“STUDY OFGROWTH & DEVELOPMENT OF

INDIAN BANKING SECTOR IN LAST 10 YEARS”

Bachelor of commerce

Banking & Insurance

Semester v

Submitted

In partial Fulfilment of requirement for the

Award of Degree of Bachelor of Commerce – Banking

& Insurance

By

Utekar Rohit Chandrakant

Seat No:

T.Z.A.SHIKSHAN PRASARAK MANDAL’S

PRAGATI COLLEGE OF ARTS & COMMERCE

Dombivli (East), Maharashtra-421 201

PRAGATI COLLEGE OF ARTS &COMMERECE

DOMBIVLI (E)

CERTFICATE

(2015-2016)

This is to certify that Mr. ROHIT CHANDRAKANT UTEKAR, Seat No:

of B.com Banking & Insurance Semester VI (2015-16) has successfully

completed the project on, STUDY OF GROWTH AND DEVELOPMENT

OF INDIAN BANKING SECTOR IN LAST 10 YEARS under the guidance

of Prof.Swati Pusalkar.

(Prof. Swati Pusalkar) (Dr. A.P.Mahajan)

Course Coordinator Principal

(Prof. Swati Pusalkar.)

DECLARATION

I am, ROHIT CHNADRAKANT UTEKAR , the student of B.COM BANKING

& INSURANCE SEMESTER V (2015-16) declare that I have completed the

project on STUDY OF GROWTH AND DEVELOPMENT OF INDIAN

BANKING SECTOR IN LAST 10 YEARS

The information submitted is true and original to the best of my knowledge.

Signature of student

Rohit Utekar

Seat No. :

ACKNOWLEDGEMENT

Apart from the efforts of me, the success of my project is totally depends on encouragement and guidelines of many others. I take this opportunity to express my view to the people who have been thankful in the success of completion of this project.

I would like to show my greatest appreciation to my project guide as well as course coordinator Prof .Swati Pusalkar without their encouragement, this project would not have materialized.

The guidance and support received from all the persons who contributed was very important for the success of the project.

Finally, I take this opportunity to extend my deep appreciation to my family and friends for all they meant to me during the extremely important times of completion of this project.

Student signature

Rohit chandrakant utekar

INDEX

SR

NO.

TOPICS PAGE

NO.

1. EXECUTIVE SUMMERY I

2. OBJECTIVE II

3. RESEARCH METHODOLOGY & LIMITATIONS III

5. CHAPTER-I

INTRODUCATION OF BANKING

9-17

6. CHAPTER-II

GROWTH AND DEVELOPMENT OF BANKS

18-34

7. CHAPTER-III

FINDINGS

35

8. CONCLUSION 36

9. BIBLIOGRAPHY 37

10. WEBLIOGRAPHY 37

EXECUTIVE SUMMAMARY

The topic of this project is useful to know how banks are tremendously performance. If we want to develop our country, then increases in their there must be a proper financial status of our country& therefore there sector. This is helpful to development in banking must be systematic developments in banks by using new creative understand the overall policies and innovation. The creation and development of new forms of distribution in the banking sector is both necessary a great business because it leads to improvements in institutions opportunity for financial measured in terms of income costs, productivity performance overall and quality of service. The bank which used the right technology to increase and thereby gain supply timely information will see productivity a competitive edge. To competitive for the Indian Banks to observe environment. Not only the latest technology and modify it to suit their banks need greatly enhanced use of technology to the customer friendly. Existing service and business, they also need efficient and competitive technology for providing never products and never form of services in a Today, the private environment. Dynamic and globalized increasingly Indian banks have brought a fresh perspective to bear on the situation. They already overshadow foreign banks on the situation.

OBJECTIVES OF STUDY

To study about the current scenario of banks.

To study the technological developments and innovations in banks in last 10 YEARS in banking Sector.

To know growth and Indian banking sector

RESEARCH MRTHODOLOGY

Secondary Data:-

My secondary data was collected from the website & websites & publish Data, report, circulars, annual report, Journals & Articles.

LIMITATIONS

I. There is no scope to collect primary data.

II. Duration for project is limited. i.e. 2 months

III. Updated data is unavailable

CHAPTER I

1.1 Introduction

1.2 General information of banking

1.3 History of bank

1.4 Banking sector in India

1.5 Importance of banking in Indian economy

1.6 Organizational structure

1.7 Product of banking sector

CHAPTER -I

1.1 INTRODUCTION OF BANK:

A bank is a financial institution that provides banking and other financial services

to their customers. Basically, a bank is an institution which dealing with two basic

principles such as accepting deposits and giving loans to the customers. The banks

are the main participants of financial system in India. There are also non-banking

financial institutions that provide banking services. Banks are the subset of the

financial service industry. The banking sector offers several facilities and

opportunities to their customer. All the banks provide services such as checking

accounts, money order and cashier cheque. The banks also offer investment and

insurance product such as mutual fund, life insurance, general insurance and so on.

Banker is a person who accepts deposits, money on current accounts issued and

pays cheques and collects cheques for his customer. The bank acts as an agent of

the customer. Banks also dealing with other activities like factoring, housing

finance, giving credit cards, debit cards, making portfolio management, facilities of

ATM’s , mobile banking, internet banking etc.

1.2 GENERAL INFORMATION OF BANKING:

The banking in India was originated in the last decades of 18th century. The first

banks such as Bank of Hindustan and General Bank of India were established in

the year 1786.

In 1806, the Bank of Calcutta which become Bank of Bengal as well as Bank of

Bombay and Bank of Madras all three banks were established under the act of

British East India Company and theses three banks were merged in 1921 to form

the Imperial Bank of India. After independence it became State Bank of India in

1955. For regulation of such banks, the Reserve Bank of India was established in

1935. In 1969, the government has declared nationalized for all major banks which

have remained under government ownership. Their operations are under a structure

known as Profit Making-Public Sector Undertakings (PSU) which can be operated

as commercial banks.

Banking sector has also making their presence in rural area. The government has

developed through State Bank of India having large network and through National

Bank for Agriculture and Rural Development by providing micro finance. The

Indian banking sector has made up of four types of banks, public sector banks as

well as all state banks. Banking company is a company which transacts the

business of banking in India. All banks which are included in the second schedule

of Reserve Bank of India Act, 1934 are scheduled banks. This bank includes

scheduled commercial banks and scheduled co-operative banks.

1.3 HISTORY OF BANK:

The word bank is derived from the German words ‘bancs’ which means bench.

Banking is an old concept in India. It was present in ancient times during the third

century; the great Hindu Jurist devoted a section of his work to deposits and

advances. He had led down certain rules regarding to the rates of interest to be paid

or change.

During the Maugham period the banks plays a very important role in lending

money and financing trade and commerce. In that period, the first bank was

probably the religious temple of the ancient world where the gold was stored in the

form of easy to carry in compressed plates. Banking in India was originated in the

last decades of 18th century. Every town or village was involving in transferring

funds from place to place. They were collecting money through handiest. Greek

temples as well as private and civic entities conducted financial transactions such

as loans, deposits, and currency exchange and so on. Throughout the moray period,

the desk banks played a vital role in economic development of the country.

1.4 BANKING SECTOR IN INDIA:

The banking sector in India is very important tool for employment. As per the

Mckinsey report “India Banking 2010” the banking sector index has grown at

annual rate of 51per cent since the year 2001, as compared to the 27 per cent

growth in market index in the same year. Today, the banks have diversified their

activities and are getting into new product and services such as credit cards,

consumer finance, wealth management life and general insurance, investment

banking, mutual fund, pension fund regulation, stock broking services, custodian

services, private equity, etc. Most of the leading Indian banks act as global have

open their branches in foreign country also by themselves or through their

subsidiaries. In India the commercial banks have been established under the

provisions of Banking Regulation Act, 1949. Commercial banks may be scheduled

or non-scheduled banks.

In public sector, there are 107 public sector banks. Out of these, 1state bank plus 5

subsidiary banks plus 19 nationalized banks plus 82 regional rural banks. In private

sector, there are 21 banks. Out of which, 7 are new and 14 are old private sector

banks. There are 32 foreign banks operating in India. The nationalized banks

where wholly owned by Government of India. In India, 41 foreign banks operated

through representative offices. Out of 29 foreign banks 4 banks have 10 or more

branches. The branches of these banks have spread in 15 states.

1.5 IMPORTANCE OF BANKING IN INDIAN ECONOMY:

Bank plays a significant role in the economic development. The overall economic

of a country is absolutely dependent on the efficient banking system. Industrial,

agricultural and commercial progress of a country is not possible without a good

banking system. The importance of banking may be stated as follows:

1. Capital Formation:

Economic development depends upon the division of economic resources from

consumption to capital formation. Capital grows out of savings. Banks play the

prime role in accumulating capital by collecting the scattered savings of the people.

Thus banks render a valuable service towards the development of a country by

encouraging the growth of capital.

2. Inexpensive Media of Exchange:

Modern Banking provides inexpensive media of exchange. Issuing of currency

notes is a great achievement of modern banking. In addition the cheques issued on

the banks are frequently used instead of money in transacting business. Thus the

cheques economize the use of currency notes.

3. Development of Trade and Industry:

Bank utilize their collected funds by advancing loans to commercial and industrial

undertakings. In respect of foreign trade also, banks render a valuable service by

issuing letter of credit etc.

4. Reservoirs of Funds:

Banks acts as the reservoirs of money in the country. In times of economic, crisis

the bankers come forward to help the Government by purchasing the Government

securities or by advancing loans.

5. Transfer of Funds:

Banks facilitate the transfer of funds from one place to another safely and at a very

cheap cost through bank drafts, mail transfers, telegraphic transfer, travelers

cheque etc.

6. Dealing in Foreign Exchange:

Banks deal in foreign exchange by purchasing and selling foreign currencies and

by issuing letters of credit. Foreign remittances of funds are possible only through

banks.

7. Money Market Operations:

The structure and ups and downs of money market in the country are largely

dependent on the banker’s activities. Under the guidance of the central bank all the

banks in the country do their best for the sound management of money market.

1.6 ORGANIZATIONAL STRUCTURE

The entire organized banking system comprises of scheduled and non-scheduled

banks. Largely, this segment comprises of the scheduled banks, with the

unscheduled ones forming a very small component. Banking needs of the

financially excluded population is catered to by other unorganized entities distinct

from banks, such as, moneylenders, pawnbrokers and indigenous bankers.

1.7PRODUCTS OF BANKING INDUSTRY:

The products of the banking industry broadly include deposit products, credit

products and customized banking services. Most banks offer the same kind of

products with minor variations. The basic differentiation is attained through

quality of service and the delivery channels that are adopted. Apart from the

generic products like deposits (demand deposits – current, savings and term

deposits), loans and advances (short term and long term loans) and services, there

have been innovations in terms and products such as the flexible term deposit,

convertible savings deposit (wherein idle cash in savings account can be

transferred to a fixed deposit), etc. Innovations have been increasingly directed

towards the delivery channels used, with the focus shifting towards ATM

transactions, phone and internet banking. Product differentiating services have

been attached to most products, such as debit/ATM cards, credit cards, nomination

and demat services.

Other banking products include fee-based services that provide non-interest

income to the banks. Corporate fee-based services offered by banks include

treasury products; cash management services; letter of credit and bank guarantee,

bill discounting; factoring and forfeiting services; foreign exchange services,

merchant banking; leasing; credit rating; underwriting and custodial services.

Retail fee-based services include remittances and payment facilities, wealth

management, trading facilities and other value added services.

CHAPTER II

2.1 Introduction

2.2 Physical Growth

2.3 Technological Growth

2.4 Business Growth

2.5 Banking Sector Witness Development in Last 10 Years

2.6 Impacts of Growth & Development of Banking Sector

over Economy

2.7 Future of banking sector

2.8 Announced digital banking: An Initiative by Narendra

Modi Govt.

Chapter - II

2.1 INTRODUCTION:-

The banking sector comprises of 28 public sector banks with majority government

ownership, 23 private banks and 27 foreign banks. Private sector banks were

barred from involvement in the banking market after the nationalization of banks

in 1969. Most important changes were implemented after 1990. First, the market

was opened up to private sector banks and foreign banks. Second, regulations

governing the establishment of branches were amended. Third, regulations relating

to lending were eased. Fourth, public sector banks were allowed to procure

financial resources from the stock market up to 49% of their paid-up capital.

The state of affairs began to change after 2000.The government adopted a policy of

converting development financial institutions into banks, and ICICI became a bank

in 2001, followed by IDBI in 2004. During this period, one public sector bank and

four private sector banks were established, and 16 foreign banks entered the

market.

2.2 Physical growth:

The banking sector comprises of 28 public sector banks with majority government

ownership, 23 private banks and 27 foreign banks. Private sector banks were

barred from involvement in the banking market after the nationalization of banks

in 1969. Most important changes were implemented after 1990. First, the market

was opened up to private sector banks and foreign banks. Second, regulations

governing the establishment of branches were amended. Third, regulations relating

to lending were eased. Fourth, public sector banks were allowed to procure

financial resources from the stock market up to 49% of their paid-up capital. The

state of affairs began to change after 2000.The government adopted a policy of

converting development financial institutions into banks, and ICICI became a bank

in 2001, followed by IDBI in 2004. During this period, one public sector bank and

four private sector banks were established, and 16 foreign banks entered the

market. In March 1991, foreign banks had 151 branches. This had increased to 205

by March 2001, and to 295 by March 2009.

Table -showing Number of banks

2006 2007 2008 2009 2010 2011

Schedule commercial banks 72069 74694 78740 82850 88155 93027

SBI Group 14310 14673 15848 16894 18186 18823

State owned banks 35858 37415 39235 40937 43467 45850

Private sector banks 6835 7424 8324 9240 10452 12001

Foreign banks 259 272 279 295 310 319

Regional rural banks 14807 14822 15054 15484 15740 16034

Non Scheduled commercial

banks

41 47 47 47 48 53

2.3 Technological growth:

Indian banking has changed terrifically in the past few years. The changes

are multiple and at a fast pace in the term of transformation of technology

advancement. It has become completely dependent on technology as the

service/ product channel. Up gradation of technology, innovation and

modernization are the key factors of having excellence in banking sector. It

becomes necessary for a bank to differentiate its products from others. The

differentiation can be in terms of specialization, new products, increasing

added value by technology convergence.

Technology in banking sector is one of the focus areas of banks. The banks

in India are using Information Technology (IT) not only to improve their

own internal processes but also to increase facilities and services to their

customers.

Technological innovation not only enables a broader reach for consumer

banking and financial services, but also enhances its capacity for continued

and inclusive growth.

Table -showing: Computerization in Public Sector banks

Category 2007 2008 2009 2010

Fully

computerized

Branches (%)

85.6 93.7 95.0 97.8

85.6

93.7 9597.8

2007 2008 2009 2010

Fully computerized Branches %Fully computerized Branches %

Automated clearing House (ACH): Automated clearing house (ACH) is an

electronic network for financial transaction. In clearing house, computers are

employed to handle cheques. The nature of work involved in clearing

operations in voluminous, repetitive, routine in nature. ACH processes large

number of debit and credit transaction in batches.

Electronic Clearing Services (ECS): ECS is an electronic mode of

payment which is used for bulk transfer from one bank account to another

bank account .the service is for companies and government department to

make or receive large volume of payments, rather than for funds transfer by

individual. There are two type of ECS service.

ECS transaction in Rs. Crores

Item 2005-

06

2006-

07

2007-08 2008-

09

2009-10

ECS

Credit

32,324 83,277 7,82,222 97,487 1,17,833

ECS

Debit

12,986 25,441 48,937 66,976 69,819

National Electronic fund Transfer (NEFT): NEFT facilitates online

transfer of funds from one bank account to another bank account. The limit

of transferring fund is 200000/-. In India, NEFT system lives with effect

from 21 November 2005. NEFT was sent to cover all banks which were

participating in the special electronic funds transfer (NEFT) clearing. NEFT

was made on the structured financial messaging solution (SFMS) platform.

Electronic Funds Transfer (EFT): Electronic Fund Transfer (EFT) is a

function of electronic banking that facilitates to customer transfer of funds

from any branch of a bank to any other branch of any bank in the shortest

time period. The EFT system presently covers all the branches of the 27

public sector banks and 55 scheduled commercial banks at the 15 centers

viz:- Ahmadabad, Bangalore, Bhubaneswar, Kolkata, Chandigarh, Chennai,

Guwahati, Hyderabad, Japura, Kanpur, Mumbai, Nagpur, new Delhi, Patna,

and Thiruvananthapuram.

EFT/NEFT Transactions in Rs. Crores

Category 2005-

06

2006-

07

2007-08 2008-09 2009-10

EFT /

NEFT

61,288 77,446 1,40,326 2,51,956 4,11,088

CARDS TRANSACTION:

Debit card: debit card is a card which designate to customer to withdraw

own money from the bank in any time. It is also called a plastic card. Debit

card is used for cash withdraw from ATM, funds transfer, paying bills,

accessing detail account information, charging PIN etc. Bank gives debit

card free of cost at the time of opening account. From 1st Jan 2011, RBI

declared that for every transaction with debit card on ATM user has to enter

password for every transaction. This is done for security purpose.

Credit card: Credit Card is a postpaid card. The Credit Card holder is

empowered to spend money wherever and whenever he wants with his

Credit Card within the limits fixed by his bank

Category 2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Credit

Cards

33,886 41,361 57,985 65,356 62,950

Debit

Cards

5,897 8,172 12,521 18,547 26,566

Showing Card based payment Transaction Value (Rupees Crores)

Smart card: smart card was first introduced in Europe 1990s for low value

payment system it is also called as stored value card or electronic purse system.

The smart card technology is used for purchase through the internet, purchase

product and services from market, withdraw and deposits cash money.

Core Banking: core banking solution is a networking which creates an

environment where the entire bank’s operations can be controlled and run from a

centralized hub. This creates a centralized customer data base which makes

anytime, anywhere, anyway banking possible. It provides faster and efficient

service to the customers. An important development in the percentage of branches

of public sector banks implementing CBS. The percentages of such branches

increased by 79.4 % at end March 2009 to 90% at the end of March-2010.

Table showing: Branches under Core Banking (in %)

Name of the Bank Branches under core banking solutions

Public Sector Banks 90%

Nationalized Banks 85.9%

State Bank Group 100

Automated Teller Machine (ATM): ATM is an electronic machine which

allows to customer to withdraw or deposit funds, check account balances, transfer

fund, and check statement information, Purchasing online products, Train tickets

reservations, Products from shopping mall, Donating to charities, Claque

processing module, Adding pre-paid cell phone/mobile phone credit, Advertising

channels for own or third party products and services, Pay premium.

Table 12 showing: Growth in ATM Installation (2005 To 2009)

Year Number of ATMs

2005 -06 21110

2006-07 25247

2007-08 34547

2008-09 43651

In 2010-11 the number of ATMs increases of 24 per cent over the earlier year.

However, the percentage of off-site ATMs to total ATMs show decline to 45.3 per

cent in 2010-11 from 45.7 per cent in 2009-10. More than 65 per cent of the total

ATMs belonged to the public sector banks as at end March 2011

ATMs of Scheduled Commercial Banks (As at end-March 2011)

SR

NO

Bank group On-site

No. ATMs

Off-site

No.

ATMs

Total

number

ATMs as

of ATMs

Off-site

ATMs as

per cent

of total

ATMs

I Public sector banks 29,795 19,692 49,487 39.8

1.1 Nationalized banks 15,691 9,145 24,836 36.8

1.2 SBI group 14,104 10,547 24,651 42.8

II Private sector banks 10,648 13,003 23,651 55.0

2.1 Old private sector banks 2,641 1,485 4,126 36.0

2.2 New private sector banks 8,007 11,518 19,525 59.0

III Foreign banks 286 1,081 1,367 79.1

All SCBs (I+II+III) 40,729 33,776 74,505 45.3

The use of electronic payment has witnessed manifold increase, partly reflecting

increased adoption of technology. The growth of volume of ATMs indicates that

customer most prefer ATMs for transactions because they do not want to go

branches for their day to day banking transaction.

Mobile Banking: Mobile banking is used for performing balance inquiry, account

transactions, payments etc. via a mobile phone. Mobile banking is performed via

SMS or the Mobile Internet, but can also use special programs downloaded to the

mobile device Magnetic Ink Character Recognition (MICR): MICR introduced in

1987 in India. In this system data are printed at the bottom of cheque in magnetic

ink, for an electronic read is a typical use of electronics for cheque processing. In

14 centers the MICR clearing is operation viz- Hyderabad, Bangalore, Ahmadabad,

Kanpur, Japura, Nagpur, Baroda, Pune, Gauhati, Trivandrum. Speed clearing,

introduced in 2008, operating on the core banking infrastructure of banks has now

been mode available as a part of MICR. Dearing at all the 66 MICR cheque

processing centers (CPCS).

Showing: Payment system indicators-annual turnover

Volume

(000’s)

Value (Rupees in Crore)

Item 2007-

2008

2008-

2009

2009-

2010

2007-

2008

2008-

2009

2009-

2010

MICR

Clearing

1201045 1140492 1143164 6028672 5849642 6664003

MICR

clearing

237600 233566 230567 1867376 2060893 1878425

Real Time Gross Settlement (RTGS): RTGS means funds are transfer on a real

time from one bank to another .Real time refers to there is no waiting period. The

transactions are settled as soon as they are processed or one to one basis without

bunching with any other transaction.

Table showing: Growth of RTGS in India

Item Volume

(000’s)

Value (Rupees in Crore)

2007-

08

2008-

09

2009-

2010

2010-

2011

2007-08 2008-09 2009-10 2010-

2011

RTGS 5840 13,366 33,24

1

49,3 2,73,18,33

0

3,22,79,88

1

3,94,53,35

9

4,84,8

7,234

INFINET: The 'INFINET' - Indian Financial Network is a satellite based wide

area network using VSAT (Very Small Aperture Terminal) technology set up by

the RBI in June 1999. The hub and the Network Management System of the

INFINET are located in the Institute for Development and Research in Banking

Technology, (IDRBT) Hyderabad. A Closed User Group of the member banks of

the network called the "INFINET User Group" has been formed to resolve issues

of common interest on a continuing basis.

2.4 Business growth:

Everyone knows public sector banks are less profitable, more prone to

political influence and have higher ratios of non-performing assets (NPAs)

than their private sector counterparts. In contrast, new private sector banks,

set up post 1991, are media and stock market darlings. Most analysts tend

not to mention that public sector banks carry the main burden of the

government’s developmental policies — from rural lending to infrastructural

development and now the Jan Dhan Yojana. Rather, the private sector’s

better profits are taken as a sign of superior management.

Government banks are rightly criticized for their poor credit management

and corruption. But who remembers the private banks that faltered and were

merged with other banks? Global Trust Bank, established in 1994, was

involved in the 2001 Ketan Parikh-managed stock scam that resulted in

losses of Rs 1,000 crores. These were finally borne by the majority

government-owned Oriental Bank of Commerce in 2004. Other banks like

Times Bank, Centurion Bank and Bank of Punjab were ultimately merged

with HDFC Bank as their promoters lost interest or ran into difficulties.

The divergent performance of the Indian banking sector was reflected in the

fourth quarter (Q4 FY2015) earnings: 11 private sector banks posted a

robust 35 per cent rise in net profits while 10 government banks declared a

59 per cent fall in net profits. (Business Standard, May 14, 2015) No doubt

private banks are more profitable but exactly how are private banks doing so

well, when the economy is not?

Strangely, despite corporate sales growth decelerating, industrial growth

remaining anemic (2.8 per cent for 2014-2015) and a general squeeze on

corporate cash flows, the private sector banks with significant exposure to

Indian companies appear to be immune to the general economic slowdown.

Private sector banks attribute their performance to better credit appraisal and

monitoring and stringent asset recovery procedures, resulting in superior

asset quality. For example, in 4QFY2015, ICICI Bank, the largest new

private sector bank by assets, reported gross and net impaired (non-

performing plus restructured standard) loans of 6.5 per cent and 4.4 per cent

of total loans respectively, while Punjab National Bank, the largest of the

nationalized banks, reported gross and net impaired loans of 16.3 per cent

and 14.2 per cent respectively.

If the business media and analysts were to probe deeper, they would detect

some highly questionable practices adopted by some private sector banks in

reporting low poor quality loans.

In the current industrial slowdown, many corporate projects (the setting up

of new capacities) financed by bank term loans are stuck for diverse reasons

and companies have been unable to commence commercial production. As

cash flows for the project will commence once commercial production starts,

the date of commercial production is extremely important. As the projects

are unable to achieve completion, some of the private sector banks go so far

as to extend the date of commercial production by backdating credit

committee meeting minutes.

RBI must regulate The RBI also lends a helping hand in allowing banks to

report higher profits. ICICI Bank in 4QFY2015 reported a net profit growth

of 10 per cent to Rs 2,922 crores but a note to accounts stated that with the

regulator’s permission the bank had reversed Rs 929 crores of interest

income till FY2008 as a direct deduction from reserves (in a single quarter

as against RBI allowing it over three quarters) instead of reducing the profit

in 4QFY2015. 

  If the RBI had not given this largesse, ICICI Bank’s 4QFY2015 net profits

would have declined instead of the rise it reported. The regulator apparently

did not seem to mind that the bank had inflated its income, yield on credit,

net interest margin (interest income less interest expenditure/average interest

earnings assets) and profits till FY2008 and that it is disclosed to

shareholders and the public after six long years.

Indian companies are confronted with major issues: a demand slowdown

impacting sales, unfinished projects set up at inflated costs, lengthening

working capital cycle squeezing cash flows, and rising debt.

Corporate India banks with both government and private sector banks, and

hence problems in the corporate sector should impact the entire banking

sector, as corporate loans form a significant component of total bank loans.

Yet it is only government banks which report high non-performing loans and

lower net profits, while private sector banks report low bad loans and higher

profits.

The media may be excused for their softness towards private banks; not

only are the latter big advertisers, but some media houses have stakes in

them while promoters of banks have also stakes in media houses. More

puzzling is the regulator’s feather-touch approach which permits these

banks to continue to do business as usual.

2.5 Banking sector Witness development in last 10 years

Witness development in last 10 years in banking sector

Global Hunt MD Sunil Goel said that the banking sector is likely to witness

15-20% growth in hiring this year as a large pool of jobs is expected to be

created.

MUMBAI: Banks are likely to witness up to 50 per cent increase in attrition

this year compared to last year as new players entering the sector would

prefer seasoned industry professionals to grow their operations, say experts.

The two new banking licenses that were given by RBI to infrastructure

financing firm IDFC and micro-finance firm Bandhan Financial Services are

also expected to create job opportunities across the board in the banking

space, they said.

2.6 Impact of growth & development of banking sector over Indian economy

Face of Global Banking is undergoing a transition. Banking is now a global

issue. Reforms in the financial sector, covering banking, insurance, financial

markets, trade, taxation etc. have been a major catalyst in strengthening the

fundamentals of the Indian economy. The reform measures have brought

about sweeping changes in this critical sector of the Indian's economy.

Banking in India is generally fairly mature in terms of supply, product range,

and reach-even though reach in rural India still remains a challenge for the

private sector and foreign banks in the year 2007. The broad objective of the

financial sector reform has thus been to create a viable and efficient banking

system.

Improvements in the growth rate can be effected through three, not

necessarily mutually exclusive channels: improving productivity of capital,

through investments in human capital and raising total factor productivity

(TFP).Indian economy has been recording impressive growth rates since

1991.

Taking this as a base, the author intends to examine the impact of the

reforms on Credit Deposit ratio, Credit to GDP ratio, Investment in

Government securities to deposits, share of business of public sector banks,

the proportion of various types of advances etc.

Further, it goes onto examine the difference in various aspects of the

working results of the Public sector banks and private banks when compared

with foreign banks. Reforms in the financial sector, covering Banking,

Insurance, Financial markets, Trade, taxation etc. have been a major catalyst

in strengthening the fundamentals of the Indian economy.

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, securitization, etc.

At the same time, liberalization has brought greater competition among

banks, both domestic and foreign, as well as competition from mutual funds,

NBFCs (non-bank finance companies), post office, etc. As banks benchmark

themselves against global standards, there has been a marked increase in

disclosures and transparency in bank balance sheets (www.bseIndia.com).

The face of banking is changing rapidly.

In most emerging markets, banks assets comprise well over 80 per cent of

total financial sector assets, whereas these figures are significantly lower in

developed economies. Another difference in the banking industry in

developed and emerging economies is the degree of internationalization of

banking operations.

For a few decades preceding the onset of banking and financial sector

reforms in India, banks operated in an environment that was heavily

regulated and characterized by sufficient barriers to entry which protected

them against too much competition.

The banking reform package was based on the recommendation proposed by

NarsimhanCommittee report (1992) that advocated a move to a more market

oriented banking system, which could operate in an environment of

prudential regulation and transparent accounting.

Market discipline, especially in the financial liberalization phase, reinforces

regulatory and supervisory efforts and provides a strong incentive to banks

to conduct their business in a prudent and efficient manner and to maintain

adequate capital as a cushion against risk exposures. The administered

interest rate structure, both on the liability and the assets side, allowed banks

to earn reasonable spread without much efforts.

Consequently, the RBI as part and parcel of the financial sector deregulation,

attempted to enhance the transparency of the annual reports of Indian banks

by, among other things, introducing stricter income recognition and assets

classification rules, enhancing the capital adequacy norms, and by requiring

a number of additional disclosures sought by investors to make better cash

flow and risk assessment.

2.7 Future of banking sector:

A decade ago, transferring money from your account to a family member's

would have meant a visit to the nearest bank branch, a long queue and a few

days-long wait. Today, you can use your mobile phone to make the same

transaction instantly.

Innovations such as automatic bill payment, cash transfers through mobile

phones and online banking have ensured that customers no longer have to

make pilgrimages to bank branches. Passbook entries have been replaced by

hassle-free e-statements; ATMs facilitate easy withdrawals and payments.

Most importantly, banks have been able to ensure that all these

transactions are safe and secure. Banking in India has rapidly innovated to

keep up with the times. Banks today are competing heavily with each other,

offering low rates on housing loans, credit cards to anyone who answers

those annoying tele-marketers and freebies for existing customers.

The HT-MaRS Bank and Credit Card Satisfaction Survey 2012 ranked

banks according to customers' satisfaction across various categories.

According to the results, India's second-largest private bank, HDFC,

emerged as the winner, dethroning 2010's champion, Axis Bank (which

slipped to third place).

ICICI Bank moved up one place from the previous survey to the second

position. Though private sector banks may have got the top spots, ahead of

public sector ones, when it comes to satisfying consumers, the top 10 list

features more state-owned banks.

Bank of Baroda bested the mammoth State Bank of India, improving

drastically from its 12th position in 2010 by landing the fourth position over-

all, becoming the best government-run bank.

The survey ranked banks across five parameters, namely account opening,

bank staff, branch facilities, turnaround time and account-related services.

Each parameter had various attributes on which customers were asked to

score their banks.

Compared to 2010, there has been a marked increase in over-all satisfaction

scores. Indian Bank, Indian Overseas Bank and Canara Bank fell out of the

top ten while relative newbies such as Kotak Mahindra Bank and Yes Bank,

which featured nowhere in the 2010 list have inched into the results

2.8 Announced Digital Banking: An Initiative by Narendra

Modi Govt.

SBI INTOUCH

SBI to open digital bank in malls, will offer instant loans

MUMBAI: The 208-year-old State Bank of India (SBI) is creating a digital bank

within the institution in a bid to stay relevant to a generation that's grown on social

networks and demands instant gratification. The new electronic banking outlets

will be situated in malls and will open accounts, issue cards and sanction loans

across the counter. With a network of 13,000 branches, the country's largest bank

has held on to market share as it continued to grow its network. But new private

banks are gaining valuations disproportionate to their size as investors expect them

to grow more efficiently than public sector banks. "To continue to remain the

market leader we have to periodical reinvent ourselves.

Banking today has to be sold, which is why we have decided to be in the malls,"

said Arundhati Bhattacharya, chairman, SBI.

FINIDINGS

I find that banking industry of India after globalization period since- 1991 is doing progress on large scale.

In this project I understand the history of modern banking of India

The banking sector in India saw greater value being placed on the technology and innovation. Banks begum to use technology to provide better quality of services at greater speed.

CONCLUSION

In the 1990s, the banking sector in India saw greater emphasis being placed on technology and innovation. Banks began to use technology to provide better quality or services at greater speed.

At present, banks in India are venturing into non-traditional areas and generating income through diversified activities other than the core banking activities.

Strategic mergers and acquisitions are being explores and implemented. With this, the banking sector is currently on the threshold of an exciting phase.

Banking in India has already undergone a huge transformation in the years since The rate of transformation was particularly Independence changed the high in the 1990s and 2000 when a number of innovations changed the way of banking was perceived. While traditionally, banking meant ‘borrowing and leading’, in the latter part of the 20th century, the word borrowing Banks took on a different meaning altogether. Banks no longer restricted themselves to traditional banking activities, but explored newer avenue to increases business and capture new markets.

BIBLIOGRAPHY

By Vipuls Publication, Universal Banking, P.K.Bangar & Aarti Kalyanraman

By palak publication , Mumbai, The Indian Banking, by B. Suryakant

WIBLIOGRAPHY

www.wikipedia.org/wiki

All introduction/Meaning definition of banks is collected on this websites

www.academia.edu

Development of Indian banks is collected on this websites

www.indiannewslink.co.nz

Latest news of and all related news banks are collected on this websites