A SEMINAR REPORT ON A CONTEMPORARY MANAGEMENT ISSUE TITLED

QUICKLY CHANGING VIEW OF BANKING SECTOR IN INDIA

Submitted for The requirement of The subject seminar on contemporary management issue MASTER OF BUSINESS ADMINISTRATION [M.B.A]

TABLE OF CONTENTS

S. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Name History of Banking System in India Functions of Bank New CTS Cheque Book White Label ATM (WLA) Enhance Security in pass book Plastic Money: Rs. 10 notes in polymer/plastic on trial basis Phishing, A New Crime in Plastic Card Frauds Government's Direct cash transfer scheme Technologies in Indian Banking Sector Recent Development, Growth & Prospects Technological Innovation in Indian Banking Sector Scope for New Entrance Conclusion Bibliography

Page No. 5 9 11 13 15 16 17 18 20 22 27 35 37 38

HISTORY OF BANKING SYSTEM IN INDIA

PHASE I:- The General Bank of India was set up in the year 1786. Next came
Bank of Hindustan and Bengal Bank. The East of India Company established Bank of Bengal (1809), Bank of Bombay (1840) and bank of madras (1843) as independent units and called it Presidency Banks.

PHASE II:- Nationalization of Imperial Bank of India with extensive banking

facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transaction of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. 14 major commercial banks in the country was nationalized.

PHASE III:- This phase has introduced many more products and facilities in he
banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimhama, a committee was set up by his name which worked for the liberalization of banking practices.

In India since independence following major nationalizations have taken place :1949 : RBI was nationalized (RBI was state owned at the time of Indian independence). 1953 : Air India was nationalised under the Air Corporations Act 1953 1955 : Control of Imperial Bank of India was acquired by RBI 1969 : 14 Indian private banks were nationalised; 1972 : 106 insurance companies were nationalised into four insurance companies 1973 : Coal Industry and Oil companies were nationalised 1980 : 6 more Indian private banks were nationalised The banking system has capacity to add to the total supply of money by means of credit creation. That is why Crowther has said, The bank is a dealer in credit and its own and other peoples.. It is because of an ability to manipulate credit that banks are used extensively as a tool of monetary policy. The through channeling of funds into one or the other direction on a priority basis or extending it to one or the other concessional terms and conditions, influence the flow of funds and thereby the nature of economic development.

CLASSIFICATION OF BANKS: In India, the institutions of banking has existed for a long time but previously only individuals or family concern carried on banking. They are called indigenous bankers and are known as the multans, mahajans, marwaries, or sahukars in different parts of the country. They accept deposits which are not withdrawable by cheque. They make extensive use of handiest for purpose of remittance and extend loans with or without security on varying rates of interest depending on the credit, worthiness of the borrowers. The usual classification of banks apart from indigenous bankers is as follows:
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a)

Central Bank :It is the principal banking and monetary institution of a country and has a

monopoly of the note issue. It controls and regulates the activities of other banks. It is usually under government ownership and management and regulates the monitory and credit conditions in the general interests of the economy. b) Commercial Banks: They accept deposit from various sources withdrawable generally at short notice. Since there deposits are mainly for a short, they grant loans and advances for a short period to meet the working capital needs of trade and industry. c) Industrial Banks: They provide industrial capital by subscribing for shares and debentures of companies. They also grant long term loans to meet the fixed capital needs of the industry. d) Regional Rural Bank: These are special types of banks not like the needs particularly of the weaker sections in rural areas because it was felt that the existing institutions have not been able to deliver the goods.

e) Co-operative Bank: These are organized by the people for their own collective benefit. These encourage thrift through small savings and advance to loan to their members at fair rates of interest. They are registered under the co-operative societys acts.

ESSENTIALS OF SOUND BANKING SYSTEM Stability: Bank failures damage the whole economy by destroying the general confidence of the people in such situations. Bank must therefore maintain liquidity and refrain from riskless lending or investment. The good sense of banks in this respect is reinforced by legislation. In India, under the Banking Regulation Act. 1949, the Reserve Bank has been given extensive powers of supervision, direction and regulation of commercial banks. Insurance of deposits up to Rs. 20,000 has been introduced so that depositors may feel secure. Training of bank staff has been undertaken to see officers have adequate theoretical background.

Liquidity: Liquidity means the capacity to promptly meet the demands of depositors. This can be done only by keeping such cash or near cash. Too much liquidity is costly, for liquid assets do not yield much income and a bank cannot offered to ignore profitability. Bank therefore keep in addition to cash, a large proportion to their funds in realizable or transferable assets, which also earn income.

Flexibility: Both the deposit and credit systems should be kept so flexible that they can meet the varying psychological requirements and business needs of the
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customers. The policy of selective liberalization and control is an example of flexible banking policy. Dispersal: Banking facilities should not get concentrated in a small region but get dispersed over the whole country to enable equitable regional growth. Such banking can secure better deposit mobilization which is essential for a proper and balanced growth. Profitability: Profitability should not be sacrificed, the responsibility to share holders and optional business choices in raising resources and extending credit facility within the basic farm work of security of investment demand it. FUNCTIONS OF A BANK The functions of a bank can be summarized as follows: i) Receipt of Deposits A bank receives deposits from individuals, firms and other institutions. Deposits constitute the main resources of a bank. Such deposits may be different types. Deposits which are withdrawlable on demand are called demand or current deposits other are called time deposits. Saving deposits are those from which withdrawals are restricted as regards the amount and the period. Deposits withdrawlable after the expiry of an agreed period is known as fixed deposit. Interest paid by bank is different for each kind of deposit highest for fixed deposit and lowest or even nil for current deposits.

ii) Lending of Money: Banks lend money mainly for industrial and commercial purpose. This lending may take the form of cash credits, overdrafts, loans and advances, or discounting of bills of exchange. Interest charged by banks on such lending varies according to the amount and period involved, social priority nature of security offered, the standing of the borrowers etc. iii) Agency Services: A bank renders various services to cons0075mers, such as : a) Collection of bills, promissory notes. b) Collection of dividend, interest, premium etc. c) Purchase and sale of shares and securities. d) Acting as trustee or executor when so nominated. e) Making regular payments such as insurance premiums. iv) General Services: A modern bank performs many services of general nature to the public e.g. a) Issue of letters of credit, travelers, cheque, bank drafts, circular notes etc. b) Safe keeping of valuable in safe deposit vaults. c) Supplying trade information and statistics: conducting economic surveys. d) Preparation of feasibility studies, project reports etc.

New CTS cheque book

In a circular to banks, RBI said, Residual non-CTS2010 Standard cheques that get presented in the clearing system beyond this extended period (March 2013) will continue to be accepted for clearing but will be cleared at less frequent intervals. The central bank, however, indicated it might impose some fee for such cheques after March. While most of the banks have confirmed that they are issuing only multi-city/payable at par CTS-2010 standard cheques at present, representations have been received from various stakeholders requesting for extension of the time beyond December 31, 2012 for withdrawal / replacement of non-CTS-2010 Standard cheques / post-dated EMI cheques with CTS-2010 standard cheques, the circular further said.

What is CTS?

CTS standard cheques are aimed at enhancing customer safety and facilitating easier processing. Under the CTS system, the physical movement of cheques between banks will be eliminated. Normally, when you issue a cheque to someone, he presents the cheque in his bank to get the credit. And then, the cheque physically moves from his bank to your bank which involves a lot of time and risk. RBI recognized the disadvantages of this old system and has introduced a new format for cheques, referred as CTS-2010, where instead of the physical movement of the cheque, an electronic image of the cheque is transmitted to the drawee branch (a bank that must pay for a draft or a bill). The presenting bank (which is the bank of the person to whom you had issued the cheque to) retains the physical cheque. In addition to the electronic image, certain relevant information is also transmitted, such as date of presentation, presenting bank details, data on the MICR band.

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White Label ATM (WLA)

White Label ATM (WLA) operator is a non-bank entity which can set up, own and operate an automated teller machine (ATM) as extended delivery channels.

The Reserve bank of India has given in-principle approval to seven companies to roll out White Label ATMs on April, 2013. Seven companies have been given authorization (to set up WLAs) while five were given in December last year, taking the total to 12. As soon as they get their act together, they will be in operation, said Vijay Chugh, Chief General Manager, Reserve Bank of India, at the sidelines of a conference hosted by Discover Financial Services and National Payments Corporation of India. Of the total 19 applicants, 17 have been found eligible, 12 have been given the authorization. We expect one or two operators to kick-start business in the next few months. One of them is Tata (Communications Banking Infra Solutions), Chugh said.

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About 1.5 lakh ATMs can be rolled out in the next three years and two million PoS (Point-of-Sale) terminals in two years if all the 17 companies start functioning. That is the expectation, he added. Under the RBI guidelines, the authorization for setting up a WLA operation would be initially valid for a period of one year under three schemes A, B and C which specify the rural to semi-urban ATM ratio for network expansion. WLA operators are allowed to charge their customers as per the banks charges. Currently, banks are not allowed to charge the customers for the first five transactions in other bank ATMs. Above that, banks levy Rs 15 for cash withdrawal and Rs 5 for balance enquiry.

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Enhance Security in pass book

The Reserve Bank directed all banks to offer the pass book facility, without any charges, to all customers with savings account. "It has come to our notice that some banks are not issuing pass books to their savings banks account holders (individuals) and only issue a computer generated account statement even when the customer desires pass book facility. "Banks are, therefore, advised to strictly adhere to the instructions...," the Reserve Bank of India (RBI) said in a notification. RBI has asked banks to ensure that demand drafts of Rs 20,000 and above are issued with account payee crossing. "Instruments with account payee crossing are required to be credited to the payee's account and not paid in cash over the counter.However, some unscrupulous elements use demand drafts without any crossing for transfer of money as an alternative to settlement through cash," RBI said. In view of concerns raised, it said, RBI reiterates that banks shall strictly adhere to the instructions and not collect account payee cheques for any person other than the payee constituent. Banks may note that the above prohibition and relaxation shall also extend to drafts, pay orders

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and bankers' cheques, RBI notification said.

Plastic Money: Rs. 10 notes in polymer/plastic on trial basis

1bn pieces of Rs. 10 notes being introduced in five cities viz. Kochi, Mysore, Jaipur, Bhubaneswar and Shimla with varied geographical locations and climatic conditions.

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Government will introduce one billion pieces of Rs 10 bank notes made of plastic on a field trial basis in five cities, Minister of State for Finance said in Parliament. It has been decided by the government and the RBI (Reserve Bank of India) to introduce one billion pieces of Rs 10 notes in polymer/plastic on a field trial basis, Minister of State for Finance Namo Narain Meena said in a written reply to the Rajya Sabha. The minister said the field trail will be conducted in five cities Kochi, Mysore, Jaipur, Bhubhaneswar and Shimla with varied geographical locations and climatic conditions. RBI has informed that while the primary objective of introduction of polymer notes is to increase its life, it could also help in combating counterfeiting, he added.

Phishing, A New Crime in Plastic Card Frauds

According to national cyber-crime estimates, credit card frauds, phishing, hacking into accounts and so on are on the rise and increasing at an alarming rate of 30 per cent in India.

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In the past seven to eight months, we are noticing a rise in phishing complaints in net banking or e-commerce in India. Another common complaint is identity theft, done by copying the data from the cards magnetic strip, usually at shopping outlets, says Uttam Nayak, group country manager, South Asia, Visa. Last year, the two largest payment processing firmsVisa and Mastercardsuffered a massive online data breach of 1.5 million card details in North America. Although frauds in India are on the rise, it is still one of the lowest impacted countries globally because of stringent Reserve Bank of India guidelines, adds Nayak. Well, in the last six months alone, there have been numerous instances of huge amounts being skimmed (where the magnetic strip of the card has been copied). Most recently, unauthorized transactions of an estimated Rs 30 crore have affected all the top card-issuing banks, including ICICI, HDFC, SBI, Citibank and Axis Bank. Senior banking sources told Outlook that it was suspected that many of these online international transactions might have taken place through cloning or skimming of data at key department stores and fast food joints.

Government's Direct cash transfer scheme

One eye on elections 2014, the Congress-led UPA government announced on Tuesday that it was making cash transfers the default system for welfare delivery.
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Come the first day of 2013, in 51 districts, a set of central government welfare services will be delivered as money transfers to recipients' bank accounts. More services and the rest of the country will follow by April 2014.

About Direct cash transfer scheme:It is a poverty reduction measure in which government subsidies and other benefits are given directly to the poor in cash rather than in the form of subsidies. What are its benefits? It can help the government reach out to identified beneficiaries and can plug leakages. Currently, ration shop owners divert subsidized PDS grains or kerosene to open market and make fast buck. Such Leakages could stop. The scheme will also enhance efficiency of welfare schemes. How is it implemented? The money is directly transferred into bank accounts of beneficiaries. LPG and kerosene subsidies, pension payments, scholarships and employment guarantee scheme payments as well as benefits under other government welfare programs will be made directly to beneficiaries. The money can then be used to buy services from the market. For eg. if subsidy on LPG or kerosene is abolished and the government still wants to give the subsidy to the poor, the subsidy portion will be transferred as cash into the banks of the intended beneficiaries. What are the scheme's disadvantages? It is feared that the money may not be used for the intended purpose and men may squander it. Has it already been implemented in India?
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Electronic Benefit Transfer (EBT) has already begun on a pilot basis in Andhra Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu, West Bengal, Karnataka, Pondicherry and Sikkim. The government claims the results are encouraging. Are there any other drawbacks? Yes, because only Aadhar card holders will get cash transfer. As of today, only 21 crore of the 120 crore people have Aadhar cards. Two other drawbacks are that most BPL families don't have bank accounts and several villages don't have any bank branches. These factors can limit the reach of cash transfer. What about elsewhere in the world? Many Latin American countries have conditional cash transfer schemes in which money is transferred to poor families through women. The money is given, subject to them ensuring that their children attend school regularly, take preventive healthcare measures and provide better nutrition to their children. The Indian scheme is unconditional. What are the scheme's political implications? While many studies have assessed positive impacts of such schemes, few have looked at their political benefits. A World Bank study recently reported there is a direct link between cash transfers and voting behavior. It was found beneficiaries express a stronger preference for the ruling party that implements and expands cash transfers.

Technologies in Indian Banking Sector

Computerisation

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The process of computerization marked the beginning of all technological initiatives in the banking industry. Computerization of bank branches had started with installation of simple computers to automate the functioning of branches, especially at high traffic branches. Thereafter, Total Branch Automation was in use, which did not involve bank level branch networking, and did not mean much to the customer. Networking of branches are now undertaken to ensure better customer service. Core Banking Solutions (CBS) is the networking of the branches of a bank, so as to enable the customers to operate their accounts from any bank branch, regardless of which branch he opened the account with. The networking of branches under CBS enables centralized data management and aids in the implementation of internet and mobile banking. Besides, CBS helps in bringing the complete operations of banks under a single technological platform. CBS implementation in the Indian banking industry is still underway. The vast geographical spread of the branches in the country is the primary reason for the inability of banks to attain complete CBS implementation. Satellite Banking Satellite banking is also an upcoming technological innovation in the Indian banking industry, which is expected to help in solving the problem of weak terrestrial communication links in many parts of the country. The use of satellites for establishing connectivity between branches will help banks to reach rural and hilly areas in a better way, and offer better facilities, particularly in relation to electronic funds transfers. However, this involves very high costs to the banks. Hence, under the proposal made by RBI, it would be bearing a part of the leased rentals for satellite connectivity, if the banks use it for connecting the north eastern states and the under banked districts.

Development of Distribution Channels The major and upcoming channels of distribution in the banking industry, besides branches are ATMs, internet banking, mobile and telephone banking and card based delivery systems.
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Automatic Teller Machines ATMs were introduced to the Indian banking industry in the early 1990s initiated by foreign banks. Most foreign banks and some private sector players suffered from a serious handicap at that time- lack of a strong branch network. ATM technology was used as a means to partially overcome this handicap by reaching out to the customers at a lower initial and transaction costs and offering hassle free services. Since then, innovations in ATM technology have come a long way and customer receptiveness has also increased manifold. Public sector banks have also now entered the race for expansion of ATM networks. Development of ATM networks is not only leveraged for lowering the transaction costs, but also as an effective marketing channel resource.

Card Based Delivery Systems Among the card based delivery mechanisms for various banking services, are credit cards, debit cards, smart cards etc. These have been immensely successful in India since their launch. Penetration of these card based systems have increased manifold over the past decade. Aided by expanding ATM networks and Point of Sale (POS) terminals, banks have been able to increase the transition of customers towards these channels, thereby reducing their costs too.

Recent Development, Growth & Prospects

January 2013
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CURRENT STATUS AND DEVELOPMENT OF THE INDIAN BANKING SECTOR:The Indian economys liberalization in the early 1990s has resulted in the conception of various private sector banks. This has sparked a boom in the countrys banking sector in the past two decades4. The revenue of Indian banks grew four-fold from US$ 11.8 billion to US$ 46.9 billion, whereas the profit after tax rose nearly nine-fold from US$ 1.4 billion to US$ 12 billion over 2001-105. This growth was driven primarily by two factors. First, the influx of Foreign Direct Investment (FDI) of up to 74 per cent with certain restrictions4. Second, the conservative policies of the Reserve Bank of India (RBI), which have shielded Indian banks from recession and global economic turmoil. Figure 1.1 and 1.2 compares the countrys Banking Index (Bankex) with the Sensex. The Bankex is an index tracking the performance of important banking sector stocks, and has grown at a compounded annual growth rate (CAGR) of approximately 20 per cent over 2003-126. The Figure below shows that the Bankex and the Sensex have had similar growth trends over the past decade.

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The high CAGR exhibited by Indias Bankex demonstrates the industrys resilience to recession and economic instability. This resilience primarily stems from two factors.
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First, the highly regulated Indian banking sector restricts exposure to high risk assets and excessive leveraging. Second, Indian economys overall growth rate has been much higher than other economies worldwide7. However, the recent crisis in the eurozone is likely to affect the Indian economy and in particular the countrys banking sector. The RBIs Financial Stability Report estimates the claim of European Banks on India at approximately 8.6 per cent of the countrys GDP, while some analysts estimate the figure to have reached 15 per cent of the GDP7. Further, the recent implementation of the Basel III guidelines may also force European banks to deleverage significantly7. Data from the International Monetary Fund (IMF) suggests that these banks will deleverage up to US$ 2.6 trillion by the end of 2013 especially from the sale of securities and non-core assets. This will see the credit supply to businesses shrinking by 1.7 per cent8, thereby driving Indian companies to borrow from the Indian banks at a higher cost in times of inflation and in a period of depreciation in the value of rupee7. The non-performing assets PAs) of banks were pegged at 2.9 per cent in the fourth quarter of 2011, and are expected to rise to 3.5 per cent by 20129. All these factors might hamper the performance of the Indian banking sector. However, amongst positive initiatives taken by the government, the RBI mandated banks to maintain 70 per cent of the provision coverage ratio of their bad loans as on September 2010, thereby mitigating the effect of NPAs to a certain extent10. The NPAs of public, private and foreign banks in India are exhibited in Figure 2.

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The solace for Indian banks, however, lies in the fact that India has shown a comparatively robust growth in its GDP over past years, which analysts closely correlate to the performance of the banking industry11. The report forecasts that Indias GDP growth will take the size of the countrys banking sector, to the third largest in the world by 2025 11. Figure 3 shows the data from the Ministry of Finance that supports this.

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Figure 3 demonstrates that the growth of the banking sector in terms of percentage contribution to the GDP has remained mostly uniform over FY 06-10. The banking sector is currently growing at approximately the same rate as the countrys economy. Another important parameter for assessing the performance of the banking industry is the domestic credit provided as a percentage of the GDP, as exhibited in Figure 4 below.

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TECHNOLOGICAL INNOVATION IN INDIAN BANKING SECTOR

Today we have electronic payment system along with currency notes. Indias financial sector is moving towards a scenario, where it can have new instruments along with liquidity and safety. Important events in the evolution of new age payment systems in India: Arrival of card- based payments- debit card, credit card- late 1980 s and early 1990s. Introduction of Electronic Clearing Service (ECS) in late 1990 s Introduction of Electronic Funds Transfer/ Special EFT (EFT/SEFT) in the early 2000s Real Time Gross Settlement (RTGS) was introduced in March 2004 Introduction of NEFT (National Electronic Funds Transfer)as a replacement for EFT/SEFT in 2005/06 Plan for implementation of cheque truncation system as a pilot program in New Delhi in 2007. Migration from cash and cheque based payment system, it has become a necessity to electronic fund transfer system on account of the following reasons: 1. Large volumes of transaction, 2. High cost of physical handling and storage of paper instruments. 3. Delay in realization is a common feature.
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4. Finality of payment takes time because the physical movement of instruments in large volumes from branches to and from clearing house, and sorting them according to each bank branch at the center creates problems. RBI has taken two major steps to tackle this problem: Use Of Magnetic Ink Character Recognition

(MICR) technology was resorted to facilitate and expedite physical sorting of instruments using high-speed MICR sorters. There are about 40 MICR centers in India today. Introduction of Electronic Clearing Service.

The ECS was the first version of Electronic Payments in India. It is a mode of electronic funds transfer from one bank account to another bank account using the mechanism of clearing house. It is very useful in case of bulk transfers from one account to many accounts or vice- versa. There are two types of ECS (Electronic Clearing Service) 1. ECS credit 2. ECS- debit. ECS facility is available at more than 60 centers in India. The beneficiary has to maintain an account with one of the banks at ECS center in order to avail benefits of ECS.

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1. ECS- CREDIT Advantages of ECS to ultimate beneficiary are: No need to make frequent visits to bank for depositing physical paper instruments. No possibility of loss of instrument and fraudulent encashment No chance of delay or return in realization of proceeds as in the case of paper instruments.

Benefits to Corporate bodies of ECS Save on administrative machinery for printing, dispatch and reconciliation Avoid the chance of loss of instruments in postal transit Avoid the chance of frauds due to fraudulent access to the paper instruments and encashment It can be ensured that the beneficiarys accounts get credited on a designated date. 2. ECS DEBIT It is a scheme under which an account holder with a bank can authorize an ECS user to recover an amount at a prescribed frequency by raising a debit in his account. Utility service providers such as telephone companies, electricity boards, credit card collections, collection of loan installments by bank and

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financial institutions, and investment schemes such as mutual funds are eligible to participate in the ECS debit scheme. Advantages of ECS debit scheme:

A. To the ultimate beneficiary is: Eliminates the need of physical visit and the trouble of standing in long queues for making payment There is no need to track down payments by last dates.

B. To the corporate bodies and Institutions are: Saves on administrative machinery for collecting the cheques, monitoring their realization and reconciliation Better cash management Avoids chances of fraud

Receives payments on a single date These schemes were introduced when Indian banking was in infant stage of its computerization hence cost benefits could not be maximized. EFT Electronic Fund transfer EFT scheme targeted one to one payments as an alternative to the use of cheques and drafts for remitting funds between bank accounts located at different centers. EFT encountered the problem of low level of computerization and connectivity in the Indian banking industry.

Core Banking Solution

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CBS is a centralized platform, which creates environment where the entire bank s operations can be controlled, and run from a centralized hub. This creates a centralized customer database, which makes anytime, anywhere, anyway banking possible. Immediate advantages of CBS are: Faster and efficient customer service. Offering multiple delivery channels, like ATMs, Cards, mobile/Telephone Banking, internet Banking, Call centers, etc. Reducing the operational costs, through manpower saving and space saving. Centralizing the back end processes and reporting. Creating a customer profile database, it is a powerful tool for gaining competitive advantage through cross selling opportunities. Adoption of Risk management, by taking care of risk-monitoring and riskreporting requirements ATMs ATMs are an issue of survival for the banks and are becoming just another part of everyday life. Falling costs of machines and connectivity is a key factor contributing to the growth of ATM network. Banks have also been cutting costs and gaining synergies through ATM sharing agreements amongst themselves, for example: Cash Tree (Bank of India, Union Bank of India, Indian Bank, Dena Bank and Syndicate Bank)
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SBI, HDFC Bank, UTI Bank, Indian Bank and Andhra Bank ICICI Bank, Andhra Bank and Federal Bank

Banks are now using ATMs for product promotion as banks market broader financial services to their captive audience of ATM users. But these facilities come with added problems when huge amount of money is withdrawn by large number of consumers in a market period (very short period of time). CRM Customer Relationship Management Solution is the set of methodologies and tools that help an enterprise manage customer relationships in an organized way - finding, getting, and retaining customers. It helps to provide better customer service, increase customer revenues, discover new customers and sell products more effectively.

CORPORATE INTERNET BANKING The Internet has initiated an electronic revolution in the global banking sector. Its dynamic and flexible nature as well as its ubiquitous reach has helped in leveraging a variety of banking activities. The Internet has emerged as one of the major distribution channels of banking products and services for banks in the U.S and in European countries. Consumers are embracing the many benefits of Internet banking like improved customer access which facilitates the offering of more services, attract new customers and reduce customer attrition. Advantages of Internet Banking:
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A. Advantages to customers: Banking from your desk: - with e-banking services, one can actually carry out a number of transactions sitting on ones seat with just a few click. Net banking customers view their account balance and also open fixed deposits, transfer funds, pay electricity, telephone or mobile phones bills and much more. Instant information: The accounts of the customers are updated as soon as the transaction takes place i.e., the accounts show the information updated to the last second. This means if a cheque issued by you has been debited from your account in the morning, your account status will reflect this when you log in to your accounts in the afternoon as against the earlier updating at the end of the day.

B. Advantages to the banks Lesser personnel required: online banking has encouraged a chunk of people, though a smaller one to carry out most of their transactions from a distance. This has resulted in lesser pressure on the employees in terms of entertaining customers. Easy publicity: banks can easily pass on the information about their new avenues/schemes without any wastage of time. Customers interested in the schemes would revert back and can be attended to later. PAYMENT SYSTEMS BY RBI: Inter-bank Clearing System High Value Clearing System
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MICR Clearing System Government Securities Clearing System and Real Time Gross Settlement System

Banks not only deal with corporate and individual but also they need to make payments to each other to settle the accounts arising of the transactions carried out for their customers, and also for borrowing or repayment, investments, sale and purchase of various assets. These payments have to be effected through their accounts maintained with the Reserve Bank of India.

Real Time Gross Settlement System The inter Bank Payments handle large amounts of money. The RTGS system is one in which payment instructions between banks are processed and settled individually and continuously throughout the day. In India currently it covers more than 28,000 branches of banks. The attraction of RTGS is that the payee banks and their customers receive funds with certainty and finality during the same day enabling them to use the funds immediately without exposing themselves to risk. RTGS system, do not create credit risk for the receiving participant because they settle the each payment individually , as soon as it is accepted , liquidity risks remains, as well as the possibility of the risks being shifted outside the system .The security has to ensure that hacking is not possible at the site.

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SCOPE FOR NEW ENTRANTS 81.25% also felt that there was further scope for new entrants in the market, in spite of capital management and human resource constraints, as there continue to remain opportunities in unbanked areas. With only 30-35% of the population financially included, and the Indian banking industry unsaturated with CAGR of well above 20%, participants in our survey felt that the market definitely has scope to accommodate new players. While there has been prior debate, we questioned banks on NBFCs and Industrial houses being established as banking institutions and find opinion to be marginally against the notion, with 35.71% in favor while 42.86% were against them being established as banks. However, on further questioning, 57.14% of respondents feel that the above may be allowed but only if it is along with specific regulatory limitations. Banks felt that limitations regarding track record, ensuring adequate capitalization levels, a tiered license that enables new entrants to enter into specific areas of the business only after satisfactorily achieving set milestones for the prior stages, cap on promoter's holdings and wider public holding in addition to a common banking regulator on a level playing field are essential before they may set themselves up as banks.

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CONCLUSION From the above we can conclude that, 1) As the bank is providing many schemes in Rural and Urban sectors and increasing smoothness in transactions. Government also help to provide more security to the consumers. And also provide Direct cash transfer scheme to the Rural consumers. 2) The working procedure which has been existed in the bank is really nice in the nature. The staff which is working in the bank is very co-operative in natures and they are working at their best level and providing best kind of services to its customers. As the employees are taking part in the decision making process so they are not having any complaint with the management. 3) The bank is conducting many social activities and helping the needy ones. The bank is facing the tremendous challenge in terms of the service, quality managing service, competition from other firms and customer satisfaction. The management of the bank is linking to accept the challenge for the process of learning and relearning.

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BIBLIOGRAPHY

www.wikipedia.com www.google.com www.yahoo.com News papers magazines

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