CHAPTER 2

OVERVIEW OF BANKING SECTOR IN INDIA

 CHAPTER-2
OVERVIEW OF BANKING SECTOR IN INDIA
2.1 INTRODUCTION

A bank is a financial intermediary that accepts deposits and channels those deposits into
lending activities, either directly or through capital markets. A bank connects customers
with capital deficits to customers with capital surpluses. Banking is generally a highly
regulated industry, and Government restrictions on financial activities by banks have
varied over time and location. The Banking Industry was once a simple and reliable
business that took deposits from investors at a lower interest rate and loaned it out to
borrowers at a higher rate. According to section 5(b) of the Banking Regulation Act the
term banking is defined as accepting for the purpose of lending or investment of deposits
of money from the public, repayable on demand or otherwise and withdrawable by
cheque, draft and order or otherwise.

However deregulation and technology led to a revolution in the Banking Industry. Banks
have become global industrial powerhouses that have created ever more complex
products that use risk and securitization in models. Through technology development,
banking services have become available 24 hours a day, 365 days a week, through
ATMs, at online banking. Banking services include transactional services, such as
verification of account details, account balance details and the transfer of funds, as well
as advisory services that help individuals and institutions to properly plan and manage
their finances. Online banking channels have become highly popular in the last 10 years.

2.2 THE ROLE OF COMMERCIAL BANKS IN THE ECONOMIC

DEVELOPMENT

Banking industry is a very important tool in the construction of economic structure of any
country and it plays a significant role in the economic development of a developing
country. Economic development involves investment in various sectors of economy. The
major function of a financial institution is to provide the maximum financial convenience
to the public. There are three major responsibilities that such institutions have. First, they
are responsible for promoting overall savings by making banks more accessible to the
public. Second, they distribute savings in a more efficient manner to those who need it
more, from an economic and social perspective. Third, banks are responsible for creating
35 'TH..113G
credit and facilitating the transaction of business and trade which ultimately affect the
growth of the economy (Desai, 1987). Thus the banks collect savings from the people
and mobilize saving for investment in industrial projects. The investors borrow from
banks to finance the projects. Special funds are provided to the investors for the
completion of projects. The banks provide a guarantee for industrial loan from
international agencies. The foreign capital flows to developing countries for investment
in projects. Besides normal banking, the banks perform agency services for the client.
The banks buy and sell securities, make rent payments, receive subscription funds and
collect utility bills for the Government departments. Thus these banks save the time and
energy of busy people. Banks arrange foreign exchange for the business transactions with
other countries. The facility of foreign currency account has resulted in an increase of
foreign exchange-reserves; By opening a--letter of credit the banks promote foreign-trade.
The banks not only collect funds from the customers but also serve as a guide to them in
investing their funds. The policy of banks is an instrument in wide dispersal of credit in
the country.

Banking sector plays a positive role in augmenting the progress of a country as

repositories of community’s savings and as purveyors of credit. It is the heart of financial
structure since it has the ability to add to the money supply of the nation and thus creates
additional purchasing power. Lending, investing and related activities of banks facilitate
the economic processes of production, distribution and consumption. In a developing
country like India banks also have social responsibilities like uplifting the weaker
sections and financing the social projects. Banking industry in India has been playing a
pivotal role in rebuilding the Indian economy by extending its network to the backward
and rural areas, small industries and weaker sections of the society etc., in addition to
providing finance to industry and business. In a way commercial banks have emerged as
the key financial agencies of rapid economic development today than ever before.

Without a sound and effective banking system in India, it cannot have a healthy
economy. The banking system of India should not only be hassle free but it should be
able to meet new challenges posed by the technology and any other external and internal
factors. For the past three decades India's banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no longer
confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system
has reached even to the remote comers of the country. This is one of the main reasons of

36
India's growth process. The government's regular policy for Indian bank since 1969 has
paid rich dividends with the nationalization of 14 major private banks of India. Not long-
ago, an account holder had to wait for hours at the bank counters for getting a draft or for
withdrawing his own money. Today, he has a choice. Gone are days when the most
efficient bank transferred money from one branch to other in two days. Now it is simple
as instant messaging or dial- a-pizza. Money has become the order of the day. The first
bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are
as mentioned below:

• Early phase from 1786 to 1969 of Indian Banks

• Nationalization of Indian Banks and up to 1991 prior to Indian banking sector
Reforms.
• New phase of Indian Banking System with the advent of Indian Financial & Banking
Sector Reforms after 1991

The development of Indian banking can be divided in to three phases:

Phase I

The General Bank of India was set up in the year 1786. Next Bank of Hindustan and
Bengal Bank came into existence. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and
called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial
Bank of India was established which started as private shareholders banks, mostly
Europeans shareholders. In 1865 Allahabad Bank was established and first time
exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters
at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of
Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of
India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To
streamline the functioning and activities of commercial banks, the Government of India
came up with The Banking Companies Act, 1949 which was later changed to Banking
Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank

37
of India was vested with extensive powers for the supervision of banking in India as the
Central Banking Authority. During those day‘s public has lesser confidence in the banks.
As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility
provided by the Postal department was comparatively safer. Moreover, funds were
largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a
large scale especially in rural and semi-urban areas. It formed State Bank of India to act
as the principal agent of RBI and to handle banking transactions 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. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major
commercial banks in the country were nationalized. Second phase of nationalization
Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step
brought 80% of the banking segment in India under Government ownership. The
following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

• 1949: Enactment of Banking Regulation Act.

• 1955: Nationalization of State Bank of India.
• 1959: Nationalization of SBI subsidiaries.
• 1961: Insurance cover extended to deposits.
• 1969: Nationalization of 14 maj or banks.
• 1971: Creation of credit guarantee corporation.
• 1975: Creation of regional rural banks.
• 1980: Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.

Phase III

This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M. Narasimham, a committee was
38
set up by his name which worked for the liberalization of banking practices. The country
is flooded with foreign banks and theiiv<ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and net banking is introduced. The
entire system became more convenient and swift. Time is given more importance than
money. The financial system of India has shown a great deal of resilience. It is sheltered
from any crisis triggered by any external macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves
are high, the capital account is not yet fully convertible, and banks and their customers
have limited foreign exchange exposure.

2.3 NATIONALIZATION OF BANKS IN INDIA

The nationalization of banks in India took place in 1969 by Mrs.Indira Gandhi'the'then

prime minister. It nationalized 14 banks then. These banks were mostly owned by
businessmen and even managed by them:
• Central Bank of India • Indian Overseas Bank
• Bank of Maharashtra • BankofBaroda
• Dena Bank • Union Bank
• Punjab National Bank • Allahabad Bank
• Syndicate Bank • United Bank of India
• Canara Bank • UCO Bank
• Indian Bank • Bank of India

Before the steps of nationalization of Indian banks, only State Bank of India (SBI) was
nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of
seven State Banks of India (formed subsidiary) took place on 19th July, 1960. The State
Bank of India is India's largest commercial bank and is ranked one of the top five banks
worldwide. It serves 90 million customers through a network of 9,000 branches and it
offers -- either directly or through subsidiaries — a wide range of banking services.

The second phase of nationalization of Indian banks took place in the year 1980. Seven
more banks were nationalized with deposits over 200 crores. Till this year, approximately
80% of the banking segment in India was under Government ownership.

After the nationalization of banks in India, the branches of the public sector banks rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.

39
 • 1955: Nationalization of State Bank of India.
• 1959: Nationalization of SBI subsidiaries.
• 1969: Nationalization of 14 major banks.
• 1980: Nationalization of seven banks with deposits over 200 cores.

The commercial banking structure in India consists of:

• Scheduled Commercial Banks in India

• Unscheduled Banks in India

Scheduled Banks in India constitute those banks which have been included in the Second
Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those
banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the
Act. As on 30th June, 1999, there were 300 scheduled banks in India having a total
network of 64,918 branches. The scheduled commercial banks in India comprise of State
bank of India and its associates (7), nationalized banks (19), foreign banks (45), private
sector banks (32), co-operative banks and regional rural banks. "Scheduled banks in
India" means the State Bank of India constituted under the State Bank of India Act, 1955
(23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks)
Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970),
or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule
to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative
bank". "Non-scheduled bank in India" means a banking company as defined in clause (c)
of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled
bank".

The following are the Scheduled Banks in India (Public Sector):

• State Bank of India • Bank of Maharashtra
• State Bank of Bikaner and Jaipur • Canara Bank
• State Bank of Hyderabad • Central Bank of India
• State Bank of Indore • Corporation Bank
• State Bank of Mysore • Dena Bank
• State Bank of Patiala • Indian Overseas Bank

40
 • State Bank of Saurashtra • Indian Bank
• State Bank of Travancore • Oriental Bank of Commerce
• Andhra Bank • Punj ab N ational Bank
• Allahabad Bank • Punjab and Sind Bank
• BankofBaroda • Syndicate Bank
• Bank of India • Union Bank of India
• United Bank of India • UCO Bank
• VijayaBank .

The following are the Scheduled Banks in India (Private Sector)

• Vysya Bank Ltd. • Axis Bank Ltd.
« Indusind Bank Ltd. ® IGIGIBankingCorporation-BankLtd.
• Global Trust Bank Ltd. • HDFC Bank Ltd.
• Centurion Bank Ltd. • Bank of Punj ab Ltd.
9 IDBI Bank Ltd.

The following are the Scheduled Foreign Banks in India (Foreign Sector):
• American Express Bank Ltd. • ANZ Gridlays Bank Pic.
• Bank of Tokyo Ltd. 9 Bank of America NT & SA
• Barclays Bank Pic • Banquc Nationale de Paris
• Citi Bank N.C. • Deutsche Bank A.G.
• Honkong and Shanghai Banking • Standard Chartered Bank
Corporation • Dresdner Bank AG.
• The Chase Manhattan Bank Ltd.

41
2.4 CURRENT SCENARIO OF BANKING SECTOR IN INDIA

Figure 2.1 - Structure of the Organized Banking Sector in India

Currently, overall, banking in India is considered as 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. Even in terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets-as
compared to other banks in comparable economies in its region. The Reserve Bank of
India is an autonomous body, with minimal pressure from the government. The stated
policy of the Bank on the Indian Rupee is to manage volatility-without any stated
exchange rate-and this has mostly been true. With the growth in the Indian economy
expected to be strong for quite some time especially in its services sector, the demand for
banking services-especially retail banking, mortgages and investment services are
expected to be strong. Mergers and acquisitions, takeovers, asset sales and much more
action (as it is unraveling in China) will happen on this front in India. Recently (March
2006), the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak
Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been
allowed to hold more than 5% in a private sector bank since the RBI announced norms in
2005 that any stake exceeding 5% in the private sector banks would need to be vetted by
them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector
banks (that is with the Government of India holding a stake), 29 private banks (these do
not have government stake; they may be publicly listed and traded on stock exchanges)
42
and 31 foreign banks. They have a combined network of over 53,000 branches and
17,000 ATMs. According to a report by ICRA Limited, abating agency, the public sector
banks hold over 75 percent of total assets of the banking industry, with the private and
foreign banks holding 18.2% and 6.5% respectively.

2.5 PRIVATE BANKS IN INDIA

Initially all the banks in India were private banks, which were founded in the pre
independence era to cater to the banking needs of the people. In 1921, three major banks
i.e. Banks of Bengal, Bank of Bombay, and Bank of Madras, merged to form Imperial
Bank of India. In 1935, the Reserve Bank of India (RBI) was established and it took over
the central banking responsibilities from the Imperial Bank of India, transferring
commerciaLbarikin^functions“completel3^to_IBI: InM 955, after the declaration of first-
five year plan, Imperial Bank of India was subsequently transformed into State Bank of
India (SBI).

Following this, occurred the nationalization of major banks in India on 19 July 1969. The
Government of India issued an ordinance and nationalized the 14 largest commercial
banks of India, including Punjab National Bank (PNB), Allahabad Bank, Canara Bank,
Central Bank of India, etc. Thus, public sector banks revived to take up leading role in
the banking structure. In 1980, the GOI nationalized 6 more"commercial banks, with
control over 91% of banking business of India. In 1994, the Reserve Bank of India issued
a policy of liberalization to license limited number of private banks, which came to be
known as New Generation tech-sawy banks. Global Trust Bank was, thus, the first
private bank after liberalization; it was later amalgamated with Oriental Bank of
Commerce (OBC).Then Housing Development Finance Corporation Limited (HDFC)
became the first (still existing) to receive an 'in principle' approval from the Reserve
Bank of India (RBI) to set up a bank in the private sector. At present, Private Banks in
India includes leading banks like ICICI Banks, INGVysya Bank, Jammu & Kashmir
Bank, Karnataka Bank, Kotak Mahindra Bank, SBI Commercial and International Bank,
etc. Undoubtedly, being tech-savvy and full of expertise, private banks have played a
major role in the development of Indian banking industry. They have made banking more
efficient and customer friendly. In the process they have jolted public sector banks out of
complacency and forced them to become more competitive.

43
2.6 FOREIGN BANKS IN INDIA

Foreign banks have brought latest technology and latest banking practices in India. They
have helped made Indian Banking system more competitive and efficient. Government
has come up with a road map for expansion of foreign banks in India. The road map has
two phases. During the first phase between March 2005 and March 2009, foreign banks
may establish a presence by way of setting up a wholly owned subsidiary (WOS) or
conversion of existing branches into a WOS. The second phase will commence in April
2009 after a review of the experience gained after due consultation with all the
stakeholders in the banking sector. The review would examine issues concerning
extension of national treatment to WOS, dilution of stake and permitting
mergers/acquisitions of any private sector banks in India by a foreign bank.

Major foreign banks in India are:

ABN-AMRO Bank
Abu Dhabi Commercial Bank Ltd.
American Express Bank Ltd.
BNP Paribas
Citibank
DBS Bank Ltd.
Deutsche Bank
HSBC Ltd.

44
2.7 BRIEF PROFILE OF SELECTED BANKS UNDER STUDY

There are key eight banks from private and public sector has been selected under current
study. The names of these banks are Axis, HDFC, ICICI, Kotak Mahindra, Bank of
Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI) and IDBI bank.
The following is the short introduction of these banks:

2.7.1 AXIS Bank

History

Axis Bank began its operations in 1994, after the Government of India allowed new
private banks to be established. The Bank was promoted in 1993jointly by the
Administrator of the Unit Trust of India (UTI-I), Life Insurance Corporation of
India (LIC), General Insurance Corporation Ltd.. National Insurance Company Ltd., The
New India Assurance Company. The Oriental Insurance Corporation and United India
Insurance Company. The Unit Trust of India holds a special position in the Indian capital
markets and has promoted many leading financial institutions in the country.

45
Axis Bank (erstwhile UTI Bank) opened its registered office in Ahmedabad and
corporate office in Mumbai in December 1993. The first branch was inaugurated on 2
April 1994 in Ahmedabad by Dr. Manmohan Singh, then Finance Minister of India.

In 2001 UTI Bank agreed to merge with and amalgamate Global Trust Bank, but
the Reserve Bank of India (RBI) withheld approval and nothing came of this. In 2004 the
RBI put Global Trust into moratorium and supervised its merger into Oriental Bank of
Commerce.

UTI Bank opened its first overseas branch in 2006 Singapore. That same year it opened a
representative office in Shanghai. China.

UTI Bank opened a branch in the Dubai International Financial Centre in 2007. That
same year it began branch operations in Hong Kong. The next year it opened a
representative office in Dubai.

Axis Bank opened a branch in Colombo in October 2011, as a Licensed Commercial

Bank supervised by the Central Bank of Sri Lanka. Also in 2011, Axis Bank opened a
representative offices in Abu Dhabi.

In 2013, Axis Bank's subsidiary. Axis Bank UK commenced banking operations. Axis
Bank UK has a branch in London.

In 2014, Axis Bank upgraded its representative office in Shanghai to a branch.

Operations

Indian Business: As on 31-Mar-2014, the Bank had a network of 2402 branches and
extension counters and 12922 ATMs. Axis Bank has the largest ATM network among
private banks in India and it operates an ATM at one of the world’s highest sites at
Thegu. Sikkim at a height of 4,023 meters (13.200 ft) above sea level.

International Business: The Bank has seven international offices with branches at
Singapore. Hong Kong. Dubai (at the DIFC),Shanghai and Colombo and representative
offices at Dubai and Abu Dhabi, which focus on corporate lending, trade finance,
syndication, investment banking and liability businesses. In addition to the above, the
Bank has a presence in UK with its wholly owned subsidiary Axis Bank UK Limited.

46
 1AXIS BANK
Traded as BSE: 532215
LSE: AXBC
NSE: AXISBANK

Industry Banking, Financial services

Founded 1994 (as UTI Bank)

Headquarters Mumbai, Maharashtra, India

Key people (Chairman)

Shikha Sharma (MD & CEO)

Products Credit cards, consumer banking, corporate banking,

finance and insurance, investment banking, mortgage
loans, private banking, private equity, wealth management

Number of employees 42,420 (on 31-March-2014)

Website www.axisbank.com

2.7.2 HDFC Bank

47
History

HDFC Bank Limited is an Indian banking and financial services company

headquartered in Mumbai, Maharashtra. It is the fifth largest bank in India by assets,
incorporated in August 1994, after the Reserve Bank of India allowed establishing
private sector banks. The bank was promoted by the Housing Development Finance
Corporation, a premier housing finance company (set up in 1977) of India.

HDFC is India’s premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
corporation has maintained a consistent and healthy growth in its operations to remain
the market leader in mortgages. Its outstanding loan portfolio covers well over a million
dwelling units. HDFC has developed significant expertise in retail mortgage loans to
different market segments and also has a large corporate client base for its housing
related credit facilities. With its experience in the financial markets, strong market
reputation, large shareholder base and unique consumer franchise, HDFC was ideally
positioned to promote a bank in the Indian environment.

HDFC Bank’s mission is to be a World Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank’s risk appetite. The bank is
committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. FIDFC Bank's business philosophy is
based on five core values: Operational Excellence, Customer Focus, Product Leadership.
People and Sustainability.

As on March 31, 2014, the authorized share capital of the Bank is Rs. 550 crore. The
paid-up capital as on the said date is Rs. 479,81,00.870/- ( 2399050435 ) equity shares of
Rs. 2/- each). The HDFC Group holds 22.64 % of the Bank's equity and about 16.97 %
of the equity is held by the ADS / GDR Depositories (in respect of the bank's American
Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 34.11 % of the
equity is held by Foreign Institutional Investors (Fils) and the bank has 4,22,314
shareholders.

HDFC Bank is headquartered in Mumbai. As of March 31, 2014, the Bank’s distribution
network was at 3,403 branches in 2,171 cities. All branches are linked on an online real-
48
time basis. Customers in over 1397 locations are also serviced through Telephone
Banking. The Bank's expansion plans take into account the need to have a presence in all
major industrial and commercial centres, where its corporate customers are located, as
well as the need to build a strong retail customer base for both deposits and loan
products. Being a clearing / settlement bank to various leading stock exchanges, the Bank
has branches in centres where the NSE / BSE have a strong and active member base.

Operations

As of 30 September 2013, HDFC Bank has 3,251 branches and 11,177 ATMs, in 2.022
cities in India, and all branches of the bank are linked on an online real-time basis. The
Bank has overseas branch operations in Bahrain and Hong Kong.

HDFC Bank has two subsidiaries:

HDB Financial Services Limited (‘HDBFS’): HDBFS is engaged in retail asset

financing. It is a non-deposit taking non-bank finance company (NBFC). Apart from
lending to individuals, the company grants loans to micro, small and medium business
enterprises. It also runs call centers for collection services to the HDFC Bank's retail loan
products. HDFC Bank holds 97.4% shares in FIDBFS. As of March 31, 2013, F1DBFS
has 230 branches in 184 cities. During the FY 2012-13, HDBFS had turnover of INR 9.6
billion and profit after tax of INR 1 billion.12’ It has 6,404 employees as’ of 31 March
2013.

HDFC Securities Limited ('FISL'): FISL is engaged in stock broking. As of March 31,
2013, HDBFS has 194 branches across 150 cities. HDFC Bank has 62.1% shareholding
in FISL. During the FY 2012-13, HSL had turnover of INR 2.3 billion and profit after tax
of INR 668 million. During the year, the Company received the "Best e-Brokerage
Award - 2012” in the Outlook Money Awards in the runner up category.

ft HDFC BANK
Traded as BSE:500180
NSE: HDFCBANK
NYSE: HDB
BSE SENSEX Constituent
CNX Nifty Constituent

49
Industry Banking, Financial services

Founded August 1994

Headquarters Mumbai. Maharashtra,India

Key people Aditya Puri (MD)

Products Investment Banking, Investment Management, Wealth

Management, Private Banking. Corporate Banking, Private
Equity, Finance and Insurance, Consumer Banking,
Mortgages, Credit Cards

Number of employees 999.065 (March 2013)

Website HDFCBank.com

2.7.3 ICICI Bank

History'

ICICI Bank was established by the Industrial Credit and Investment Corporation of
India (ICICI), an Indian financial institution, as a wholly owned subsidiary in 1994. The

50
parent company was formed in 1955 as a joint-venture of the World Bank, India's public-
sector banks and public-sector insurance companies to provide project financing to
Indian industry. The bank was initially known as the Industrial Credit and Investment
Corporation of India Bank, before it changed its name to the abbreviated ICICI Bank.
The parent company was later merged with the bank.

ICICI Bank launched internet banking operations in 1998.

ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public offering
of shares in India in 1998, followed by an equity offering in the form of American
Depositary Receipts on the NYSE in 2000. ICICI Bank acquired the Bank of
Madura Limited in an all-stock deal in 2001 and sold additional stakes to institutional
investors during 2001-02.

In the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services group, offering a wide
variety of products and services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first
bank or financial institution from non-Japan Asia to be listed on the NYSE.

In 2000, ICICI Bank became.the first Indian bank to list on the New York Stock
Exchange with its five million American depository shares issue generating a demand
book 13 times the offer size.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger
of ICICI and two of its wholly owned retail finance subsidiaries, ICICI Personal
Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The
merger was approved by shareholders of ICICI and ICICI Bank in January 2002. by
the High Court of Gujarat at Ahmedabad in March 2002 and by the High Court of
Judicature at Mumbai and the Reserve Bank of India in April 2002.1211

ICICI Bank is an Indian multinational banking and financial services company

headquartered in Mumbai. Maharashtra, India. As of 2014 it is the second largest bank in
India in terms of assets and market capitalization. It offers a wide range of banking
products and financial services for corporate and retail customers through a variety of
delivery channels and specialized subsidiaries in the areas of investment
banking, life, non-life insurance, venture capital and asset management. The Bank has a
51
network of 3,845 branches and 12,012 ATMs in India, and has a presence in 19
countries.

ICICI Bank is one of the Big Four banks of India, along with State Bank of India. Punjab
National Bank and Bank of Baroda. The bank has subsidiaries in the United Kingdom,
Russia, and Canada; branches in United States. Singapore, Bahrain, Hong Kong, Sri
Lanka, Qatar and Dubai International Finance Centre; and representative offices in
United Arab Emirates, China. South Africa, Bangladesh, Thailand, Malaysia and
Indonesia. The company's UK subsidiary has also established branches in Belgium and
Germany.

Traded as
0ICICI Bank
BSE: 532174
NSE: ICICIBANK
NYSE: IBN
BSE SENSEX Constituent
CNX Nifty Constituent

Industry Banking, Financial services

Founded 1994

Headquarters Mumbai, Maharashtra. India

Key people K. V. Kamath (Chairman)

Ms.Chanda Kochhar (MD & CEO)

Products Credit cards. Consumer banking, corporate banking,

finance and insurance, investment banking, mortgage
loans, private banking, wealth management

Number of employees 94,204(2014)

Website www.icicibank.com

52
2.7.4 IDBI Bank

History

IDBI (Industrial Development Bank of India) is today one of India’s largest commercial
Banks. For over 40 years. IDBI Bank has essayed a key nation-building role, first as the
apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in
the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004
onwards).

Fleadquartered in Mumbai, IDBI Bank today rides on the back of a robust business
strategy, a highly competent and dedicated workforce and a state-of-the-art information
technology platform, to structure and deliver personalized and innovative Banking
services and customized financial solutions to its clients across various delivery channels.

Formation of Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was established in 1964 under an Act
of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 1976, the
ownership of IDBI was transferred to the Government of India and it was made the
principal financial institution for coordinating the activities of institutions engaged in
financing, promoting and developing industry in India. 1DBI provided financial
assistance, both in rupee and foreign currencies, for green-field projects as also for
expansion, modernisation and diversification purposes. In the wake of financial sector
reforms unveiled by the government since 1992, IDBI also provided indirect financial
assistance by way of refinancing of loans extended by State-level financial institutions
and banks and by way of rediscounting of bills of exchange arising out of sale of
indigenous machinery on deferred payment terms.

After the public issue of IDBI in July 1995, the Government shareholding in the Bank
came down from 100% to 75%.

IDBI played a pioneering role, particularly in the pre-reform era (1964—91), in catalyzing
broad based industrial development in India in keeping with its Government-ordained
'development banking' charter.

Conversion of IDBI into a commercial bank

A committee formed by RBI under chairmanship of S. H. Khan recommended the

development financial institution (IDBI) to diversify its activity and harmonise the role of
development financing and banking activities by getting away from the conventional
distinction between commercial banking and developmental banking. To keep up with
reforms in financial sector, IDBI reshaped its role from a development finance institution
to a commercial institution. With the Industrial Development Bank (Transfer of
Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz.,
IDBI Ltd.

Subsequently, in September 2004. the Reserve Bank of India incorporated IDBI as a

'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, formally entered the
portals of banking business as IDBI Ltd. from 1 October 2004. The commercial banking
arm, IDBI BANK, was merged into IDBI in 2005.

Services

Retail banking: It provides a wide range of products and services like deposits, loans,
NRI services, demat, pension account, mobile banking, internet banking, investment
schemes such as mutual fund, insurance products, bonds, debentures etc.

54
Corporate banking: It provides corporates project finance, film finance, foreign
currency loan, working capital finance, treasury products, etc.

Agri business and microfinance: It provides finance to agri businesses in the form of
dairy loans, farm mechanization loans, financing for fisheries, poultry, piggery,
warehouse receipt finance, etc. SME: IDBI Bank also offers products and services to
SME sector.

Subsidiaries of the bank

• IDBI Capital Markets
• IDBI Intech
• IDBI Asset Management

Recognition

IDBI’s long term foreign currency debt was given Baa2 rating by Moody’s reflecting
strong government ownership and control. IDBI Bank was assigned ‘BBB’ rating by
Standard's & Poor and Fitch, which represents strong market position. IDBI’s long-term
bonds, fixed deposits and short-term borrowing are rated by CRISIL. ICRA and Fitch,
reflecting high safety in respect to timely payment of interest and principal.

©IDBI bankH
Traded as
I BSE: 500116

Industry Banking, Financial services

Founded July 1964

Headquarters Mumbai India

Key people M.S. Raghavan (Chairman & MD)

Products Consumer banking, corporate banking, finance and

insurance, investment banking, mortgage loans, private
banking, private equity, wealth management, agriculture
loan

Number of employees 18.465 (March 2013)

Website www.idbi.com

55
2.7.5 State Bank of India (SBI)

State Bank of India (Hindi: SBI) (BSE: SBI, LSE: SBID) is the largest bank in India. The
bank traces its ancestry to British India, through the Imperial Bank of India, to the
founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the
Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in
1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank
of India. In 2008. the Government took over the stake held by the Reserve Bank of India.
SBI provides a range of banking products through its vast network in India and overseas,
including products aimed at NRIs.

SBI has tried to reduce over-staffing by computerizing operations and golden handshake
schemes that led to a flight of its best and brightest managers. These managers took the
retirement allowances and then went on to become senior managers in new private sector
banks. The State bank of India is the 29th most reputed company in the world according
to Forbes.

State Bank of India is one of the Big Four Banks of India, along with ICICI Bank, Axis
Bank and HDFC Bank — its main competitors. The All India Rural Credit Survey
56
Committee proposed the takeover of the Imperial Bank of India, and integrating with it,
the former state-owned or state associate banks. Subsequently, an Act was passed in the
Parliament of India in May 1955. As a result, the State Bank of India (SBI) was
established on 1 July 1955. This resulted in making the State Bank of India more
powerful, because as much as a quarter of the resources of the Indian banking system
were controlled directly by the State. Later on, the State Bank of India (Subsidiary
Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the
eight former State-associated banks as its subsidiaries The State Bank of India emerged
as a pacesetter, with its operations carried out by the 480 offices comprising branches,
sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of
serving as mere repositories of the community's savings and lending to creditworthy
parties, the State Bank of India catered to the needs of the customers, by banking
purposefully. The bank served the heterogeneous financial needs of the planned
economic development.

As of December 2013, it had assets of US$388 billion and 17,000 branches, including
190 foreign offices, making it the largest banking and financial services company in India
by assets.

Operations

SBI provides a range of banking products through its network of branches in India and
overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional
hubs and 57 Zonal Offices that are located at important cities throughout India.

Domestic Presence

SBI has 14,816 branches in India, as on 31 March 2013, of which 9.851 (66%) were in
Rural and Semi-urban areas. In the financial year 2012-13. its revenue was INR 200.560
crores (US$36.9 billion), out of which domestic operations contributed to 95.35% of
revenue. Similarly, domestic operations contributed to 88.37% of total profits for the
same financial year.

Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by
Government in August 2014, SBI held 11,300 camps and opened over 30 lakhs accounts
by September, which included 21.16 lakh accounts in rural areas and 8.8 lakh accounts in

urban areas.
57
International Presence

As of 28 June 2013, the bank had 180 overseas offices spread over 34 countries. It has
branches of the parent in Moscow, Colombo, Dhaka, Frankfurt, Hong
Kong, Tehran. Johannesburg, London, Los Angeles, Male in the Maldives, Muscat,
Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in
the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape
Town.

Subsidiaries

The State Bank Group includes a network of eight banking subsidiaries and several non­
banking subsidiaries. Through the establishments, it offers various services including
merchant banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance.

Traded as NSE: SB1N

BSE: 500112
LSE: SBID
BSE SENSEX Constituent
CNX Nifty Constituent

Industry' Banking, Financial Services

Founded 2 June 1956 .Nationalization . 1 July 1955*11

Headquarters Mumbai. Maharashtra. India

Key people Arundhati Bhattacharya

(Chairperson)

Products Consumer banking, corporate banking, finance and

insurance, investment banking, mortgage loans, private
banking, private equity, savings, Securities, asset
management, wealth management. Credit cards,

Number of employees 222,033 (2014)

Website www.sbi.co.in

58
2.7.6 Bank of Baroda (BOB)

History

Bank of Baroda was the brainchild of Maharaja Sayajirao Gaekwad, under whose
patronage the bank was incorporated on 20th July 1908 with a paid-up capital of Rs. 10
lacs (now US$ 20,800). The bank survived the disastrous years between 1913 and 1917 —
when as many as 87 banks failed - mainly due to its financial integrity and an abiding
responsibility it feels toward its client's hard earned money. These principles have
become the guiding mantra of the bank in the 101 years of its existence and have helped
steer the bank safely through various financial upheavals. In 1953 Bank of Baroda
became one of the first Indian banks to open an office abroad, when it set up a branch in
Kenya followed by an office in London four years later. It has since extended its footprint
to 25 countries which it a powerful symbol of free enterprise.

Based on 2012 data, it is ranked 715 on Forbes Global 2000 list. BoB has total assets in
excess of? 3.58 trillion, a network of 4913 branches in India, and over 2000 ATMs.

Bank of Baroda is one of the Big Four banks of India, along with State Bank of
India, ICICI Bank and HDFC Bank.
59
International Presence

In its international expansion Bank of Baroda followed the Indian diaspora, and
especially that of the Gujaratis. It has significant international presence with a network of
72 offices in 25 countries, six subsidiaries, and four representative offices. Among Bank
of Baroda's 42 overseas branches are ones in the world‘s major financial centers i.e. New
York. London, Dubai. Hong Kong (which it has upgraded recently), Brussels and
Singapore, as well as a number in other countries. The bank is engaged in retail banking
via 17 branches of subsidiaries in Botswana. Guyana, Kenya, Tanzania, and Uganda.
Bank of Baroda also has a joint-venture bank in Zambia with nine branches. Bank of
Baroda maintains representative offices in Malaysia, China, Thailand, and Australia. It
plans to upgrade its offices in China and Malaysia shortly to a branch and joint-venture,
respectively. Bank of Baroda has received permission or in principle approval from host
country regulators to open new offices in Trinidad and Tobago and Ghana, where it is
seeking to establish joint ventures or subsidiaries. The bank has received Reserve Bank
of India approval to open offices in the Maldives, and New Zealand. It is seeking
approval for operations in Bahrain, South Africa, Kuwait, Mozambique, and Qatar and is
establishing offices in Canada, New Zealand, Sri Lanka, Bahrain, Saudi Arabia, and
Russia. It also has plans to extend its existing operations in the United Kingdom, the
United Arab Emirates, and Botswana.

im 3m
Bank of Baroda
Traded as BSE: 532134

Industry Banking, Financial services

Founded 20 July 1908

Headquarters Vadodara (Baroda), Gujarat, India

Products Credit cards,consumer banking, corporate banking, finance

and insurance, investment banking, mortgage
loans, private banking, private equity, wealth management

Number of employees 43108 (2012-13)

Website www.bankofbaroda.com

60
2.7.7 Central Bank of India (CB1)

History

Central Bank of India, a government-owned bank, is one of the oldest and largest
commercial banks in India. It was established on 21 December 1911 by Sir Sorabji
Pochkhanawala with Sir Pherozeshah Mehta as Chairman, and claims to have been the
first commercial Indian bank completely owned and managed by Indians. The
establishment of the Bank was the ultimate realization of the dream of Sir Sorabji
Pochkhanawala. founder of the Bank. Sir Pherozesha Mehta was the first Chairman of a
truly 'Swadeshi Bank'. In fact, such was the extent of pride felt by Sir Sorabji
Pochkhanawala that he proclaimed Central Bank of India as the 'property of the nation
and the country's asset’. He also added that 'Central Bank of India lives on people's faith
and regards itself as the people's own bank'.

By 1918 it had established a branch in Hyderabad. A branch in

nearby Secunderabad followed in 1925. In 1923, it acquired the Tata Industrial Bank in
the wake of the failure of the Alliance Bank of Simla. The Tata bank, established in
1917, had opened a branch in Madras in 1920 that became the Central Bank of India,
Madras.
t>i
Central Bank of India was instrumental in the creation of the first Indian exchange bank,
the Central Exchange Bank of India, which opened in London in 1936.
However. Barclays Bank acquired Central Exchange Bank of India in 1938.

Also before World War II, Central Bank of India established a branch in Rangoon. The
branch's operations concentrated on business between Burma and India, and especially
money transmission via telegraphic transfer. Profits derived primarily from foreign
exchange and margins. The bank also lent against land, produce, and other assets, mostly
to Indian businesses.

In 2008 Central Bank of India entered into distribution tie up with Kotak Mahindra Asset
Management Company. Under this agreement it will offer entire products of Kotak
Mutual Fund products from the bank's branches.

Central Bank of India has signed a Memorandum of Understanding with WMG, an

Academic Department, University of Warwick. The MOU provides for several areas of
cooperation including provision of fast-track loans for Indian students studying at WMG
and the building of cooperative relationships between UK and Indian business and also
the development of a low cost housing project.

Jffas $HziF
Central Bank of India

Industry Financial
Commercial banks

Founded 21 December 1911; 103 years ago

Headquarters Mumbai, India

Key people Shri. Rajeev Rishi, Chairman & Managing Director

Number of employees 42000(approx)

Website www.centralbankofindia.co.in

62
2.7.8 Punjab National Bank (PNB)

History

Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act.
with its office in Anarkali Bazaar. Lahore. 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.1'1 PNB's founders included several leaders of

the Swadeshi movement such as Dyal Singh Majithia and Lala Harkishan Lai, Lala
Lalchand. Shri Kali Prosanna Roy. Shri E.C. Jessawala, Shri Prabhu Dayal. Bakshi Jaishi
Ram. and Lala Dholan Dass. Lala Lajpat Raiwas actively associated with the
management of the Bank in its early years. The board first met on 23 May 1894.
Ironically, the PNB Website now claims Lala Lajpat Rai to be the founding father,
surpassing Rai Mul Raj and Dyal Singh Majithia.'11 The bank opened for business on 12

April 1895 in Lahore.

63
PNB has the distinction of being the first Indian bank to have been started solely with
Indian capital that has survived to the present. (The first entirely Indian bank. Oudh
Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.)

PNB has had the privilege of maintaining accounts of national leaders such as Mahatma
Gandhi, Jawahar Lai Nehru, Lai Bahadur Shastri, Indira Gandhi, as well as the account of
the famous Jalianwala Bagh Committee.

Operations

The bank had 6,351 branches in India as on 30 September 2014. It also had 4 overseas
branches out of which 2 were in Dubai and one each in Dubai and Kabul. The total
business of overseas branches was billion as on 31 March 2013, which accounted for
6.98% of its total business. Bank also has one joint venture in Nepal - Everest Bank
Limited which has 48 branches.

punjob notional bonk

V' 1- ■... u.w.u.lSA.Wtve*1

Traded as BSE: 532461

NSE: PNB
CNX Nifty Constituent

Industry Banking, Financial services

Founded 19 May 1894

Headquarters New Delhi. Delhi. India

Key people Gauri Shankar (Executive Director with additional charge

of MD & CEO)

Products Credit cards, consumer banking, corporate

banking, finance and insurance. investment
banking, mortgage loans. private banking, private
equity, wealth management

Number of employees 62,392 (March 2013)

Website www.pnbindia.in

64
References
1. www.axisbank.com
2. www.banknetindia.com
3. www.bankofbaroda.com
4. www.centralbankofmdia.co.in
5. www.hdfcbank.com
6. www.iba.org.in
7. www.icicibank.com
8. www.idbi.com
9. www.pnbindia.in
10. www.rbi.org.in/scripts/banklinks.aspx
11. www'. statebankofmdia.com
12. http://en.wikipedia.org

65