CHAPTER-I INTRODUCTION

Banking Sector The banking system in India is significantly different from that of other Asian nations because of the countrys unique geographic, social, and economic characteristics. India has a large population and land size, a diverse culture, and extreme disparities in income, which are marked among its regions. There are high levels of illiteracy among a large percentage of its population but, at the same time, the country has a large reservoir of managerial and technologically advanced talents. The countrys economic policy framework combines socialistic and capitalistic features with a heavy bias towards public sector investment. India has followed the path of growth-led exports rather than the exportled growth of other Asian economies, with emphasis on self-reliance through import substitution. These features are reflected in the structure, size, and diversity of the countrys banking and financial sector. The banking system has had to serve the goals of economic policies enunciated in successive five year development plans, particularly concerning equitable income distribution, balanced regional economic growth, and the reduction and elimination of private sector monopolies in trade and industry. In order for the banking industry to serve as an instrument of state policy, it was subjected to various nationalization schemes in different phases (1955, 1969, and 1980). As a result, banking remained internationally isolated (few Indian banks had presence abroad in international financial centers) because of preoccupations with domestic priorities, especially massive branch expansion and attracting more people to the system. A big challenge facing Indian banks is how, under the current ownership structure, to attain operational efficiency suitable for modern financial intermediation. On the other hand, it has been relatively easy for the public sector banks to recapitalize, given the increases in nonperforming assets (NPAs), as their Governmentdominated ownership structure has reduced the conflicts of interest that private banks would face. State Bank of India Ltd. Financial sector reforms were initiated as part of overall economic reforms in the country and wide ranging reforms covering industry, trade, taxation,external sector, banking and financial markets have been carried out since mid 1991. A decade of economic and financial sector reforms has strengthened the fundamentals of the Indian economy and transformed the operating environment for banks and financial institutions in the country. The sustained and gradual pace of reforms has helped avoid any crisis and has actually fuelled growth. As pointed out in the RBI Annual Report 2001-02, GDP growth in the 10 years after reforms i.e. 1992-93 to 20012

02 averaged 6.0% against 5.8% recorded during 1980-81 to 1989-90 in the pre-reform period. The most significant achievement of the financial sector reforms has been the marked improvement in the financial health of commercial banks in terms of capital adequacy, profitability and asset quality as also greater attention to risk management. Further, deregulation has opened up new opportunities for banks to increase revenues by diversifying into investment banking, insurance, credit cards, depository services, mortgage financing, securitisation, etc. At the same time, liberalisation has brought greater competition among banks, both domestic and foreign, as well as competition from mutual funds, NBFCs,post office, etc. Post-WTO, competition will only get intensified, as large global players emerge on the scene. Increasing competition is squeezing profitability and forcing banks to work efficiently on shrinking spreads. A positive fallout of competition is the greater choice available to consumers, and the increased level of sophistication and technology in banks. As banks benchmark themselves against global standards, there has been a marked increase in disclosures and transparency in bank balance sheets as also greater focus on corporate governance. Major Reform Initiatives Some of the major reform initiatives in the last decade that have changed the face of the Indian banking and financial sector are: Interest rate deregulation. Interest rates on deposits and lending have been deregulated with banks enjoying greater freedom to determine their rates. Adoption of prudential norms in terms of capital adequacy, asset classification, income recognition, provisioning, exposure limits, investment fluctuation reserve, etc. Reduction in pre-emptions lowering of reserve Government equity in banks has been reduced and strong banks have been allowed to access the capital market for raising additional capital. Banks now enjoy greater operational freedom in terms of opening and swapping of branches, and banks with a good track record of profitability have greater flexibility in recruitment. New private sector banks have been set up and foreign banks permitted to expand their operations in India including through subsidiaries. Banks have also been allowed to set up Offshore Banking Units in Special Economic Zones.

 New areas have been opened up for bank financing: insurance, credit cards, infrastructure financing, leasing, gold banking, besides of course investment banking, asset management, factoring, etc. New instruments have been introduced for greater flexibility and better risk management: e.g. interest rate swaps, forward rate agreements, cross currency forward contracts, forward cover to hedge inflows under foreign direct investment, liquidity adjustment facility for meeting day-to-day liquidity mismatch. Several new institutions have been set up including the National Securities Depositories Ltd., Central Depositories Services Ltd., Clearing Corporation of India Ltd., Credit Information Bureau India Ltd. Limits for investment in overseas markets by banks, mutual funds and corporates have been liberalised. The overseas investment limit for corporates has been raised to 100% of net worth and the ceiling of $100 million on prepayment of external commercial borrowings has been removed. MFs and corporates can now undertake FRAs with banks. Indians allowed to maintain resident foreign currency (domestic) accounts. Full convertibility for deposit schemes of NRIs introduced. Universal Banking has been introduced. With banks permitted to diversify into long-term finance and DFIs into working capital, guidelines have been put in place for the evolution of universal banks in an orderly fashion. Technology infrastructure for the payments and settlement system in the country has been strengthened with electronic funds transfer, Centralised Funds Management System,Structured Financial Messaging Solution, Negotiated Dealing System and move towards Real Time Gross Settlement. Adoption of global standards. Prudential norms for capital adequacy, asset classification, income recognition and provisioning are now close to global standards. RBI has introduced Risk Based Supervision of banks (against the traditional transaction based approach). Best international practices in accounting systems, corporate governance, payment and settlement systems, etc. are being adopted. Credit delivery mechanism has been reinforced to increasethe flow of credit to priority sectors through focus on microcredit and Self Help Groups. The definition of priority sector has been

widened to include food processing and cold storage, software upto Rs 1 crore, housing above Rs 10 lakh, selected lending through NBFCs, etc. RBI guidelines have been issued for putting in place risk management systems in banks. Risk Management Committees in banks address credit risk, market risk and operational risk. Banks have specialised committees to measure and monitor various risks and have been upgrading their risk management skills and systems. The limit for foreign direct investment in private banks has been increased from 49% to 74% and the 10% cap on voting rights has been removed. In addition, the limit for foreign institutional investment in private banks is 49%. Challenges Ahead
(i) Improving profitability:

The most direct result of the above changes is increasing competition and narrowing of spreads and its impact on the profitability of banks. The challenge for banks is how to manage with thinning margins while at the same time working to improve productivity which remains low in relation to global standards. This is particularly important because with dilution in banks equity, analysts and shareholders now closely track their performance. Thus, with falling spreads, rising provision for NPAs and falling interest rates, greater attention will need to be paid to reducing transaction costs. This will require tremendous efforts in the area of technology and for banks to build capabilities to handle much bigger volumes. (ii) Reinforcing technology: Technology has thus become strategic and integral part of banking, driving banks to acquire and implement world class systems that enable them to provide products and services in large volumes at a competitive cost with better risk management practices.The pressure to undertake extensive computerisation is very real as banks that adopt the latest in technology have an edge over others. Customers have become very demanding and banks have to deliver customised products through multiple channels, allowing customers access to the bank round the clock.
(iii)

Risk management:

The deregulated environment brings in its wake risks along with profitable opportunities, and technology plays a crucial role in managing these risks. In addition to being exposed to credit risk, market risk and operational risk, the business of banks would be susceptible to country risk, which
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will be heightened as controls on the movement of capital are eased. In this context, banks are upgrading their credit assessment and risk management skills and retraining staff, developing a cadre of specialists and introducing technology driven management information systems.
(iv)

Sharpening skills:

The far-reaching changes in the banking and financial sector entail a fundamental shift in the set of skills required in banking. To meet increased competition and manage risks, the demand for specialised banking functions, using IT as a competitive tool is set to go up. Special skills in retail banking, treasury, risk management, foreign exchange, development banking, etc., will need to be carefully nurtured and built. Thus, the twin pillars of the banking sector i.e. human resources and IT will have to be strengthened.
(v) Greater customer orientation:

In todays competitive environment, banks will have to strive to attract and retain customers by introducing innovative products, enhancing the quality of customer service and marketing a variety of products through diverse channels targeted at specific customer groups.
(vi)

Corporate governance:

Besides using their strengths and strategic initiatives for creating shareholder value, banks have to be conscious of their responsibilities towards corporate governance. Following financial liberalisation, as the ownership of banks gets broadbased, the importance of institutional and individual shareholders will increase.In such a scenario, banks will need to put in place a code for corporate governance for benefiting all stakeholders of a corporate entity.
(vii)

International standards:

Introducing internationally followed best practices and observing universally acceptable standards and codes is necessary for strengthening the domestic financial architecture. This includes best practices in the area of corporate governance along with full transparency in disclosures. In todays globalised world, focusing on the observance of standards will help smooth integration with world financial markets. Classification of banks: The Indian banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of
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ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old / new domestic and foreign). These banks have over 67,000 branches spread across the country. The Indian banking industry is a mix of the public sector, private sector and foreign banks. The private sector banks are again spilt into old banks and new banks. Banking System in India Reserve bank of India (Controlling Authority)

Development Financial institutions

Banks

IFCI IDBI ICICI NABARD NHB IRBI

EXIM Bank

SIDBI

Commercial Banks

Regional Rural Banks

Land Development Banks

Co-operative Banks

Public Sector Banks

Private Sector Banks

SBI Groups Financial Structure

Nationalized Banks

Indian Banks

Foreign Bank

The Indian financial system comprises the following institutions:

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1. Commercial banks a. Public sector b. Private sector c. Foreign banks d. Cooperative institutions (i) Urban cooperative banks (ii) State cooperative banks (iii) Central cooperative banks 2. Financial institutions a. All-India financial institutions (AIFIs) b. State financial corporations (SFCs) c. State industrial development corporations (SIDCs) 3. Nonbanking financial companies (NBFCs) 4. Capital market intermediaries About 92 percent of the countrys banking segment is under State control while the balance comprises private sector and foreign banks. The public sector commercial banks are divided into three categories. State bank group (eight banks): This consists of the State Bank of India (SBI) and Associate Banks of SBI. The Reserve Bank of India (RBI) owns the majority share of SBI and some Associate Banks of SBI.1 SBI has 13 head offices governed each by a board of directors under the supervision of a central board. The boards of directors and their committees hold monthly meetings while the executive committee of each central board meets every week. Nationalized banks (19 banks): In 1969, the Government arranged the nationalization of 14 scheduled commercial banks in order to expand the branch network, followed by six more in 1980. A merger reduced the number from 20 to 19. Nationalized banks are wholly owned by the Government, although some of them have made public issues. In contrast to the state bank group, nationalized banks are centrally governed i.e., by their respective head offices. Thus, there is only one board for each nationalized bank and meetings are less frequent (generally, once a month). The state bank group and nationalized banks are together referred to as the public sector banks (PSBs). Tables 1 and 2 provide details of public issues and post-issue shareholdings of these PSBs.
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Regional Rural Banks (RRBs): In 1975, the state bank group and nationalized banks were required to sponsor and set up RRBs in partnership with individual states to provide low-cost financing and credit facilities to the rural masses. Table 3 presents the relative scale of these public sector commercial banks in terms of total assets. The table clearly shows the importance of PSBs. More than 40,000 NBFCs exist, 10,000 of which had deposits totaling Rs1,539 billion as of March 1996. After public frauds and failure of some NBFCs, RBIs supervisory power over these highgrowth and high-risk companies was vastly strengthened in January 1997. RBI has imposed compulsory registration and maintenance of a specified percentage of liquid reserves on all NBFCs. Reserve Bank of India and Banking and Financial Institutions RBI is the banker to bankswhether commercial, cooperative, or rural. The relationship is established once the name of a bank is included in the Second Schedule to the Reserve Bank of India Act, 1934. Such bank, called a scheduled bank, is entitled to facilities of refinance from RBI, subject to fulfillment of the following conditions laid down in Section 42 (6) of the Act, as follows: it must have paid-up capital and reserves of an aggregate value of not less than an amount specified from time to time. it must satisfy RBI that its affairs are not being conducted in a manner detrimental to the interests of its depositors. Specialized development financial institutions (DFIs) were established to resolve market failures in developing economies and shortage of long-term investments. The first DFI to be established was the Industrial Finance Corporation of India (IFCI) in 1948, and was followed by SFCs at state level set up under a special statute. In 1955, Industrial Credit and Investment Corporation of India (ICICI) was set up in the private sector with foreign equity participation. This was followed in 1964 by Industrial Development Bank of India (IDBI) set up as a subsidiary of RBI. The same year saw the founding of the first mutual fund in the country, the Unit Trust of India (UTI). A wide variety of financial institutions (FIs) has been established. Examples include the National Bank for Agriculture and Rural Development (NABARD), Export Import Bank of India (Exim Bank), National Housing Bank (NHB), and Small Industries Development Bank of India (SIDBI),which serve as apex banks in their specified areas of responsibility and concern. The three institutions that dominate the term-lending market in providing financial assistance to the corporate sector are
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IDBI, IFCI, and ICICI. The Government owns insurance companies, including Life Insurance Corporation of India (LIC) and General Insurance Corporation (GIC). Subsidiaries of GIC also provide substantial equity and loan assistance to the industrial sector, while UTI, though a mutual fund, conducts similar operations. RBI also set up in April 1988 the Discount and Finance House of India Ltd. Cooperative banks, and RRBs. RBI is authorized to exclude the name of any bank from the Second Schedule if the bank, having been given suitable opportunity to increase the value of paid-up capital and improve deficiencies, goes into liquidation or ceases to carry on banking activities. A wide variety of financial institutions (FIs) has been established. Examples include the National Bank for Agriculture and Rural Development (NABARD), Export Import Bank of India (Exim Bank), National Housing Bank (NHB), and Small Industries Development Bank of India (SIDBI), which serve as apex banks in their specified areas of responsibility and concern. The three institutions that dominate the term-lending market in providing financial assistance to the corporate sector are IDBI, IFCI, and ICICI. The Government owns insurance companies, including Life Insurance orporation of India (LIC) and General Insurance Corporation (GIC). Subsidiaries of GIC also provide substantial equity and loan assistance to the industrial sector, while UTI, though a mutual fund, conducts similar operations. RBI also set up in April 1988 the Discount and Finance House of India Ltd. CORPORATE ACCOUNTSTRANSPARENCY One of the important amendments introduced by the Companies (Amendment) Ordinance in 19982 requires that companies comply with accounting standards. As a step towards good corporate governance and better disclosure and presentation of accounts, it is a milestone. However, it was introduced and implemented in a halfhearted way. While the auditor was required to check on compliance with accounting standards, there was no statutory requirement for the company to make such compliance. Now the ordinance says that companies shall comply with accounting standards as defined. The requirement covers all companies, public or private, listed or unlisted. That accounting standards are now compulsory is contradicted by the requirement that if the accounting standards are not complied with, the fact of such noncompliance, and the reasons and the financial effect of such noncompliance shall be disclosed. It is possible that a company can get away with noncompliance merely by making the required disclosures. The going concern is a

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fundamental accounting concept that allows financial statements to be prepared on the assumption that the enterprises will continue in operational existence in the foreseeable future. The Institute of Chartered Accounts of India in 1998 issued a Statement on Standard Auditing Practices (SAP 16) that aims to establish auditors responsibilities regarding the appropriateness of the going concern assumption as a basis for preparing financial statements. It also elaborates the need for planning and conducting audits, gathering sufficient evidence, and exercising judgment whether the going concern assumption made by directors is appropriate. The practice was to be followed for accounting periods commencing on or after April 1999. The conclusion that a financial statement has been prepared for a going concern depends on a few fundamental uncertainties. Regulatory Issues INDIAN BANKS ASSOCIATION The Indian Banks Association (IBA) should evolve into a self-regulatory organization (SRO) that would work toward strengthening Indias fairly weak banking sector and the sectors moral regulator. Its broad agenda should be to encourage the continued implementation of prudential business practices. IBA is completing an organizational restructuring after which it will examine its role as an SRO. It is now an advisory organization of banks in India and its members include most of the PSBs, private banks, and foreign banks. Its main activities involve generation and ex change of ideas on banking issues, policies; and practices; collection and analysis of sectoral data; personnel administration; and wage negotiations between labor unions and bank managements. But in its new role, it would reportedly expand its functions to supplement RBIs role as a legal regulator with a focus on strengthening the sector. While the sectors risk profile improved considerably after prudential norms were introduced in 1994, by international standards, Indias banking sector is perceived as fairly weak with poor asset quality by leading agencies such as Standard & Poors. The SRO would examine and recommend the implementation of more stringent prudential norms as laid out in the recommendations of the Narasimham Committee (II). It would encourage practices to strengthen the sector. Its expanded role could incorporate vigilance, improvement in accounting standards and balance sheet practices, encouraging provisioning, and tackling the problem of weakness and deteriorating asset quality in the banking sector. IBA as an SRO would have to ensure that banks follow at least a certain minimum level of prudential practices. This can, however, be all very well in theory but difficult to
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practice because an SRO is more of a culture than an institution. It takes a long time to breed a culture of self-regulation. The respect for a supervisor has to be earned and does not happen overnight. IBA has to transform itself into a real industry body once the IBA management committee acts on the blueprint for change proposed by a consulting firm. The proposal is to overhaul the structure of the organization to increase efficiency. The new focus is on networking as IBA was, for a long time, working in isolation. Now the objective is to emerge as a representative body for the banking industry. IBA has already started interacting with different industries and looking into various aspects of financing software companies, the film industry, construction companies, and the shipping industry. Improving Regulatory Frameworks To Decrease Systemic Risk Deregulation has helped promote competition and efficiency in the banking system in India and will have a positive impact on systemic risk in the long run. Initially, however, deregulation has affected the stability of the banking sector. Substantial progress has been made toward stronger regulatory frameworks. Changes in banks reporting requirements,improvement in the quality of on-site supervision, and the establishment of credit information and loan-grading and provisioning requirements have all helped. More important, a focus on evaluating bank solvency,more than enforcing a set of detailed regulations, has resulted in lower systemic risk across the board. But there are still many instances in which neither investors nor bank supervisors are able to properly monitor an institutions creditworthiness. Asset quality is still the main source of risk for a financial institution and must be carefully assessed. There are loan classification systems in which bad loans can be converted into good ones through restructuring and are never reported as bad by rolling over the debt (evergreening). In some instances the main factor for loan classification is performance of payment instead of the financial position of borrower, which also creates difficulties in assessing credit risk. Previously, DFIs in India supported new industries through equity and loan participation, and they usually insisted on payment of dues on existing loans. But these payments may be diverted from working capital sourced from cash credit facilities from banks for their existing ventures. In this way, defaulters could promote new industries. What is important, therefore, is not merely payment record but actual surplus generation by the borrowers to qualify for investment in new ventures. Consolidated supervision of banks and their subsidiaries is another important area that needs to be addressed in future regulatory framework improvements.
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Regulation Of Financial Conglomerates

In 1993, the Bank for International Settlements (BIS) set up a Tripartite Group of banking, securities, and insurance regulators to consider ways of improving the supervision of financial conglomerates. The Tripartite Group agreed that the term financial conglomerate would be used to refer to any group of companies under common control whose exclusive or predominant activities consist of providing significant services in at least two different financial sectors (banking, securities, insurance). Many of the problems encountered in the supervision of financial conglomerates would also arise in the case of mixed conglomerates offering not only financial services, but also nonfinancial services and products. Coordination between RBI, Insurance Regulatory Authority, and Securities and Exchange Board of India (SEBI) is becoming increasingly urgent. Asset Liability Management Maturity Mismatch Interest rates have changed several times over the past seven years causing maturity transformations in assets and liabilities and their frequent repricing. A clear and continuous statement of rate sensitive assets and rate sensitive liabilities has to form the basis of interest rate risk management. RBI is expected to issue guidelines that show that management-driven asset liability management (ALM) initiatives in banks are absent. This is also the reason why Indias money market has remained mostly as a call money market that is meant for clearing day to day temporary surpluses and deficits among banks.Traditionally, many banks, including the foreign banks, have used call money as a regular funding source.PSBs are notably absent players in the market for term funds since they lack data on maturity gaps and interest rate gaps to be complied under ALM discipline.The common complaints about difficulties in collection of data from hundreds of rural and semiurban branches will not be combated unless there is computerization in these branches to facilitate data compilation progressively. SOPHISTICATION The importance of more sophisticated ALM has increased for Indian banks in view of liberalization of interest rates and business activities, limits to the expansion of lending volume, introduction of derivatives, prevailing international discussions concerning risk management, innovation of computer technology, and globalization. In ALM, risks in the banking account
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(which comprises the traditional banking products including deposits and loans and the trading account, which mainly comprises short-term trading products such as foreign exchange and investments) are managed separately. The primary focus is on how to hedge the passively arising interest rate risk in the banking account. However, given the changes in the business environment, Indian banks and financial institutions have to move forward to maximize profits through comprehensive measurement and management of market risks, particularly interest rate risk, by upgrading the risk management measures for banking and trading accounts, thus integrating the risk measurement for the institution as a whole shifting the focus of ALM in the banking account from simply hedging risks to actively taking and controlling risks reviewing organizational structure to make risk management more sophisticated and provide for more flexible ALM operations. An example of such organizational structure review is strengthening the authority of a financial institutions ALM committee, or by establishing an ALM expert section or a middle office. Risk management can shift from the worst method of controlling the market risks related to assets and liabilities to an integrated risk management measure incorporating the credit risks in the banking and trading accounts. This shift would enable objective assessments of profitability and, based on these assessments, a strategic allocation of resources could be carried out. In general, the development of ALM operations has to be in the direction of an objective and comprehensive measurement of various risks, a pursuit of returns commensurate with the size of the risk, and a strategic allocation of capital and human resources based on the risk. This can be said to be the key to successful ALM in an era of financial liberalization. Unless Indian banks and FIs adopt these principles, there can be little progress in the following critical ALM operations: upgrading of trading techniques; implementation of flexible ALM operations in the banking account, such as strategic risk-taking operations that use interest rate swaps and investment securities and strategic pricing of medium to long-term deposits, as well as the concentration of interest rate risk at the head office through a review of the interoffice rate with regard to customer business, the provision of various financial services based on improved market risk management abilityfor example,the development of new types of deposit and loan products involving the use of derivatives and the provision of ALM servicesand the search for
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new clients among small- and medium-size firms through sophisticated credit risk management techniques. The evolution in financial management in terms of sophistication in ALM operations has to be an autonomous response and not driven by regulators. Risk Assessment Of Investment Banks are required to comply with the SLR by investing in approved securities, e.g., central Government bonds, Treasury bills (T-bills), and state government bonds. Moreover, banks invest in PSU bonds, corporate debentures, and equities (limit is 5 percent of the increase in the previous years deposits).Investments are assessed at market prices. As for approved securities, only 60 percent of outstanding are assessed at mark-to-market. It is difficult to identify the actual asset position of banks if approved securities are not assessed at market price. For this reason, RBI is planning to require banks to assess 100 percent of the approved securities at markto- market in a few years. These regulations are based on the Governments objective of bringing down fiscal deficit. It recognizes the fact that it is simply not feasible for banks and FIs to increase the share of Government securities in their portfolio without affecting their own viability and indeed the viability of the productive sectors of the economy. Despite the progressive reduction in the SLR over the past five years in the wake of implementation of Narasimham Committee (I) recommendations, banks voluntarily directed high deposits growth into riskfree assets of Government securities. This trend coincided with companies raising external commercial borrowings and issuing GDRs in international markets in preference to borrowings from banks. Backtracking during previous changes in government on efforts to curb the fiscal deficit caused monetary policy to be tight and interest rates to remain high. Now that an industrial slowdown has set in, RBI has concluded that nothing should be done to dampen the emerging signs of incipient recovery and focus should be largely on strengthening balance sheets of banks and financial institutions. Excess investments made by banks in Government securities point to the fact that investable surpluses have not been adequately deployed to finance industry and trade. Clearly, banks have been unable to predict interest rate changes, the root cause being that ALM has been neglected. FUNCTION OF BANK CAPITAL Capital Adequacy
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Capital adequacy is a self-regulatory discipline and cannot save banks that are distressed. As such, the time required for meeting bank capital adequacy must be shortened to a minimum. The CAMEL rating system clearly recognizes the strength of bank capital as just one requirement and also an end product of other processes, mostly management driven. It is essential to amplify the quality of earnings as it is the first thing that catches shareholders attention. History shows that banking problems germinate during years of economic boom. When the earnings component becomes volatile and susceptible to sharp growth that is not sustainable, the quality of loan/risk assets can become suspect. PSBs are owned by the Government, therefore, they have implicit guarantees from the Government, resulting in the lack of capital adequacy ratio (CAR) norm. Given the recommendation of the Narasimham Committee (I) in 1991 on the BIS standard of capital adequacy, a CAR of 8 percent was to be achieved by March 1996. Twenty-six out of 27 PSBs had complied with this requirement as of March 1998. Narasimham Committee (II) recommended CAR targets of 9 percent by 2000 and 10 percent by 2002. As many PSBs have already high CARs (some indicated an average CAR of about 9.6 percent as of March 1998), such targets could be attained. Moreover, as 35 percent of deposits are allocated to CRR and SLR, coupled with investment in Government guaranteed bonds, risk assets are not preferred. However, RBI has introduced a calculation method that 60 percent of approved securities should be markto- market, and the ratio will be raised to 100 percent in a few years. Despite the higher mark-to-market ratio, many banks increased investments in approved securities to comply with CAR. The banks will have difficulties raising more capital in the near future, with capital markets sluggish, investor confidence low, and bank issues unpopular with investors. The need for general provisioning on standard assets increases the pressure on profitability of banks as Governmentguaranteed securities are prone to default. RBI has decided to implement certain recommendations of Narasimham Committee (II). Banks are to achieve a minimum of 9 percentCAR by 31 March 2000. Decisions on further enhancement will be made thereafter. An asset will be treated as doubtful if it has remained substandard for 18 months instead of 24 months. Banks may make provisions in two phases. On 31 March 2001 provisioning will be at not less than 50 percent on the assets that have become doubtful on account of the new norms. On 31 March 2002, a balance of 50 percent of the provisions should be made in addition to the provisions needed by 31 March 2001. A proposal to introduce a norm of 12 months will be
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announced later. Government-guaranteed advances that have turned sticky are to be classified as NPAs as per the existing prudential norms effective 1 April 2000. Provisions on these advances should be made over a period of four years such that existing/old Government-guaranteed advances that would become NPAs on account of new asset classification norms should be fully provided for during the next four years from the year ending March 1999 to March 2002 with a minimum of 25 percent each year. To start with, banks should make a general provision of a minimum of 0.25 percent for the year ending 31 March 2000. The decision to raise further the provisioning requirement on standard assets shall be announced in the process. Banks and financial institutions should adhere to the prudential norms on asset classification, provisioning, etc., and avoid the practice of evergreening. Importance Of Branches Brand Identity PSBs and the rural banking system have to build up the transaction and advisory services of their branches. In a competitive marketplace, a retail branch environment that can project and deliver the brand promise has become increasingly important. As retail banks undertake strategic reengineering of distribution and delivery strategies, product and service enhancement and network downsizing, they ignore the role of the branch and the power of a brand at their peril, since the branch is a retail banks shop window and platform for differentiating its products and services. With the growth of automated transactions, the role of the branch is changing and must reflect new marketing and brand communication strategies. Is the branch to be a retail opportunity drawing customers for financial services advice, or is it an outpost of technology and remote transaction efficiency? Can the branch network provide both? The answers lie in the strength, depth, and clarity of an organizations brand identity, which is the foundation upon which a retail bank can communicate its unique product or service. Interdepartmental Coordination Branch investment and reengineering is often the responsibility of operations or premises departments with little regard for coordination with marketing departments. In order to maximize the benefits of branch investment or reengineering, astute management teams should integrate all

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aspects of their brand and its customer interface under identity management to harness the power of the bank REGIONAL SPREAD OF BANKING RBI currently uses only demographic data for issuing branch licenses. The population served per branch criterion is the yardstick that is routinely used to measure the adequacy or otherwise of banking facilities in regions that have been demographically demarcated as follows: rural (population below 10,000), semi-urban (population between 10,000 and 100,000), urban (population between 100,000 and 1 million), and metropolitan (population above one million). Dividing the total population by the number of bank branches, the population per branch has fallen from 64,000 in 1969 to 15,000 as of June 1997. This does not take into account, however, staff redundancies likely from computer-based banking including the spread of automated teller machine (ATM) outlets. Even in the most advanced branch banking and computerized banking environments such as Canada, the ratio of population to branch is only 3,000 and if ATM banking is included as branchtype retail outlet, the ratio is still lower. In India, foreign banks are fast experiencing staff redundancy and aging problems but not allowed to branch out freely into places requiring competition, especially in foreign trade financing.The Government needs to expand the branch network to ensure a reduction in the population per branch ratio further to 10,000 (phase I), 5,000 (phase II), and 3,000 (phase III) by including, if necessary, ATMs and similar outlets as branches at metro and urban centers. SPREAD OF CREDIT CARD CULTURE It would be worthwhile for RBI to reward banks through a special subsidy for spreading a credit card culture on the basis of the number of credit cards and annual transition volumes. The largest bank, SBI, did not even have a credit card until the formation of its joint venture with GE Capital in 1998/99. NARROW BANKING Weaker banks have been under pressure to cease lending and concentrate on investments in Government securities, which are subject to depreciation risks. Narrow banking is therefore not a solution for The Indian Banking Sector: On The Road To Progress 91

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weak banks. Enhancing the branch network can improve the bottom line and should be explored. Such banks require all-round restructuring. Credit Delivery System Indian banks low coverage of bills and receivables financing, and low level of exposure of bank clientele to the foreign trade segment. Partly these should be ascribed to a lack of banking services or expertise of centers where demand for the services exists but is met by distantly placed branches. Inadequate bills and direct receivables financing results in underutilization of network branches through which collections can take place. HUMAN RESOURCES ISSUES IN BANKING Labor Union And Human Resources The number of bank management staff and employees in India is vast (223,000 in SBI; 81,252 in SBI Associates; 581,000 in nationalized banks; 57,241 in old private sector banks; 1,620 in new private sector banks, and 13,510 in foreign banks operating in the country). The total is 957,623, with the number of staff employed in cooperative and rural banks equally large. Potentially, the gap between availability of required skills and actual requirements is increasing as more complex product mixes are introduced and traditional banking products are replaced. Another reason is the skewed age profile of employees, some of whom were taken on 30-35 years back when the branch expansion programs started. Indian banks are highly unionized and productivity benchmarks are not clearly established. To create a more constructive work attitude, the disinvestment or privatization programs of PSBs should include share offerings to staff, an idea successfully carried out by SBI, Bank of Baroda, and Bank of India, among others. The spread of computerization (so far inhibited by staff union pressures on quotas and wage hikes) must be evaluated in terms of return on information technology assets of the banks and revised productivity benchmarks. Another issue requiring attention is regular recruitment in various grades every year, since experienced employees in banking are built up over several years. An embargo on recruitment since 1985 has skewed the age profile of the workforce in PSBs. Such imbalances are difficult to rectify. There are those who argue for productivity-linked wages, which is a dangerous recipe in the context of a unionized workforce. CREDIT CARD

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A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card: a charge card requires the balance to be paid in full each month.In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 53.98 mm (33/8 21/8 in) in size. HISTORY The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel. The modern credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sellfuel to a growing number of automobile owners. In 1938 several companies started to accept each other's cards. Western Union had begun issuing charge cards to its frequent customers in 1921. Some charge cards were printed on paper card stock, but were easily counterfeited. The Charga-Plate, developed in 1928, was an early predecessor to the credit card and used in the U.S. from the 1930s to the late 1950s. It was a 2 in 1 in rectangle of sheet metal related to Addressograph and military dog tag systems. It was embossed with the customer's name, city and state. It held a small paper card for a signature. In recording a purchase, the plate was laid into a recess in the imprinter, with a paper "charge slip" positioned on top of it. The record of the transaction included an impression of the embossed information, made by the imprinter pressing an inked ribbon against the charge slip. Charga-Plate was a trademark of Farrington Manufacturing Co. Charga-Plates were issued by large-scale merchants to their regular customers, much like department store credit cards of today. In some cases, the plates were kept in the issuing store rather than held by customers. When an authorized user

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made a purchase, a clerk retrieved the plate from the store's files and then processed the purchase. Charga-Plates speeded back-office bookkeeping that was done manually in paper ledgers in each store, before computers. Collectible credit cards A growing field of numismatics (study of money), or more specifically exonumia (study of moneylike objects), credit card collectors seek to collect various embodiments of credit from the now familiar plastic cards to older paper merchant cards, and even metal tokens that were accepted as merchant credit cards. Early credit cards were made of celluloid plastic, then metal and fiber, then paper, and are now mostly polyvinyl chloride (PVC) plastic. How credit cards work Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account has been approved by the credit provider, after which cardholders can use it to make purchases atmerchants accepting that card. Merchants often advertise which cards they accept by displaying acceptance marks generally derived from logos or may communicate this orally, as in "We take (brands X, Y, and Z)" or "We don't take credit cards". When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a card not present transaction (CNP). Electronic verification systems allow merchants to verify in a few seconds that the card is valid and the credit card customer has sufficient credit to cover the purchase, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or point-of-sale (POS) system with a communications link to the merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card; the latter system is called Chip and PIN in the United Kingdom and Ireland, and is implemented as an EMV card. For card not present transactions where the card is not shown (e.g., e-commerce, mail order, and telephone sales), merchants additionally verify that the customer is in physical possession of
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the card and is the authorized user by asking for additional information such as the security code printed on the back of the card, date of expiry, and billing address. Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see 15 U.S.C. 1643, which limits cardholder liability for unauthorized use of a credit card to $50, and the Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit issuer charges interest on the amount owed if the balance is not paid in full (typically at a much higher rate than most other forms of debt). In addition, if the credit card user fails to make at least the minimum payment by the due date, the issuer may impose a "late fee" and/or other penalties on the user. To help mitigate this, some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts, thus avoiding such penalties altogether as long as the cardholder has sufficient funds. Interest charges Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid Benefits to customers The main benefit to each customer is convenience. Compared to debit cards and cheques, a credit card allows small short-term loans to be quickly made to a customer who need not calculate a balance remaining before every transaction, provided the total charges do not exceed the maximum credit line for the card. Credit cards also provide more fraud protection than debit cards. In the UK for example, the bank is jointly liable with the merchant for purchases of defective products over 100. Many credit cards offer rewards and benefits packages, such as offering enhanced product warranties at no cost, free loss/damage coverage on new purchases, and points which may be redeemed for cash, products, or airline tickets.
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Detriments to customers High interest and bankruptcy Low introductory credit card rates are limited to a fixed term, usually between 6 and 12 months, after which a higher rate is charged. As all credit cards charge fees and interest, some customers become so indebted to their credit card provider that they are driven to bankruptcy. Some credit cards often levy a rate of 20 to 30 percent after a payment is missed. In other cases a fixed charge is levied without change to the interest rate. In some cases universal default may apply: the high default rate is applied to a card in good standing by missing a payment on an unrelated account from the same provider. This can lead to a snowball effect in which the consumer is drowned by unexpectedly high interest rates. Further, most card holder agreements enable the issuer to arbitrarily raise the interest rate for any reason they see fit. First Premier Bank at one point offered a credit card with a 79.9% interest rate, however they pulled the plug on this card in February 2011 because of persistent defaults. Complex fee structures in the credit card industry limit customers' ability to comparison shop, help ensure that the industry is not price-competitive and help maximize industry profits. Inflated pricing for all consumers Merchants that accept credit cards must pay interchange fees and discount fees on all credit-card transactions. In some cases merchants are barred by their credit agreements from passing these fees directly to credit card customers, or from setting a minimum transaction amount (no longer prohibited in the United States). The result is that merchants may charge all customers (including those who do not use credit cards) higher prices to cover the fees on credit card transactions.[13] In the United States in 2008 credit card companies collected a total of $48 billion in interchange fees, or an average of $427 per family, with an average fee rate of about 2% per transaction. Weakens self regulation Several studies have shown that consumers are likely to spend more money when they pay by credit card. Researchers suggest that when people pay using credit cards, they do not experience the abstract pain of payment. Furthermore, researchers have found that using credit cards can increase consumption of unhealthy food.

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Grace period A credit card's grace period is the time the customer has to pay the balance before interest is assessed on the outstanding balance. Grace periods may vary, but usually range from 20 to 50 days depending on the type of credit card and the issuing bank. Some policies allow for reinstatement after certain conditions are met. Usually, if a customer is late paying the balance, finance charges will be calculated and the grace period does not apply. Finance charges incurred depend on the grace period and balance; with most credit cards there is no grace period if there is any outstanding balance from the previous billing cycle or statement (i.e. interest is applied on both the previous balance and new transactions). However, there are some credit cards that will only apply finance charge on the previous or old balance, excluding new transactions. Benefits to merchants An example of street markets accepting credit cards. Most simply display theacceptance marks (stylized logos, shown in the upper-left corner of the sign) of all the cards they accept. For merchants, a credit card transaction is often more secure than other forms of payment, such as cheques, because the issuing bank commits to pay the merchant the moment the transaction is authorized, regardless of whether the consumer defaults on the credit card payment (except for legitimate disputes, which are discussed below, and can result in charges back to the merchant). In most cases, cards are even more secure than cash, because they discourage theft by the merchant's employees and reduce the amount of cash on the premises. For each purchase, the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee (interchange rate). In addition, a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Some small merchants require credit purchases to have a minimum amount to compensate for the transaction costs.

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Costs to merchants Merchants are charged several fees for accepting credit cards. The merchant is usually charged a commission of around 1 to 3 percent of the value of each transaction paid for by credit card. The merchant may also pay a variable charge, called an interchange rate, for each transaction. In some instances of very low-value transactions, use of credit cards will significantly reduce the profit margin or cause the merchant to lose money on the transaction. Merchants with very low average transaction prices or very high average transaction prices are more averse to accepting credit cards. In some cases merchants may charge users a "credit card supplement", either a fixed amount or a percentage, for payment by credit card. This practice is prohibited by the credit card contracts in the United States, although the contracts allow the merchants to give discounts for cash payment. Parties involved

Cardholder: The holder of the card used to make a purchase; the consumer. Card-issuing bank: The financial institution or other organization that issued the credit card

to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. American Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case. Cards issued by banks to cardholders in a different country are known as offshore credit cards.

Merchant: The individual or business accepting credit card payments for products or Acquiring bank: The financial institution accepting payment for the products or services on Independent sales organization: Resellers (to merchants) of the services of the acquiring Merchant account: This could refer to the acquiring bank or the independent sales Credit Card association: An association of card-issuing banks such

services sold to the cardholder.

behalf of the merchant.

bank.

organization, but in general is the organization that the merchant deals with.

as Discover, Visa, MasterCard, American Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks.

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Transaction network: The system that implements the mechanics of the electronic

transactions. May be operated by an independent company, and one company may operate multiple networks.

Affinity partner: Some institutions lend their names to an issuer to attract customers that

have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their name. Examples of typical affinity partners are sports teams, universities, charities, professional organizations, and major retailers. The flow of information and money between these parties always through the card associations is known as the interchange, and it consists of a few steps. Transaction steps

Authorization: The cardholder presents the card as payment to the merchant and the

merchant submits the transaction to the acquirer (acquiring bank). The acquirer verifies the credit card number, the transaction type and the amount with the issuer (Card-issuing bank) and reserves that amount of the cardholder's credit limit for the merchant. An authorization will generate an approval code, which the merchant stores with the transaction.

Batching: Authorized transactions are stored in "batches", which are sent to the acquirer.

Batches are typically submitted once per day at the end of the business day. If a transaction is not submitted in the batch, the authorization will stay valid for a period determined by the issuer, after which the held amount will be returned to the cardholder's available credit (see authorization hold). Some transactions may be submitted in the batch without prior authorizations; these are either transactions falling under the merchant's floor limit or ones where the authorization was unsuccessful but the merchant still attempts to force the transaction through. (Such may be the case when the cardholder is not present but owes the merchant additional money, such as extending a hotel stay or car rental.)

Clearing and Settlement: The acquirer sends the batch transactions through the credit card

association, which debits the issuers for payment and credits the acquirer. Essentially, the issuer pays the acquirer for the transaction.

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Funding: Once the acquirer has been paid, the acquirer pays the merchant. The merchant

receives the amount totaling the funds in the batch minus either the "discount rate," "midqualified rate", or "non-qualified rate" which are tiers of fees the merchant pays the acquirer for processing the transactions.

Chargebacks: A chargeback is an event in which money in a merchant account is held due

to a dispute relating to the transaction. Chargebacks are typically initiated by the cardholder. In the event of a chargeback, the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it. Secured credit cards A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, they will be given credit in the range of $500$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. Credit card issuers offer this because they have noticed that delinquencies were notably reduced when the customer perceives something to lose if the balance is not repaid. The cardholder of a secured credit card is still expected to make regular payments, as with a regular credit card, but should they default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history. Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the
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original deposit and the cardholder not only forfeits their deposit but is left with an additional debt. Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened. Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding one's credit. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards are almost always more expensive than unsecured credit cards. Prepaid "credit" cards A prepaid credit card is not a true credit card, since no credit is offered by the card issuer: the cardholder spends money which has been "stored" via a prior deposit by the card-holder or someone else, such as a parent or employer. However, it carries a credit-card brand (such as Discover, Visa, MasterCard, American Express, or JCB etc.) and can be used in similar ways just as though it were a regular credit card.[18] Unlike debit cards, prepaid credit cards generally do not require a PIN. An exception are prepaid credit cards with an EMV chip. These cards do require a PIN if the payment is processed via Chip and PIN technology. After purchasing the card, the cardholder loads the account with any amount of money, up to the predetermined card limit and then uses the card to make purchases the same way as a typical credit card. Prepaid cards can be issued to minors (above 13) since there is no credit line involved. The main advantage over secured credit cards (see above section) is that you are not required to come up with $500 or more to open an account.[19] With prepaid credit cards purchasers are not charged any interest but are often charged a purchasing fee plus monthly fees after an arbitrary time period. Many other fees also usually apply to a prepaid card Features As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment

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arrangement, and other perks (such asrewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cashback). Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen. Code 10 Code 10 calls are made when merchants are suspicious about accepting a credit card.The operator then asks the merchant a series of YES or NO questions to find out whether the merchant is suspicious of the card or the cardholder. The merchant may be asked to retain the card if it is safe to do so Over limit charges Consumers who keep their account in good order by always staying within their credit limit, and always making at least the minimum monthly payment will see interest as the biggest expense from their card provider. Those who are not so careful and regularly surpass their credit limit or are late in making payments are exposed to multiple charges that were typically as high as 25 - 35 until a ruling from the Office of Fair Trading[33] that they would presume charges over 12 to be unfair which led the majority of card providers to reduce their fees to exactly that level.

PNB CORPORATE MISSION Vision..

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"To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof" Mission "Banking for the unbanked" Origin of PNB Punjab under the British especially after annexation in 1849 witnessed a period of rapid development giving rise to a new educated class fired with a desire for freedom from the yoke of slavery. Amongst the cherished desires of this new class was also an overriding ambition to start a Swadeshi Bank with Indian Capital and management representing all sections of the Indian community. The idea was first mooted by Rai Mool Raj of Arya Samaj who, as reported by Lal Lajpat Rai, had long cherished the idea that Indians should have a national bank of their own. He felt keenly "the fact that the Indian capital was being used to run English banks and companies, the profits accruing from which went entirely to the Britishers whilst Indians had to contend themselves with a small interest on their own capital". At the instance of Rai Mool Raj, Lala Lajpat Rai sent round a circular to selected friends insisting on an Indian Joint Stock Bank as the first special step in constructive Swadeshi. Lala Harkrishan Lal who had returned from England with ideas regarding commerce and industry, was eager to give them practical shape. On May 23, 1894, the efforts materialized. The founding board was drawn from different parts of India professing different faiths and a varied back-ground with, however, the common objective of providing country with a truly national bank which would further the economic interest of the country. The Bank opened for business on 12 April, 1895. The first Board of 7 Directors comprised of Sardar Dayal Singh Majithia, who was also the founder of Dayal Singh College and the Tribune; Lala Lalchand one of the founders of DAV College and President of its Management Society; Kali Prosanna Roy, eminent Bengali pleader who was also the Chairman of the Reception committee of the Indian National Congress at its Lahore session in 1900; Lala Harkishan Lal who became widely known as the first industrialist of Punjab; EC Jessawala, a
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well known Parsi merchant and partner of Jamshedji & Co. of Lahore; Lala Prabhu Dayal, a leading Rais, merchant and philanthropist of Multan; Bakshi Jaishi Ram, an eminent Civil Lawyer of Lahore; and Lala Dholan Dass, a great banker, merchant and Rais of Amritsar. Thus a Bengali, Parsi, a Sikh and a few Hindus joined hands in a purely national and cosmopolitan spirit to found this Bank which opened its doors to the public on 12th of April 1895. They went about it with a Missionary Zeal. Sh. Dayal Singh Majithia was the first Chairman, Lala Harkishan Lal, the first secretary to the Board and Shri Bulaki Ram Shastri Barrister at Lahore, was appointed Manager. A Maiden Dividend of 4% was declared after only 7 months of operation. Lala Lajpat Rai was the first to open an account with the bank which was housed in the building opposite the Arya Samaj Mandir in Anarkali in Lahore. His younger brother joined the Bank as a Manager. Authorised total capital of the Bank was Rs. 2 lakhs, the working capital was Rs. 20000. It had total staff strength of nine and the total monthly salary amounted to Rs. 320. The first branch outside Lahore was opened in Rawalpindi in 1900. The Bank made slow, but steady progress in the first decade of its existence. Lala Lajpat Rai joined the Board of Directors soon after. in 1913, the banking industry in India was hit by a severe crisis following the failure of the Peoples Bank of India founded by Lala Harkishan Lal. As many as 78 banks failed during this crisis. Punjab National Bank survived. Mr. JH Maynard, the then Financial Commissioner, Punjab, remarked...."Your Bank survived...no doubt due to good management". It spoke volumes for the measure of confidence reposed by the public in the Bank's management. The years 1926 to 1936 were turbulent and loss ridden ones for the banking industry the world over. The 1929 Wall Street crash plunged the world into a severe economic crisis. It was during this period that the Jalianwala Bagh Committee account was opened in the Bank, which in the decade that followed, was operated by Mahatma Gandhi and Pandit Jawaharlal Nehru. The five years from 1941 to 1946 were ones of unprecedented growth. From a modest base of 71, the number of branches increased to 278. Deposits grew from Rs. 10 crores to Rs. 62 crores. On March 31, 1947, the Bank officials decided to leave Lahore and transfer the registered office of the Bank to Delhi and permission for transfer was obtained from the Lahore High Court on June 20, 1947. PNB was then housed in the precincts of Sreeniwas in the salubrious Civil Lines, Delhi. Many
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a staff member fell victim to the widespread riots in the discharge of their duties. The conditions deteriorated further. The Bank was forced to close 92 offices in West Pakistan constituting 33 percent of the total number and having 40% of the total deposits. The Bank, however, continued to maintain a few caretaker branches. The Bank then embarked on its task of rehabilitating the displaced account holders. The migrants from Pakistan were repaid their deposits based upon whatever evidence they could produce. Such gestures cemented their trusts in the bank and PNB became a symbol of Trust and a name you can bank upon. Surplus staff posed a big problem. Fast expansion became a priority. The policy paid rich dividends by opening up an era of phenomenal growth. In 1951, the Bank took over the assets and liabilities of Bharat Bank Ltd. and became the second largest bank in the private sector. In 1962, it amalgamated the Indo-Commercial Bank with it. From its dwindled deposits of Rs. 43 crores in 1949 it rose to cross the Rs. 355 crores mark by the July 1969. Its number of offices had increased to 569 and advances from Rs. 19 crores in 1949 to Rs. 243 crores by July 1969 when it was nationalised. Since inception in 1895, PNB has always been a "People's bank" serving millions of people throughout the country and also had the proud distinction of serving great national leaders like Sarvshri Jawahar Lal Nehru, Gobind Ballabh Pant, Lal Bahadur Shastri, Rafi Ahmed Kidwai, Smt. Indira Gandhi etc. amongst other who banked with us. Profile of PNB With over 60 million satisfied customers and more than 5100 offices including 5 overseas branches, PNB has continued to retain its leadership position amongst the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card, debit card; bullion business; life and non-life insurance; Gold coins & asset management business, etc. PNB has earned many awards and accolades during the year in appreciation of excellence in services, Corporate Social Responsibility (CSR) practices, transparent governance structure, best use of technology and good human resource management. Since its humble beginning in 1895 with the distinction of being the first Swadeshi Bank to

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have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2011 amounted to Rs 5,55,005 crore. PNB is ranked as the 2nd largest bank in the country after SBI in terms of branch network, business and many other parameters. During the FY 2010-11, with 39.16% share of CASA to domestic deposits, the Bank achieved a net profit of Rs 4433 crore. Bank has a strong capital base with capital adequacy ratio of 12.42% as on Mar11 as per Basel II with Tier I and Tier II capital ratio at 8.44% and 3.98% respectively. As on March11, the Bank has the Gross and Net NPA ratio of 1.79% and 0.85% respectively. During the FY 2010-11, its ratio of Priority Sector Credit to Adjusted Net Bank Credit at 40.67% & Agriculture Credit to Adjusted Net Bank Credit at 19.30% was also higher than the stipulated requirement of 40% & 18% respectively. The Bank has been able to maintain its stakeholders interest by posting an improved NIM of 3.96% in Mar11 (3.57% Mar10). The Earning per Share improved to Rs 140.60 (Rs 123.86 Mar10) while the Book value per share improved to Rs 661.20 (Rs 514.77 Mar10). Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, Assets, Operating and Net profit in the year 2010-11. The impressive operational and financial performance has been brought about by Banks focus on customer based business with thrust on CASA deposits, Retail, SME & Agri Advances and with more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank. The performance highlights of the bank in terms of business and profit are shown below: Rs. In Crore Parameters OperatingProfit NetProfit Deposit Advance TotalBusiness Mar'09 5690 3091 209760 154703 364463 Mar'10 7326 3905 249330 186601 435931 Mar'11 9056 4433 312899 242107 555005 CAGR(%) 26.16 19.76 22.14 25.10 23.40

Bank always looked at technology as a key facilitator to provide better customer service and ensured that its IT strategy follows the Business strategy so as to arrive at Best Fit. The

33

Bank has made rapid strides in this direction. All branches of the Bank are under Core Banking Solution (CBS) since Dec08, thus covering 100% of its business and providing Anytime Anywhere banking facility to all customers including customers of more than 3200 rural & semi urban branches. The Bank has also been offering Internet banking services to its customers which also enables on line booking of rail tickets, payment of utilities bills, purchase of airline tickets, etc. Towards developing a cost effective alternative channels of delivery, the Bank with 5050 ATMs has the largest ATM network amongst Nationalized Banks. With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth, the Banks mission is Banking for Unbanked. The Bank has launched a drive for biometric smart card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, dairy farmers, construction workers, etc. Bank has launched a welfare scheme of adoption of village viz., PNB VIKAS. Under the scheme, Bank has selected 117 villages (60 in lead districts and 57 in non lead district) in different circles for all-round improvement in the living standards of the villagers. Besides, Bank has formed PNB PRERNA, an association of the wives of the Banks senior management. The association through its voluntary initiatives has undertaken activities like distribution of food to the poor and needy, provision of computers, books, stationary items to poor girl students at various orphanages and schools etc. Backed by strong domestic performance, the Bank is planning to realize its global aspirations. Bank has opened one branch each at Kabul and Dubai, two branches at Hong Kong and an Off Shore Banking Unit at Mumbai. In addition to the above, Bank has Representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned subsidiary in UK with 7 branches and a subsidiary each in Kazakhstan & Bhutan, and joint venture with Everest Bank Ltd. Nepal. During the year, Bank acquired majority equity stake of 63.64% in Dana Bank of Kazakhstan. Organisational Struture Bank has its Corporate Office at New Delhi and supervise 65 Circle Offices under which the
34

branches function. The delegation of powers is decentralised upto the branch level to facilitate quick decision making. Shri. K.R. Kamath

Chairman Managing Director and Dy. Chairman of Indian Banks Association Shri Rakesh Sethi Executive Director Smt. Usha Ananthasubramanian Shri Anurag Jain Shri Jasbir Singh Shri M.P.Singh Shri Pradeep Kumar Shri M.A Antulay Shri BB Chaudhry Executive Director Govt.of India Nominee Director RBi Nominee Director Working employees Director Office Director Part time non.official Director Part time non.official Director

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Chapter-II
Review of literature

Review of literature
Hasan A. Deveci (1984): Trademarks and domain names are infringed by an unauthorised use in the course of trade. Trademark infringement predates the Internet, of course, but by eroding the geographic boundaries that traditionally allowed multiple users to apply the same or similar mark in different countries or in relation to different products, the Internet has aggravated the illegitimate
36

use of trademarks. Part I of this article will outline the nature and justify the protection of intellectual property but argue that unlike passing off registered trademark law has strayed from its path. Part II will examine judicial attitudes towards trademarks and domain names and contend that emphasis on the reputation of the trademark rather than reputation in the product underlines current problems. Part III will review the nature of domain name disputes, comment on dispute resolution policies and suggest indexed linking or classified registration of domain names as one possible solution HAMILTON et.al (1995): One of the main problems currently facing CTedit-card issuers is the increasing number of cardholders who are using their cards less often (i.e. attrition) and/or returning their cards (closures). This problem is of particular concern as the total number of credit cards held by consumers is declining (by approximately 0.6 per cent per month in 1992) and the number of new applicants is also running at an all time-low (less than 1 per cent per month in 1992). Most of the published literature in the broad area of credit cards looks at credit scoring, rather than the need for card issuers to identify and retain a profitable portfolio of card customers. The overall objective of our research is segmentation for customer retention, and this paper aims to identify the characteristics of card customers who initiate the closure of their accounts Linear discriminant analysis is applied to a sample of approximately 17,000 UK holders of bank credit cards, using various behavioural and sociodemographic variables, and tested on a holdout sample of 10,000 cases. MATIVAT and TREMBLAY(1997):A displacement-induced crime wave model assumes that changes in crime opportunities will motivate a significant subset of offenders to engage in similar crime switching adaptations, expectation being that the crime wave will therefore be associated with a concomitant decrease in other related offences. This paper locates a particular crime wave (a 199294 wave in counterfeit credit card frauds), identifies a set of related offences (stolen-based credit card frauds) and argues that the expected displacement effect triggered by the marketing of compact and efficient encoding and embossing equipment (as well as sophisticated photocopying and printing devices) did not materialize, in practice, at least in the setting we have analysed (Montreal). Even though stolen-based and altered credit card frauds were tightly related offences and involved a homogeneous population of offenders, the actual difference in pay-off was not significant enough to trigger systematic switching in crime tactic preferences; moreover, offenders willing to participate in sophisticated pure counterfeit credit card frauds could not, as a matter of
37

fact, take advantage of such an option even if they wished to do so (mainly because they did not have the right (ethnic) connections). T Wolters (2000): Drawing from newly available archival material, this article explores the early history of one of today's most ubiquitous financial instruments, the bank credit card. It focuses on the managerial decisions that led to the implementation and development of charge card programs at the two largest American banks of the late 1950s and early 1960s. Even though the initial performance of the two programs was comparable, top management at each bank ultimately adopted different business strategies. The differences resulted from managers' contrasting interpretations of the appropriate market for the credit card, interpretations formed within the context of two distinct banking cultures Hand and blunt(2001) : After a brief highlevel discussion of the nature of data mining, this paper describes some of our experiences in mining credit card transaction data. We illustrate the use of simple graphical tools for unearthing unexpected patterns and relationships, and show how more sophisticated modelling can build on such discoveries Hynes and Posner (2002): This survey of the law and economics of consumer finance discusses economic models of consumer lending and evaluates the major consumer finance laws in light of them. We focus on usury laws; restrictions on creditor remedies, such as the ban on expansive security interests; bankruptcy law; limitations on thirdparty defenses, such as the holderin duecourse doctrine; information disclosure rules, including the Truth in Lending Act; and antidiscrimination law. We also discuss the empirical literature. Alya Guseva(2005): Based, in part, on original fieldwork in Moscow, Russia, in 1998, 1999 and 2004, this paper focuses on two markets at their conception pointsthe American credit card market of the late 1950s and 1960s and the Russian credit card market of the 1990s. Emerging credit card markets need to solve two problems: the problem of uncertainty inherent in lending and the complementarity problem of simultaneously attracting merchants and cardholders. American banks jump-started the market by mailing unsolicited cards to thousands of unsuspecting and unscreened individuals. This resulted in staggering losses, but helped to attract merchants. American banks eventually solved the uncertainty problem through formal institutional means: they shared account information with third parties (credit bureaus) and based pre-screening on the calculation of risk, which made bankcustomer relationships completely impersonal. The dominant way to disseminate cards in Russia is through payroll agreements with enterprises, whereby the
38

employees are issued cards secured by their salaries directly deposited to the bank. Not only does the rapid increase of cardholders attract merchants, but payroll projects also solve the uncertainty problem through two-stage embeddedness: banks rely on employing organizations to mediate their relations with cardholders. As a result of dissimilar solutions to the uncertainty and complementarity problems, the structures of Russian and American credit card markets differ as well. Shelly and Jackson (2009): The purpose of this paper is to identify privacy, security and legal issues facing small business in the business to consumer (B2C) e-commerce environment. Forty websites of small businesses based in Australia are examined to assess whether the content on these websites conforms with legal obligations. The study found that many of the websites examined appear not to be complying fully with their obligations under privacy and fair trading legislation as well as with those imposed in contracts with merchant facility providers. Matoe et.al (2011): Despite increasing interest, little is known about the beliefs and views of the public in relation to the use of economic incentives as a means to promote healthy eating. This study explores views of ethnically and socioeconomically diverse shoppers regarding acceptability of economic incentives to promote healthier food purchases, and factors likely to affect the success of such schemes. Six focus groups (n = 36 participants; 14 Mori, 12 Pacific, 10 non-ethnic specific low income), were held in Auckland, New Zealand, in October 2009. A general inductive approach was used to identify common themes. The single most important reported food purchasing influence was cost. Focus group participants viewed the concept of economic incentives to promote healthy eating positively, as long as such schemes provided worthwhile incentives, and were simple and convenient to use. The preferred option for delivery was a preloaded electronic swipe card. Fruit and vegetables were the food group most participants said they would like to see incentivized. There was marked variability in the incentive amount thought sufficient to promote participation in such a scheme. Our findings suggest economic incentives hold promise as a means to promote healthier household food purchases, and their effectiveness should be evaluated using robust, randomized trials. Schuh et.al(2012): In 2010, the Department of Justice (DOJ) filed a lawsuit against the credit card networks American Express, MasterCard, and Visa for alleged antitrust violations. We evaluate the extent to which the recently approved settlement between the DOJ and Visa and MasterCard (the Settlement) is likely to achieve its central objective: to allow Merchants to attempt to influence
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the General Purpose [Credit] Card or Form of Payment Customers select by providing choices and information in a competitive market. In word and spirit, the Settlement represents a significant step toward promoting competition in the credit card market. However, we find that merchants are unlikely to be able to take full advantage of the Settlement's new freedoms because they currently lack comprehensible and complete information on the full and exact merchant discount fees for their customers' credit cards. We analyze the likely consequences of this information problem and consider ways in which it could be remedied. We also evaluate the probable welfare consequences of allowing merchants to impose surcharges to reflect the fees associated with the use of payment cards.

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CHAPTER-III
NEED, SCOPE AND OBJECTIVE

NEED, SCOPE, AND OBJECTIVE OF STUDY

3.1 Need Of The Study The researches that were conducted in the past by various professionals were regarding awareness & perception about the credit card in other region and not regarding awareness and perception
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about credit card in Palmpur region. Study relating to awareness & perception about the credit card has been done and no study regarding awareness & perception about the credit card in Palampur is done. This gap has been identified and let to the present research being undertaken. So the need was felt to cover the areas neglected. Thus, awareness & perception about the credit card in Palampur region has been studied. 3.2 Objective of the study 1. 2. 3. 4. 5. To check awareness level of the customer . To check the perception about credit card of the customer. To check the which credit card is mostly preferred by the customer. To check usability of PNB credit card by the most of the customer comparative to other banks. To study the overall behavior of the customer about the credit card of the PNB bank.

3.3 Scope of study The research was carried in Palampur. PNB Palampur where I completed my Project work. The study will help to know abut the customer perception and customer awareness level about the credit card. The various point and things helps us that how much customer is aware about the credit card, how much customer have the PNBs credit card. Wheather they are satisfy by the services provided by the PNB bank. But the scope of this research is limited to the Palampur.so the the result comes from this research work is limited to Palampur only.

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CHAPTER -IV RESEARCH METHODOLOGY

RESEARCH METHODOLOGY Research Methodology is a way to systematically solve the research problem. The Research Methodology includes the various methods and techniques for conducting a Research Marketing Research is the systematic design, collection, analysis and reporting of data and finding relevant solution to a specific marketing situation or problem. D. Slesinger and M.Stephenson in the encylopedia of Social Sciences define Research as the manipulation of things, concepts or
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symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art. Research is, thus, an original contribution to the existing stock of knowledge making for its advancement. The purpose of Research is to discover answers to the Questions through the application of scientific procedures. Our project has a specified framework for collecting data in an effective manner. Such framework is called Research Design. The research process followed by us consists of following steps: Research Design: Exploratory Research:- Exploratory research often relies on secondary research such as reviewing available literature and/or data, or qualitative approaches such as informal discussions with consumers, employees, management or competitors, and more formal approaches through in-depth interviews, focus groups, projective methods, case studies or pilot studies. The Internet allows for research methods that are more interactive in nature. Descriptive Research:-A type of conclusive research which has as its major objective the description of something-usually market characteristics or functions. In other words descriptive research is a research where in researcher has no control over variable. He just presents the picture which has already studied. Conclusion Oriented Research:-Research designed to assist the decision maker in the situation. In other words it is a research when we give our own views about the research. Sample DesignSampling can be defined as the section of some part of an aggregate or totality on the basis of which judgement or an inference about aggregate or totality is made. The sampling design helps in decision making in the following areas: Universe of the study-The universe comprises of two parts as theoretical universe and

accessible universe Theoretical universe- It includes all the people throughout the universe. Accessible universe- It includes people in Palampur region.
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Sample frame-Sample frame refers from where the questionnaires are to be filled. Our sample

frame consists of client of PNB Bank. Sample size- Sample size is the number of elements to be included in a study. Keeping in

mind all the constraints 200 respondents were selected. Sample unit- Sampling unit is the basic unit containing the elements of the universe to be

sampled. The sampling unit of our study is general public. Sampling Techniques- The sampling techniques used are convience technique and simple

random sampling technique. Methods of Data CollectionResearch work is exploratory in nature. Information has been collected from both Primary and Secondary data. Primary sources- Primary data are those, which are collected are fresh and for the first time,

and thus happen to be original in character. Primary data has been collected by conducting surveys through questionnaire, which include both open- ended and close-ended questions and personal and telephonic interview. Secondary sources- Secondary data are those which have already been collected by someone

else which already had been passed through the statistical process. Secondary data has been collected through magazines, websites, newspapers and journals. Tools of AnalysisTo analyse the data obtained with the help of questionnaire, following tools were used. Likert Scale : These consist of a number of statements which express either a favourable or

unfavourable attitude towards the given object to which the respondents are asked to react. The respondent responds to in terms of several degrees of satisfaction or dissatisfaction. Weighted Average Score: This tool is used to calculate highest and lowest rank. Tables: This is a tool to present the data in tabular form.
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Percentage, Bar Graphs And Pie Charts: These tools were used for analysis of data.

LIMITATIONS OF THE STUDY Due to constraints of time and resources, the study is likely to suffer from certain limitations. Some of these are mentioned here under so that the findings of the study may be understood in a proper perspective. No study is free from limitations. The limitations of this study can be: The research was carried out in a short period. Therefore the sample size and the parameters were selected accordingly so as to finish the work within the given time frame. The information given by the respondents might be biased some of them might not be interested to give correct information. Some of the respondents could not answer the questions due to lack of knowledge. As the credit rating is one of the crucial areas for any bank, some of the technicalities are not revealed which may have cause destruction to the information and our exploration of the problem. Some of the persons were not so responsive. Possibility of error in data collection because many of clients may have not given actual answers of my questionnaire. The study only covers the area of Palampur that may not be applicable to other areas.

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CHAPTER-V DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS & INTERPRETATION

Q1. Are you aware about credit card? Table5.1 Are you aware about credit card Responses Total responses
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Percentage of responses

Yes No Total

100 0 100 Figure 5.1 Are you aware about credit card

100% 0% 100%

Interpretation: All the respondents living in the Palampur region were aware about the credit cards.

Q2. Do you have the credit card? Table 5.2 Do you have the credit card Responses Yes Total responses 100
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Percentage of responses 100%

No Total

0 100 Figure 5.2 Do you have the credit card

0% 100%

Interpretation: All the respondents living in the Palampur region have the credit card.

Q3.Which bank credit card you use? Table 5.3 Bank credit card you use Responses PNB ICICI Both PNB & ICICI Total responses 71 5 19
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Percentage of responses 71% 05% 19%

Any other ,specify Total

5 100 Figure 5.3 Bank credit card you use

5% 100%

Interpretation: Majority of the respondents have the credit card of PNB Banks n some of the have both PNB & ICICI bank credit card. Q4. Why did you choose the credit card of this above mentioned company? Table 5.4 Reason to take the credit card Responses Charges Good schemes Good services Total responses 04 32 62
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Percentage of responses 04% 32% 62%

Any other ,specify Total

02 100 Figure 5.4 Reason to take the credit card

02% 100%

Interpretation: Majority of respondents take the credit card of the above mentioned company due to the Good Services provided by the credit card companies. Q5. From where you came to know about credit card? Table 5.5 From where you came to know about credit card Responses Salesman Through bank employee Media & ads Any other Total responses 03 68 25 04
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Percentage of responses 03% 68% 25% 04%

Total

100 Figure 5.5 From where you came to know about credit card

100%

Interpretation: Majority of respondents thought that they came to about credit card from the Bank employee and some out of them by media & ads. Q6. What according to you, having credit card is a wise decision? Table 5.6 Having credit card is a wise decision Responses Yes No Total Total responses 87 13 100 Figure 5.6 Having credit card is a wise decision
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Percentage of responses 87% 13% 100%

Interpretation: Majority of respondents thought that having credit card is a wise decision.

Q7. What according to you, Is the transaction through credit card is safe? Table 5.7 Is the transaction through credit card is safe Responses Yes No Total Total responses 97 03 100 Figure 5.7 Is the transaction through credit card is safe Percentage of responses 97% 03% 100%

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Interpretation: Majority of respondents thought that transaction through credit card is safe.

Q8. For what purpose credit card is used? Table 5.8 For what purpose credit card is used Responses Shopping Filling petrol/gas (CNG) Premium All the above Total Total responses 84 04 00 12 100 Figure 5.8 For what purpose credit card is used
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Percentage of responses 84% 04% 00% 12% 100%

Interpretation: Majority of respondents used the credit card for shopping purpose,where as some out of them use for shopping, payment of premium n filling of petrol /gas(CNG). Q9. Is cash according to you, is better option than credit card? Table 5.9 Cash is better that credit card Responses Yes No Total Total responses 76 24 100 Figure 5.9 Percentage of responses 76% 24% 100%

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Cash is better that credit card

Interpretation: Majority of respondents thoughts that cash is the better option then credit card.

Q10. Are you satisfied with the current card provider? Table5.10 Satisfied with the current card provider Responses Yes Total responses 92
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Percentage of responses 92%

No Total

08 100 Figure 5.10 Satisfied with the current card provider

08% 100%

Interpretation: Majority of respondents are satisfied with the current card provider.

Q11. Is Your expenditure increased after credit card usage? Table 5.11 Is Your expenditure increased after credit card usage Responses Strongly agree Total responses 12 Percentage of responses 12%

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Agree Neutral disagree Strongly disagree Total

34 50 04 00 100

34% 50% 04% 00% 100%

Parameter S.A (1) Expenditure Incresed 12 12 12 68 34 68 A (2) 50 150 150 N (3) 4 16 16 00 D (4) 00 00 314 314 S.D (5) Total

Q12. You think promises made by credit card company are fulfilled? Table 5.12 Promises made by credit card company are fulfilled Responses Yes No Total Total responses 92 08 100 Figure 5.12
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Percentage of responses 92% 08% 100%

Promises made by credit card company are fulfilled

Interpretation: Majority of respondents thought that promises made by credit card company are fulfilled.

CHAPTER-VI
59

FINDINGS

FINDINGS
All the respondents living in the Palampur region were aware about the credit cards. All the respondents living in the Palampur region have the credit card. Majority of the respondents have the credit card of PNB Banks n some of the have both PNB & ICICI bank credit card. Majority of respondents take the credit card of the above mentioned company due to the Good Services provided by the credit card companies. Majority of respondents thought that they came to about credit card from the Bank employee and some out of them by media & ads.
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 Majority of respondents thought that having credit card is a wise decision. Majority of respondents thought that transaction through credit card is safe.

Majority of respondents used the credit card for shopping purpose,where as some out of them use for shopping, payment of premium n filling of petrol /gas(CNG). Majority of respondents thoughts that cash is the better option then credit card. Majority of respondents are satisfied with the current card provider.
Majority of respondents thought that promises made by credit card company are

fulfilled.
http./wikipedia.org/creditcard

https://www.pnbindia.in/En/ui/Home

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CHAPTER-VII CONCLUSION AND RECOMMENDATIONS

Conclusion
Most often credit cards can provide convenience but they can also land you in debt through unwise choices or through no fault of your own, such as an emergency. In order to overcome the risks of credit card use, avoid accumulating too may and pay the debt off on time, read terms and conditions carefully and take measures to avoid fraud.

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63

REFERENCES

References
Hasan A. Deveci (1984), Domain Names: Has Trade Mark Law Strayed From Its Path.

Oxford Journal . volume 11 issue 3, 333-342.

HAMILTON et.al (1995), Customer retention: a behavioural model. Oxford Journal .

volume 17 issue 2, 180-205.

64

MATIVAT and

TREMBLAY(1997),

COUNTERFEITING

CREDIT

CARDSDisplacement Effects, Suitable Offenders and Crime Wave Patterns. Oxford Journal . volume 1 issue 2, 165-183.
T Wolters (2000), 'Carry your credit in your pocket': the early history of the credit card at

Bank of America and Chase Manhattan. Oxford Journal . volume 1 issue 2, 315-325.
Hand and blunt(2001), Prospecting For Gems In Credit Card Data. Oxford Journal .

volume 12 issue 2, 173-200.

Hynes and Posner (2002), The Law and Economics of Consumer Finance. Oxford Journal

. volume 19 issue 1, 37-53.

Alya Guseva(2005), Building new markets: a comparison of the Russian and American

credit card markets. Oxford Journal . volume 3 issue 3, 437-466.

Shelly and Jackson (2009), Doing Business with Consumers Online: Privacy, Security and

the Law. Oxford Journal . volume 4 issue 1, 168-207.

Matoe et. al (2011), Economic incentives to promote healthier food purchases: exploring

acceptability and key factors for success. Oxford Journal . volume 10 issue 1, 37-53.
Schuh et.al(2012), An Economic Analysis Of The 2011 Settlement Between The

Department Of Justice And Credit Card Networks. Oxford Journal . volume 10 issue 1, 1093-1110. http./wikipedia.org/advertising https://www.pnbindia.in

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ANNEXURE

Annexure
66

I am Preeti Bhandari conducting a research on the topic Awareness and perception of customer about credit card And I request you to fill the following questionnaire .This will take 3-5 minutes of your time and I promise to keep the information confidential. Demographic Information Name Age: Gender: . Below 25 Male 26-35 Female 36-45 Above 45

Contact no. - ................................................ Q1. Are you aware about credit card? Yes Q2. Do you have the credit card? Yes Q3.Which bank credit card you use? PNB Both PNB &ICICI ICICI Any other, specify ................................ No No

Q4. Why did you choose the credit card of this above mentioned company? Charges Good services Good Schemes Any other

Q5. From where you came to know about credit card? Salesman Media & ads Through Bank Employee Any other

Q6. What according to you, having credit card is a wise decision?

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Yes

No

Q7. What according to you, Is the transaction through credit card is safe? Yes Q8. For what purpose credit card is used? Shopping Premium Filling petrol/gas (CNG) All the above No

Q9. Is cash according to you, is better option than credit card? Yes No

Q10. Are you satisfied with the current card provider? Yes No

Q11. Is Your expenditure increased after credit card usage? Strongly Agree Disagree Agree Strongly Disagree Neutral

Q12. You think promises made by credit card company are fulfilled? Yes No

THANKS FOR YOUR CORPORATION

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