus, while some export demand compression is likely to put an
additional burden on our exporters of goods and services, it is unlikely to be large
enough to significantly depress growth. However, the flip side to this is that the
pressure on the prices of oil, food and other raw materials is likely to continue,
making inflation management in 2008/09 quite challenging.

Growth Estimate for 2007/08

It is our assessment that the rate of growth of GDP in 2007/08 would be
8.9%, marginally lower than our previous estimate in July 2007. The main
difference stems from lower than expected expansion in manufacturing output and
lower growth in the output of energy utilities, which has been partially offset by
better than expected expansion in the farm sector. The estimated rate of expansion
by broad industry of origin for 2007/08 is given in Table 2.
The Outlook had stated that the primary downside risk to our economic
performance in 2007-08 derived from uncertainties on account of the southwest
monsoons. As things turned out, the monsoons were good and agricultural growth
is better than what was anticipated in the Outlook. The current estimates are based
on a reasonably good rabi crop and an absence of serious weather anomalies.
Industrial growth on the other hand, which was predicated on a benign external
environment, is likely to be slower than what was assumed in the Outlook. It is
still possible that output growth in manufacturing may show a stronger recovery
than what is assumed by us. However, on the whole we believe that in the final
analysis the rate of overall expansion of the economy would be close to 8.9% for
the fiscal year ending March 2008, with per capita income rising by 7.2% in real
terms – the third successive year of above 7% real increase in per capita GDP. At
market exchange rates the Indian economy would have a size of nearly US$ 1.2trillion which translates
into per capita incomes of over US$ 1,000.


A banker or bank is a financial institution whose primary activity is to act as a payment agent for
customers, and to borrow, lend, and, in all modern banking systems, create money.

The first modern bank was founded in Italy in Genoa in 1406, its name was Banco di San Giorgio (Bank
of St. George).

Many other financial activities were added over time. For example banks are important players in
financial markets and offer financial services such as investment funds. In some countries such as
Germany, banks are the primary owners of industrial corporations while in other countries such as the
United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the
nexus of cross share holding entity known as zaibatsu. In France "Bancassurance" is highly present, as
most banks offer insurance services (and now real estate services) to their clients.

The definition of a bank varies from country to country.

Under English common law, a bank is defined as a person who carries on the business of banking, which
is specified as:

• conducting current accounts for his customers

• paying cheques drawn on him, and
• collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in
relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the
term banker: banker includes a body of persons, whether incorporated or not, who carry on the business
of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional,
because it ensures that the legal basis for bank transactions such as cheques do not depend on how the
bank is organised or regulated.

The business of banking is in many English common law countries not defined by statute but by common
law, the definition above. In other English common law jurisdictions there are statutory definitions of the
business of banking or banking business. When looking at these definitions it is important to keep in mind
that they are defining the business of banking for the purposes of the legislation, and not necessarily in
general. In particular, most of the definitions are from legislation that has the purposes of entry regulating
and supervising banks rather than regulating the actual business of banking. However, in many cases the
statutory definition closely mirrors the common law one. Examples of statutory definitions:

• "banking business" means the business of receiving money on current or deposit account, paying
and collecting cheques drawn by or paid in by customers, the making of advances to customers,
and includes such other business as the Authority may prescribe for the purposes of this Act;
(Banking Act (Singapore), Section 2, Interpretation).

• "banking business" means the business of either or both of the following:

1. receiving from the general public money on current, deposit, savings or other similar account
repayable on demand or within less than [3 months] ... or with a period of call or notice of less
than that period;
2. paying or collecting cheques drawn by or paid in by customers[2]

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and
internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This
has lead legal theorists to suggest that the cheque based definition should be broadened to include
financial institutions that conduct current accounts for customers and enable customers to pay and be paid
by third parties, even if they do not pay and collect cheques

Wider commercial role

However the commercial role of banks is wider than banking, and includes:

• issue of banknotes (promissory notes issued by a banker and payable to bearer on demand)
• processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means
• issuing bank drafts and bank cheques
• accepting money on term deposit
• lending money by way of overdraft, installment loan or otherwise
• providing documentary and standby letters of credit, guarantees, performance bonds, securities
underwriting commitments and other forms of off balance sheet exposures
• safekeeping of documents and other items in safe deposit boxes
• currency exchange
• sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar
financial products as a 'financial supermarket'

Economic functions

The economic functions of banks include:

1. issue of money, in the form of banknotes and current accounts subject to cheque or payment at
the customer's order. These claims on banks can act as money because they are negotiable and/or
repayable on demand, and hence valued at par and effectively transferable by mere delivery in the
case of banknotes, or by drawing a cheque, delivering it to the payee to bank or cash.
2. netting and settlement of payments -- banks act both as collection agent and paying agents for
customers, and participate in inter-bank clearing and settlement systems to collect, present, be
presented with, and pay payment instruments. This enables banks to economise on reserves held
for settlement of payments, since inward and outward payments offset each other. It also enables
payment flows between geographical areas to offset, reducing the cost of settling payments
between geographical areas.
3. credit intermediation -- banks borrow and lend back-to-back on their own account as middle men
4. credit quality improvement -- banks lend money to ordinary commercial and personal borrowers
(ordinary credit quality), but are high quality borrowers. The improvement comes from
diversification of the bank's assets and the bank's own capital which provides a buffer to absorb
losses without defaulting on its own obligations. However, since banknotes and deposits are
generally unsecured, if the bank gets into difficulty and pledges assets as security to try to get the
funding it needs to continue to operate, this puts the note holders and depositors in an
economically subordinated position.
5. maturity transformation -- banks borrow more on demand debt and short term debt, but provide
more long term loans. Bank can do this because they can aggregate issues (e.g. accepting deposits
and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes),
maintain reserves of cash, invest in marketable securities that can be readily converted to cash if
needed, and raise replacement funding as needed from various sources (e.g. wholesale cash
markets and securities markets) because they have a high and more well known credit quality
than most other borrowers.

Law of banking

Banking law is based on a contractual analysis of the relationship between the bank and the customer.
The definition of bank is given above, and the definition of customer is any person for whom the bank
agrees to conduct an account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the customer, when the
account is in credit, the bank owes the balance to the customer, when the account is overdrawn,
the customer owes the balance to the bank.
2. The bank engages to pay the customer's cheques up to the amount standing to the credit of the
customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the customer, e.g. a
cheque drawn by the customer.
4. The bank engages to promptly collect the cheques deposited to the customer's account as the
customer's agent, and to credit the proceeds to the customer's account.
5. The bank has a right to combine the customer's accounts, since each account is just an aspect of
the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent that the
customer is indebted to the bank.
7. The bank must not disclose the details of the transactions going through the customer's account
unless the customer consents, there is a public duty to disclose, the bank's interests require it, or
under compulsion of law.
8. The bank must not close a customer's account without reasonable notice to the customer, because
cheques are outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the customer and the
bank. The statutes and regulations in force in the jurisdiction may also modify the above terms and/or
create new rights, obligations or limitations relevant to the bank-customer relationship.

Entry regulation

Currently in most jurisdictions commercial banks are regulated by government entities and require a
special bank licence 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, however 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.
government owned bank (a central bank). Central banks also typically have a monopoly on the business
of issuing banknotes. However, in some countries this is not the case, e.g. in the UK the Financial
Services Authority licences banks and some commercial banks, such as the Bank of Scotland, issue their
own banknotes in competition with the Bank of England, the UK government's central bank.

Some types of entity may be partly or wholly exempt from bank licence requirements and are regulated
by separate regulators, e.g. building societies and credit unions.

The requirements for the issue of a bank licence vary between jurisdictions but typically include:

1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.

Politics and history

Banks have influenced economies and politics for centuries. Historically, the primary purpose of a bank
was to provide loans to trading companies. Banks provided funds to allow businesses to purchase
inventory, and collected those funds back with interest when the goods were sold. For centuries, the
banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense
activity, with banks carefully analysing the financial condition of their business clients to determine the
level of risk in each loan transaction. Banking services have expanded to include services directed at
individuals, and risk in these much smaller transactions are pooled.

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by
Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth.
However, there are traces of banking activity even in ancient times.
In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up
their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from
which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so
much invest money as merely convert the foreign currency into the only legal tender in Rome- that of the
Imperial Mint.

Banking channels

Banks offer many different channels to access their banking and other services:

• A branch, banking centre or financial centre is a retail location where a bank or financial
institution offers a wide array of face-to-face service to its customers
• ATM is a computerised telecommunications device that provides a financial institution's
customers a method of financial transactions in a public space without the need for a human clerk
or bank teller. Most banks now have more ATMs than branches, and ATMs are providing a wider
range of services to a wider range of users. For example in Hong Kong, most ATMs enable
anyone to deposit cash to any customer of the bank's account by feeding in the notes and entering
the account number to be credited. Also, most ATMs enable card holders from other banks to get
their account balance and withdraw cash, even if the card is issued by a foreign bank.
• Mail is part of the postal system which itself is a system wherein written documents typically
enclosed in envelopes, and also small packages containing other matter, are delivered to
destinations around the world. This can be used to deposit cheques and to send orders to the bank
to pay money to third parties. Banks also normally use mail to deliver periodic account
statements to customers.
• Telephone banking is a service provided by a financial institution which allows its customers to
perform transactions over the telephone. This normally includes bill payments for bills from
major billers (e.g. for electricity).
• Online banking is a term used for performing transactions, payments etc. over the Internet
through a bank, credit union or building society's secure website

Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses;
business banking, providing services to mid-market business; corporate banking, directed at large
business entities; private banking, providing wealth management services to High Net Worth Individuals
and families; and investment banking, relating to activities on the financial markets. Most banks are
profit-making, private enterprises. However, some are owned by government, or are non-profits.

• Central banks are normally government owned banks, often charged with quasi-regulatory
responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They
generally provide liquidity to the banking system and act as Lender of last resort in event of a
• Commercial bank: the term used for a normal bank to distinguish it from an investment bank.
After the Great Depression, the U.S. Congress required that banks only engage in banking
activities, whereas investment banks were limited to capital market activities. Since the two no
longer have to be under separate ownership, some use the term "commercial bank" to refer to a
bank or a division of a bank that mostly deals with deposits and loans from corporations or large
• Community Banks: locally operated financial institutions that empower employees to make local
decisions to serve their customers and the partners
• Community development banks: regulated banks that provide financial services and credit to
under-served markets or populations.
• Postal savings banks: savings banks associated with national postal systems.
• Private banks: manage the assets of high net worth individuals.
• Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore
banks are essentially private banks.
• Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th
century. Their original objective was to provide easily accessible savings products to all strata of
the population. In some countries, savings banks were created on public initiative, while in others
socially committed individuals created foundations to put in place the necessary infrastructure.
Nowadays, European savings banks have kept their focus on retail banking: payments, savings
products, credits and insurances for individuals or small and medium-sized enterprises. Apart
from this retail focus, they also differ from commercial banks by their broadly decentralised
distribution network, providing local and regional outreach and by their socially responsible
approach to business and society.
• Building societies and Landesbanks: conduct retail banking.
• Ethical banks: banks that prioritize the transparency of all operations and make only what they
consider to be socially-responsible investments.
• Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

• Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own
accounts, make markets, and advise corporations on capital markets activities such as mergers
and acquisitions.
• Merchant banks were traditionally banks which engaged in trade financing. The modern
definition, however, refers to banks which provide capital to firms in the form of shares rather
than loans. Unlike venture capital firms, they tend not to invest in new companies.

Both combined

• Universal banks, more commonly known as a financial services company, engage in several of
these activities. For example, First Bank (a very large bank) is involved in commercial and retail
lending, and its subsidiaries in tax-havens offer offshore banking services to customers in other
countries. Other large financial institutions are similarly diversified and engage in multiple
activities. In Europe and Asia, big banks are very diversified groups that, among other services,
also distribute insurance, hence the term bancassurance is the term used to describe the sale of
insurance products in a bank. The word is a combination of "banque or bank" and "assurance"
signifying that both banking and insurance are provided by the same corporate entity.

Other types of banks

Islamic banking

• Islamic banks adhere to the concepts of Islamic law. Islamic banking revolves around several
well established concepts which are based on Islamic canons. Since the concept of interest is
forbidden in Islam, all banking activities must avoid interest. Instead of interest, the bank earns
profit (mark-up) and fees on financing facilities that it extends to the customers.

Banks in the economy

Size of global banking industry

Worldwide assets of the largest 1,000 banks grew 16.3% in 2006/2007 to reach a record $74.2 trillion.
This follows a 5.4% increase in the previous year. EU banks held the largest share, 53%, up from 43% a
decade earlier. The growth in Europe’s share was mostly at the expense of Japanese banks whose share
more than halved during this period from 21% to 10%. The share of US banks remained relatively stable
at around 14%. Most of the remainder was from other Asian and European countries.
The US had by far the most banks (7,540 at end-2005) and branches (75,000) in the world. The large
number of banks in the US is an indicator of its geography and regulatory structure, resulting in a large
number of small to medium sized institutions in its banking system. Japan had 129 banks and 12,000
branches. In 2004, Germany, France, and Italy had more than 30,000 branches each—more than double
the 15,000 branches in the UK.

Top ten banking groups in the world ranked by shareholder equity ($m)

The 2008 bank atlas was compiled by Moody's from commercial banks’ annual reports and financial
statements.[8] Shareholder equity is the assessment of a bank's value in its own markets currency valuation
at a given point of time relative to other currencies. Figures are in U.S. dollars

Rank Company Shareholder equity ($m) -

1 Bank of America 135271 $mln -

2 Citigroup 119783 $mln -

3 JP Morgan 115790 $mln -

4 HSBC 114928 $mln -

5 Mitsubishi UFJ Financial Group 81,940 $mln -

6 Royal Bank of Scotland Group 78,730 $mln -

7 ING Group 78,088 $mln -

8 Crédit Agricole 77,462 $mln -

9 Wachovia Corporation 69,716 $mln -

10 BNP Paribas 67,378 $mln -

Bank crisis

Banks are susceptible to many forms of risk which have triggered occasional systemic crises. Risks
include liquidity risk (the risk that many depositors will request withdrawals beyond available funds),
credit risk (the risk that those who owe money to the bank will not repay), and interest rate risk (the risk
that the bank will become unprofitable if rising interest rates force it to pay relatively more on its deposits
than it receives on its loans), among others.

Banking crises have developed many times throughout history when one or more risks materialize for a
banking sector as a whole. Prominent examples include the U.S. Savings and Loan crisis in 1980s and
early 1990s [9] the Japanese banking crisis during the 1990s, the bank run that occurred during the Great
Depression, and the recent liquidation by the central Bank of Nigeria, where about 25 banks were
liquidated.[citation needed]

Challenges within the banking industry

The banking industry is a highly regulated industry with detailed and focused regulators. All banks with
FDIC-insured deposits have the FDIC as a regulator; however, for examinations, the Federal Reserve is
the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency
(“OCC”) is the primary federal regulator for national banks; and the Office of Thrift Supervision, or OTS,
is the primary federal regulator for thrifts. State non-member banks are examined by the state agencies as
well as the FDIC. National banks have one primary regulator—the OCC.

Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere.

The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal
interagency body empowered to prescribe uniform principles, standards, and report forms for the federal
examination of financial institutions. Although the FFIEC has resulted in a greater degree of regulatory
consistency between the agencies, the rules and regulations are constantly changing.

In addition to changing regulations, changes in the industry have led to consolidations within the Federal
Reserve, FDIC, OTS and OCC. Offices have been closed, supervisory regions have been merged, staff
levels have been reduced and budgets have been cut. The remaining regulators face an increased burden
with increased workload and more banks per regulator. While banks struggle to keep up with the changes
in the regulatory environment, regulators struggle to manage their workload and effectively regulate their
banks. The impact of these changes is that banks are receiving less hands-on assessment by the regulators,
less time spent with each institution, and the potential for more problems slipping through the cracks,
potentially resulting in an overall increase in bank failures across the United States.

The changing economic environment has a significant impact on banks and thrifts as they struggle to
effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits
and the general market changes, industry trends and economic fluctuations. It has been a challenge for
banks to effectively set their growth strategies with the recent economic market. A rising interest rate
environment may seem to help financial institutions, but the effect of the changes on consumers and
businesses is not predictable and the challenge remains for banks to grow and effectively manage the
spread to generate a return to their shareholders.

The management of the banks’ asset portfolios also remains a challenge in today’s economic
environment. Loans are a bank’s primary asset category and when loan quality becomes suspect, the
foundation of a bank is shaken to the core. While always an issue for banks, declining asset quality has
become a big problem for financial institutions. There are several reasons for this, one of which is the lax
attitude some banks have adopted because of the years of “good times.” The potential for this is
exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of
management. Problems are more likely to go undetected, resulting in a significant impact on the bank
when they are recognized. In addition, banks, like any business, struggle to cut costs and have
consequently eliminated certain expenses, such as adequate employee training programs.

Banks also face a host of other challenges such as aging ownership groups. Across the country, many
banks’ management teams and board of directors are aging. Banks also face ongoing pressure by
shareholders, both public and private, to achieve earnings and growth projections. Regulators place added
pressure on banks to manage the various categories of risk. Banking is also an extremely competitive
industry. Competing in the financial services industry has become tougher with the entrance of such
players as insurance agencies, credit unions, check cashing services, credit card companies, etc.

As a reaction, banks have developed their activities in financial instruments, through financial market
operations such as brokerage and trading and become big players in such activities.


A bank generates a profit from the differential between the level of interest it pays for deposits and other
sources of funds, and the level of interest it charges in its lending activities. This difference is referred to
as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending
activities has been cyclical and dependent on the needs and strengths of loan customers. In recent history,
investors have demanded a more stable revenue stream and banks have therefore placed more emphasis
on transaction fees, primarily loan fees but also including service charges on an array of deposit activities
and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers,
etc.). Lending activities, however, still provide the bulk of a commercial bank's income.

In the past 10 years American banks have taken many measures to ensure that they remain profitable
while responding to increasingly changing market conditions. First, this includes the Gramm-Leach-
Bliley Act, which allows banks again to merge with investment and insurance houses. Merging banking,
investment, and insurance functions allows traditional banks to respond to increasing consumer demands
for "one-stop shopping" by enabling cross-selling of products (which, the banks hope, will also increase
profitability). Second, they have expanded the use of risk-based pricing from business lending to
consumer lending, which means charging higher interest rates to those customers that are considered to be
a higher credit risk and thus increased chance of default on loans. This helps to offset the losses from bad
loans, lowers the price of loans to those who have better credit histories, and offers credit products to high
risk customers who would otherwise been denied credit. Third, they have sought to increase the methods
of payment processing available to the general public and business clients. These products include debit
cards, pre-paid cards, smart-cards, and credit cards. These products make it easier for consumers to
conveniently make transactions and smooth their consumption over time (in some countries with under-
developed financial systems, it is still common to deal strictly in cash, including carrying suitcases filled
with cash to purchase a home). However, with convenience there is also increased risk that consumers
will mismanage their financial resources and accumulate excessive debt. Banks make money from card
products through interest payments and fees charged to consumers and transaction fees to companies that
accept the cards.

The banking industry's main obstacles to increasing profits are existing regulatory burdens, new
government regulation, and increasing competition from non-traditional financial institutions.

Banking in India
Structure of the organized banking sector in India. Numbers of banks are in brackets.

Banking in India originated in the first decade of 18th century with The General Bank of India coming
into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunctional.
The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal"
in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their
Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly
due to the trade of the British Empire, and due to which banking activity took roots there and prospered.
The first fully Indian owned bank was the Allahabad Bank, which was established in 1865.
By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in
1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private
ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian
banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and
given broader powers.

Early history

At the end of late-18th century, there were hardly any banks in India in the modern sense of the term. At
the time of the American Civil War, a void was created as the supply of cotton to Lancashire stopped
from the Americas. Some banks were opened at that time which functioned as entities to finance industry,
including speculative trades in cotton. With large exposure to speculative ventures, most of the banks
opened in India during that period could not survive and failed. The depositors lost money and lost
interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of
Europeans for next several decades until the beginning of the 20th century.

At the beginning of the 20th century, Indian economy was passing through a relative period of stability.
Around five decades have elapsed since the India's First war of Independence, and the social, industrial
and other infrastructure have developed. At that time there were very small banks operated by Indians,
and most of them were owned and operated by particular communities. The banking in India was
controlled and dominated by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal,
and the Bank of Madras - which later on merged to form the Imperial Bank of India, and Imperial Bank of
India, upon India's independence, was renamed the State Bank of India. There were also some exchange
banks, as also a number of Indian joint stock banks. All these banks operated in different segments of the
economy. The presidency banks were like the central banks and discharged most of the functions of
central banks. They were established under charters from the British East India Company. The exchange
banks, mostly owned by the Europeans, concentrated on financing of foreign trade. Indian joint stock
banks were generally under capitalized and lacked the experience and maturity to compete with the
presidency banks, and the exchange banks. There was potential for many new banks as the economy was
growing. Lord Curzon had observed then in the context of Indian banking: "In respect of banking it seems
we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads
into separate and cumbersome compartments."

Under these circumstances, many Indians came forward to set up banks, and many banks were set up at
that time, a number of which have survived to the present such as Bank of India and Corporation Bank,
Indian Bank, Bank of Baroda, and Canara Bank.

During the Wars

The period during the First World War (1914-1918) through the end of the Second World War (1939-
1945), and two years thereafter until the independence of India were challenging for the Indian banking.
The years of the First World War were turbulent, and it took toll of many banks which simply collapsed
despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94
banks in India failed during the years 1913 to 1918 as indicated in the following table:

Number of
Authorised capital Paid-up Capital
Years banks
(Rs. Lakhs) (Rs. Lakhs)
that failed

1913 12 274 35

1914 42 710 109

1915 11 56 5
1916 13 231 4

1917 9 76 25

1918 7 209 1


The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal, and
banking activities had remained paralyzed for months. India's independence marked the end of a regime
of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active
role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in
1948 envisaged a mixed economy. This resulted into greater involvement of the state in different
segments of the economy including banking and finance. The major steps to regulate banking included:

• In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it
became an institution owned by the Government of India.
• In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India
(RBI) "to regulate, control, and inspect the banks in India."
• The Banking Regulation Act also provided that no new bank or branch of an existing bank may
be opened without a licence from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in India except the State Bank of India,
continued to be owned and operated by private persons. This changed with the nationalization of major
banks in India on 19th July, 1969.


By the 1960s, the Indian banking industry has become an important tool to facilitate the development of
the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about
the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India
expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper
entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm.
Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14
largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national
leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue
of the ordinance, the Parliament passed the Banking Companies (Acquition and Transfer of Undertaking)
Bill, and it received the presidential approval on 9th August, 1969.

A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the
nationalisation was to give the government more control of credit delivery. With the second dose of
nationalisation, the GOI controlled around 91% of the banking business of India.

After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average
growth rate of the Indian economy.


In the early 1990s the then Narsimha Rao government embarked on a policy of liberalisation and gave
licences to a small number of private banks, which came to be known as New Generation tech-savvy
banks, which included banks such as Global Trust Bank (the first of such new generation banks to be set
up)which later amalgamated with Oriental Bank of Commerce,UTI Bank(now re-named as Axis Bank),
ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India,
kickstarted the banking sector in India, which has seen rapid growth with strong contribution from all the
three sectors of banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been setup with the proposed relaxation in the norms for
Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could
exceed the present cap of 10%,at present it has gone up to 49% with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-
6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern
outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India.
People not just demanded more from their banks but also received more.

Current situation

Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-
even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms
of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and
transparent balance sheets relative to other banks in comparable economies in its region. The Reserve
Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of
the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has
mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in its
services sector-the demand for banking services, especially retail banking, mortgages and investment
services are expected to be strong. One may also expect M&As, takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak
Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold
more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding
5% in the private sector banks would need to be vetted by them.

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the
Government of India holding a stake), 29 private banks (these do not have government stake; they may be
publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of
over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the
public sector banks hold over 75 percent of total assets of the banking industry, with the private and
foreign banks holding 18.2% and 6.5% respectively.

Indian Banking Sector: Overview

 222 commercial banks in India (of which 133 RRBs)

 Operating with 68,681 branches (March 06)
 Nearly 70% of branches are in rural/semi-urban areas
 Bulk of commercial bank finance is for short-term working capital needs of industry, trade,
agriculture & personal segment. Foray into project finance also.
 Banks are supporting growth in the economy by financing productive sectors
 CD Ratio increased to 72.5% against benchmark 60%. Incremental CD Ratio of over 100%
reflecting the strong underlying credit momentum.

Vibrant Indian Banking Sector

 Size of the banking sector has gone up over six times from Rs.5,984 bn in 1995 to over
RS.36,105 bn in 2006

 Due to growing competition, market share of various groups of banks has changed, though public
sector banks still dominate the market.

All Scheduled Commercial Banks

Changing Market Share of Banks (%)

Public Sector OSCB Foreign Banks

Deposits 1995 85.51 6.95 7.54

Deposits 2006 75.24 19.42 5.34

Advances 1995 85.66 6.81 7.53

Advances 73.25 20.24 6.51


Banking Sector after reforms

13 years of economic and financial sector reforms have strengthened the banking sector:

 Widespread branch network, varied client base

 Recapitalisation has bolstered bank balance sheets
 Public confidence in PSBs
 Risk averseness: limited exposure to risky sectors
 Investment in retail branches in an earlier era has given PSBs competitive advantage of access to
stable, low cost deposits
But the large staff strength, age profile, Government regulations (on loss making branches, CVC) and
slow pace of change in PSBs could be a hindrance to dynamic growth in today’s fast paced world.

New Initiatives by PSBs

 Technology savvy: SBG daily 11 lakh ATM transactions amounting to Rs 140 crore per day
 Specialised branches
 New products targeted at specific groups
 Change in structure, systems and procedures involving quick turnaround time to meet world
 Marketing orientation
 Change in ambience
 Recruitment of specialists
 Tie-ups, sharing networks, and strategic alliances

Product Innovation

 Banks moving away from plain vanilla lending to commerce and industry.
 More options for customers: cash management, channel financing, foreign currency loans.
 New innovative products being introduced and fee based income increased to meet the challenges
 Bancassurance and other products, outsourcing of some products, technology-based payment
 Product innovations and process re-engineering to meet customer requirements, reduce cost,
improve efficiency.

International Competitiveness

According to Moody’s Investor Services:

 Indian lenders have highest ROE in Asia (20.38%), followed by Indonesia (20.19%), New
Zealand (18.83%), Japan (-6.42%)
 Average gross bad loans as share of total loans: India (8.18%), Phillipines (15.05%), Thailand
(13.08%), China(11.80%) and Malaysia (9.73%). Improvement in asset quality.
 Cost to Income ratio in India is 44.56% with banks of only three countries with better ratio:
Singapore(44.15%), Taiwan (42.61%) and Hong Kong (40.05%)

Technology in Banking

 IT spend by banking and financial services industry in USA is 7% of the revenue as against
around 1% by Indian Banks.
 Shared ATM network to reduce costs, increase reach.
 SBI: Branch networking (CBS), ATM network, Internet banking and other facilities introduced in
shortest time frame (Hewlett Packard)
 Cheque truncation system to change the speed of banking transactions
 RTGS system running since 2004 and covers 15,000 branches
 Adoption of Technology to lead to business transformation and cost advantage in the long term.

Human Resources

 In order to meet the global standards and to remain competitive, banks are recruiting more
specialists in various fields such as Treasury Management, Credit, Risk Management, IT related services,
 Fast track merit and performance based promotion from within would have to be institutionalized
to inject dynamism and youthfulness in the workforce.
 SBG treasury is as sophisticated and modern as that of Barclays and Natwest

Risk Management

 Under Basle II capital allocation will be based on risk of assets

 Integrated approach to risk management: credit, market and operational risk

 Risk adjusted return on capital will be used to drive pricing, performance measurement &
portfolio management

Scenario Beyond 2009

 Foreign Banks allowed to set up fully owned subsidiaries

 Foreign banks to be treated on par with Indian banks after 2009 to the extent appropriate

 Competition to intensify
 To achieve critical mass and long term profitability consolidation will be the trend

Response of Banks

Banks are expanding credit to support growth

 High Credit Growth: The YoY deposit growth for ASCBs at 23% (as on 23rd June 06) was lower
than credit growth at 30%.
 Agricultural Credit: banks exceeded the target of Rs. 87,200 cr fixed for 2005-06 and disbursed
Rs 1,07,900 cr (125% of the target).
 Govt directed banks to double agl credit in 3 yrs but in 1 ½ yrs SBI agri credit up by 67% and
9.41 lakh new farmers covered.
 Sectors driving credit growth: Agriculture, SME, Infrastructure, exports, industry.
 Large scope in retail: Share of organised retail: USA 85%, Thailand 40%, Brazil 36%, China
20%, India 5%.

 Large scope for financing services sector

Ind Agl Ser

Bank Credit / GDP (%) 65.0 11.0 14.0

Share in GDP (%) 21.8 22.1 56.1

 Rural India financing opportunities for banks. Strategies to tap rural customers: A recent survey
shows that 53% of FMCG sales & 59% of consumer durables are in rural areas. Of the 2 mn BSNL
mobile connections, 50% went to small towns and villages.

Blueprint for Banks

A strong and resilient banking sector is necessary to support a vibrant economy and sustain growth.
Banks will strive for :

 Customer Service : single window, code for banks

 Multiple channels for delivery
 Focus on Fee-based Income/Non Banking financial services as well
 Insurance, Credit cards
 Derivatives
 Financial Inclusion
 Micro Finance and SHGs
 Agricultural credit to be increased
 Contract Farming Arrangements
 Infrastructure Projects

India an Economic Powerhouse

 Service Sector leads growth

 Global leadership in BPO/KPO and IT enabled industries
 Retail Boom - The size of organised retail will grow three times in next 4-5 years

 On the way to become an International Manufacturing Hub

 Transformation in auto, auto-components, pharma, other industries
 Good Q1 Results, 170 firms so far give sales growth 35%, net profit growth 54%
 Indian Investments and acquisitions abroad
 Decreased dependence on monsoon
 Continuing Reforms
 Focus on SEZs for accelerating growth
 Manufacturing Investment Regions to be set up
 100% FDI in plantation, horticulture, etc.
 Tapping rural markets
 Bank outsourcing norms to be introduced by RBI
 Growth Constraints
 Improvements required in infrastructure
 Global oil prices are a concern
 Need capital to support growth (FDI)

Banks :Partners in Growth

 Credit to productive sectors.

 Investment in bonds, commercial paper.
 Payments, Collection, Remittances.
 Foreign exchange services.
 Specially tailored products for target groups
 Advisory support.
 Technology support: SBI’s Project Uptech
 Reschedule repayments for borrowers with genuine problems.
 Limit for FDI in private banks increased from 49% to 74%.
 Banks now enjoy greater managerial autonomy for sound banks in terms of area of business,
opening and swapping of branches, recruitment.
 Banks have also been allowed to set up Offshore Banking Units in Special Economic Zones.
 Credit delivery mechanism has been reinforced to increase the flow of credit to priority sectors
through focus on micro credit and Self Help Groups.
 Policy package to step up credit to SMEs.
 Securitisation of assets: The Indian securitisation market has come a long way since the first deal
in1992 (autoloan securitisation by Citibank).

Going Ahead

 Indian economy is poised to move into a higher growth trajectory. 11th Plan Projection 8% GDP
(12% manufacturing)
 Rapid growth of services sector
 Leveraging high quality education and vast talent pool
 Tapping India’s knowledge capital to create economic value
 Rising affluence and growth of the consuming class
 NCAER data for top 24 cities in India shows migration to higher income levels growing at over
40% per annum
 Consumer finance, robust industrial investment outlook, increasing internationalisation of India
and rural banking will drive growth in the economy.
 Upward migration of incomes, demographic patterns and access to finance will act as change
 The banking sector is gearing itself to support growth.
 Competition, consolidation and convergence will transform banking.
 Technology will be the key and drive the change.
 Banks strengthening capital base, risk management & skills



State Bank of India (SBI) (LSE: SBID) is a Public Sector Banking Organisation (PSB), in which the
Government of India is the biggest shareholder. It is the largest bank in India and is ranked at 380 in 2008
Fortune Global 500 list, and ranked 219 in 2008 Forbes Global 2000. Measured by the number of branch
offices, SBI is the second largest bank in the world. SBI traces its ancestry back to the Bank of Calcutta,
which was established in 1806; this makes SBI the oldest commercial bank in the Indian subcontinent.
SBI provides various domestic, international and NRI products and services, through its vast network in
India and overseas. With an asset base of $126 billion and its reach, it is a regional banking behemoth.

In recent years the bank has focused on four priorities, first, reducing its huge staff through the Golden
handshake scheme known as the Voluntary Retirement Scheme, second, computerizing its operations,
third, implementation of Business Process Re-Engineering(BPR), and fourth, trying to change the rude
attitude of its staff through a program aptly named 'Parivartan' or 'change'. On the whole, the Bank has
been successful in the first three initiatives but has failed in Parivartan.

After a 20 year hiatus, the Bank is recruiting 20000 clerks and 3500 officers. The pick of the universities
aspire to join the Bank and more than 2.5 million applications have been received.

Fortune Global 500 Ranking - 2008

In 2008 SBI was ranked 380 from a rank of 495 in 2007.[3] As per fortune 500-2008 following are the data
for SBI in $ million.

Revenues: 22,402.2

Profits: 2,225.0

Assets: 255,854.9

Stockholders' Equity: 15,263.3

IT Initiatives
According to PM Network (December 2006, Vol. 20, No. 12), State Bank of India launched a project in
2002 to network more than 14,000 domestic and 70 foreign offices and branches. The first and the second
phases of the project have already been completed and the third phase is still in progress. As of December
2006, over 10,000 branches have been covered.

The new infrastructure serves as the bank's backbone, carrying all applications, such as the IP telephone
network, ATM network, Internet banking and internal e-mail. The new infrastructure has enabled the
bank to further grow its ATM network with plans to add another 3,000 by the end of 2007 raising the total
number to 8,600. As of September 20, 2007 SBI has 7236 ATMs. sbi kanpur
State Bank Of India Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Profit/loss after tax

( in cr) 3105 3681 4304.52 4406.67 4541.31 6729.12

Stock price (in rs) 373.60 437.77 605.95 722.12 1072.65 1535.35

Subscribed equity
shares (net) in lakh 5262.98878 5262.98878 5262.98878 5262.98878 5262.98878 6314.70376

( PAT/Outstanding

p/E ratio (Stock


Quick ratio 1.32550325 1.26035309 1.93327266 1.64830651 1.68063147 1.56260899

Current ratio 1.36044621 1.31812181 2.00492394 1.6591066 1.73060581 1.59941147

Debt to equity ratio 0.77395849 0.84996441 0.94088722 1.28877684 1.78515714 1.48914519

Growth (%)

Total Income 10.2528057 1.60647956 3.65437473 9.91785668 2.71471299 30.7651082

Total expenses 8.91319305 0.08051558 2.23720467 10.8384603 2.67632131 28.7956943

PAT 27.6926493 18.5507246 16.9388753 2.37308689 3.05536834 48.1757466

Net Worth 16.4786835 20.5063428 21.1069214 14.8385767 13.2197201 56.6611233

Total assets 7.92187092 8.48601336 12.6963705 7.45358535 14.7007957 27.4024819

Dividend paid ( in
cr.) 504.68 653.11 751.62 840.16 862.04 1523.53

Dividend payout
ratio (dividend

Bank of Baroda (BSE: 532134) is the sixth largest bank in India. It has total assets in excess of
Rs. 1.78 lakh crores, or Rs. 1,780 bn., a network of over 2800 branches and offices, and about
1000+ ATMs. Bank of Baroda offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its specialised
subsidiaries and affiliates in the areas of investment banking, credit cards and asset management.

Maharajah of Baroda Sir Sayajirao Gaekwad III founded the bank on July 20, 1908 in the
princely state of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of
India, was nationalised on 19 July 1969, by the Government of India.

In its international expansion Bank of Baroda followed the Indian diaspora, and especially that of
the Gujaratis. It has significant international presence with a network of 70 offices in 24
countries, six subsidiaries, and four representative offices.

Among Bank of Baroda's 42 overseas branches are ones in the world’s major financial centers
i.e. New York, London, Dubai, Hong Kong (which it has upgraded recently), Brussels and
Singapore, as well as a number in other countries. The bank is engaged in retail banking via 17
branches of subsidiaries in Botswana, Guyana, Kenya, Tanzania, and Uganda, and a joint-
venture bank in Zambia with nine branches. Bank of Baroda maintains representative offices are
in Malaysia, China, Thailand, & Australia. It should be upgrading its offices in China and
Malaysia shortly to a branch or joint-venture, respectively.
Bank Of baroda Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Profit/loss after tax

( in cr) 772.78 967 676.84 826.96 1026.46 1435.52

Stock price (in rs)

Subscribed equity
shares (net) in lakh 2960 2960 2960 3670 3670 3670

( PAT/Outstanding

p/E ratio (Stock


Quick ratio 2.38341796 2.18417885 2.58307163 3.32301167 4.54576201 4.21016559

Current ratio 2.60571009 2.42208421 2.75194029 3.61633942 4.8096677 4.33581084

Debt to equity ratio 0.45126591 0.47886344 0.55809594 0.9015569 0.44643778 0.84659795

Growth (%)

Total Income 5.23638868 9.15688223 3.69655251 11.455784 20.4407962 33.0909523

Total expenses 2.17801409 7.29314012 0.11692237 10.4333446 20.0522219 32.3536256

PBDTA 41.9675273 27.7481713 -40.571592 40.1903965 37.9432571 31.9493657

PBT 47.1161218 30.9628364 43.6943872 29.1361572 48.4173695 33.4221948

PAT 41.5555393 25.132638 30.0062048 22.1795402 24.1245042 39.8515286

Net Worth 22.030549 22.620528 13.4654196 39.3881402 10.26856 27.6762613

Total assets 7.7767657 11.3629411 11.2275061 19.7839121 26.2395151 25.4658071


Bank of India

Type Public (BSE:BOI)


Headquarters Mumbai, India

Commercial banks

Bank of India (BoI), established on 7 September 1906 is a bank with headquarters in Mumbai.
Government-owned since nationalization in 1969, It is one of India's leading banks, with about
2,884 branches including 27 branches outside India. BoI is a founder member of SWIFT (Society
for World-wide Inter Bank Financial Telecommunications) in India which facilitates provision of
cost-effective financial processing and communication services. The Bank completed its first one
hundred years of operations on 7th September, 2006.

MISSION: "To provide superior, proactive banking services to niche markets globally, while
providing cost-effective, responsive services to others in our role as a development bank, and in
so doing, meet the requirements of our stakeholders".

VISION: "To become the bank of choice for corporate, medium businesses and upmarket retail
customers and to provide cost effective developmental banking for small business, mass market
and rural markets"
Bank Of india Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Profit /surplus
after tax 851 1008.32 340.05 701.44 1123.17 2009.4

Stock price (in


equity shares
(net) in lakh 4885.8 4885.8 4885.8 4885.8 4885.8 5263.526

( PAT/Outstandi
ng shares)

p/E ratio (Stock


2.1647897 3.3437454 2.0222225 3.2247585 3.3647827

Quick ratio 7 8 3 7 2 3.15068292

2.2619452 3.6908868 2.2972744 3.6341388 3.5734795

Current ratio 6 8 4 1 3 3.36944161

Debt to equity 1.8417199 1.6890232 1.9325837 1.9041899 1.9805043

ratio 3 4 5 7 6 1.37299137

Growth (%)

0.2520275 5.3015410 14.271959 27.835477
Total Income 12.233023 8 4 9 1 37.840013

7.6822735 2.0572653 4.0401983 9.7028592 24.820412
Total expenses 1 1 8 5 1 32.9208644

18.486486 66.275587 106.27554 60.123460
PAT 68.441471 5 1 8 3 78.9043511

37.421425 19.868345 16.190563 12.264203 19.048260

Net Worth 6 6 7 6 3 53.6102264

9.4431324 10.708908 11.910237 18.177906 26.696009

Total assets 1 7 1 4 7 25.7394496

Dividend paid 164.95 164.95 110.69 166.73 196.69 245.77

payout ratio