PROJECT REPORT 

ON

MEASURES TO IMPROVE THE SCENARIO OF NATIONALIZED

BANKS IN INDIA

AT

BANK OF BARODA

SUBMITTED BY

ANKIT MEHTA : 07

Emba : D (B&I)

ACADEMIC YEAR: 2010 – 2012

SUBMITTED TO

MUMBAI EDUCATIONAL TRUST

MET League of Colleges | Mumbai Educational Trust

MET Complex, Bandra Reclamation,

Bandra (West), Mumbai - 400 050

 

Student‟s Declaration 

I hereby declare that this report, submitted in partial fulfillment of the requirement for the
award for the eMBA Finanace (Banking & Insurance), to MET‟s Institute of Management is
my original work and not used anywhere for award of any degree or diploma or fellowship or
for similar titles or prizes.

I further certify that without any objection or condition I grant the rights to MET‟s Institute of 
Management to publish any part of the project if they deem fit in journals/Magazines and
newspapers etc without my permission.

Place : Mumbai

Date : ----------------------------- 

Signature

Name : Ankit Mehta

Class : eMBA Finance (B & I)

Roll No: 07
 

Certificate

This is to certify that the dissertation submitted in partial fulfillment for the award of eMBA
Finance (Banking & Insurance), of MET‟s Institute of Management is a result of the
bonafide research work carried out by Mr. Ankit Mehta under my supervision and guidance.
No part of this report has been submitted for award of any other degree, diploma, fellowship
or other similar titles or prizes. The work has also not been published in any
 journals/Magazines.

Industry guide: Faculty Guide :

1) 1)

2) 2)

Signature: ______________ Signature: _________________

______________ _________________

Company: Bank of Baroda

Designation:

1)

2)

Date: Place:
 

Acknowledgement

I feel delighted to express my gratitude and response to all those distinguished personalities
who have guided and inspired me for the successful completion of this report.

I would like to thank  Mr.Ranjit Siyodia (Branch Manager), Mr.Ashok Gamare,

Mrs.Sheetal Sangodkar, Mrs.Meena Shigrekar, Mrs. Gayatri Shenoy, Mr.Dinesh
Waghela, MrAshok Bhatt, Mr.Kishor Bhatt, Mr.Prakash Patole, Mr.Mahesh Pandya 
who guided me during this period. I express my sincere gratitude for the continuous guidance
and encouragement provided to carry out the project work. I am deeply indebted to Mr.
Bharat J. Vedh for introducing me and for giving me the opportunity to do my Summer
Internship Project at Bank of Baroda. 

I have gratification in expressing my sincere thanks to Mr. Arun Patil and, Mr. Bharat J.
Vedh for providing the necessary advice and support during the course of this work.

My genuine gratitude to all the personnel and staff at Bank of Baroda, who in spite of their
busy schedules spared their valuable time to willingly respond to my queries and helped me
to gain an in-depth understanding of the processes.
 

INTRODUCTION

Banking means accepting for purpose of lending or investment of deposits of money from
public repayable on demand or otherwise and withdraw able by cheque, drafts, order or
otherwise.

Banks have become such an important aspect of human life, everyday people transact with
banks in various forms such as depositing funds, withdrawing money, collecting bank 
statements, transacting through ATM machines, payment of utility bills, DEMAT account
held with the banks, borrowing money from banks in form of loans for various purposes like
home loan, auto loan, traders loan, educational loan to make their life easier and simpler.
Every day in some or the other way even when we are at home we can make transaction
online with the help of the services provided to us by the banks such as by inserting the 14
digit number the accountholder can do shopping, buy and book tickets online, transfer funds,
make payment of the bills, life has become so easy after the advancement in the technology
which reaches to the ultimate customers with the help of the bank.

Banks have made life so mobile for their customers that there is no need for them to come to
the branch and undertake the transaction, to save time and labour banks have provided the
customers with ATM card with the help of which they can withdraw money from various
 bank‟s ATM machines established at various places. A customer can access to most of 
his/her account details from the ATM like with the help of Mini Statement the customer can
have the history of his/her transaction conducted in past few days, as to how much money
he/she has withdrawn or deposited, whether the cheque issued has been cleared, whether the
cheque received has been cleared and deposited into the account or not and so many other
services have been provided just to ensure that the customer does not face any difficulty to
access towards his/her own funds.
 

Looking at the current scenario of banks that we are so use to the facilities provided the
question which should come in mind is that what led to Banks to come into existence. The
most prominent reason may be because of lack of trust among all the people with whom we
are surrounded, there is a lack of trust amongst all the people who form society, people stay
together but when it comes to money it is very difficult to trust someone, so this led to a rise
in establishment of banks. Banks took the initiative that they will protect their money and
also protect them from its unusual losses. A new era started as the banks started with its
practice of collecting money as deposits and lending them to the needy people by earning
interest on the amount of money lent. Banks in the beginning being government entity also
brought confidence in the minds of the people and so they stared transacting as per their
requirements.

Banks being a government entity is a safe mode of transacting and their money is also in safe
hands, in the earlier period where people use to borrow money from unauthorized people like
zamindars and other money lenders the borrowers were always under immense pressure
because the rate at which the money was lent was very high and nonpayment of the same will
lead the lender to take over the property taken as collateral in the beginning, all such practices
lead to an unfavorable and disturbed mindset of the people who needed money, thus banks
came ahead to help them with this by lending them at low interest rate and also with better
treatment and without any pressure which brought a bit of harmony amongst many people.
Like these and many such initiatives have been taken by the bank which brought drastic
change for the betterment of the people.

The banking system in India is significantly different from that of other Asian nations
 because of the country‟s unique geographic, social, and economic characteristics. India has a
large population and land size, a diverse culture, and extreme disparities in income, which are
marked among its regions. There are high levels of illiteracy among a large percentage of its
population but, at the same time, the country has a large reservoir of managerial and
technologically advanced talents. Between about 30 and 35 percent of the population resides
in metro and urban cities and the rest is spread in several semi-urban and rural centers.
 

The country‟s economic policy framework combines socialistic and capitalistic features with
a heavy bias towards public sector investment. India has followed the path of growth-led
exports rather than the “export led growth” of other Asian economies, with emphasis on self -
reliance through import substitution.

These features are reflected in the structure, size, and diversity of the country‟s banking and
financial sector. The banking system has had to serve the goals of economic policies
enunciated in successive five year development plans, particularly concerning equitable
income distribution, balanced regional economic growth, and the reduction and elimination
of private sector monopolies in trade and industry. In order for the banking industry to serve
as an instrument of state policy, it was subjected to various nationalization schemes in
different phases (1955, 1969, and 1980). As a result, banking remained internationally
isolated (few Indian banks had presence abroad in international financial centers) because of 
preoccupations with domestic priorities, especially massive branch expansion and attracting
more people to the system. Moreover, the sector has been assigned the role of providing
support to other economic sectors such as agriculture, small-scale industries, exports, and
banking activities in the developed commercial centers (i.e., metro, urban, and a limited
number of semi-urban centers).

The banking system‟s international isolation was also due t o strict branch licensing controls
on foreign banks already operating in the country as well as entry restrictions facing new
foreign banks. A criterion of reciprocity is required for any Indian bank to open an office
abroad. These features have left the Indian banking sector with weaknesses and strengths. A
big challenge facing Indian banks is how, under the current ownership structure, to attain
operational efficiency suitable for modern financial intermediation. On the other hand, it has
been relatively easy for the public sector banks to recapitalize, given the increases in
nonperforming assets (NPAs), as their Government dominated ownership structure has
reduced the conflicts of interest that private banks would face.
 

Nationalized banks are wholly owned by the Government, although some of them have made
public issues. In contrast to the state bank group, nationalized banks are centrally governed,
i.e., by their respective head offices. Thus, there is only one board for each nationalized bank 
and meetings are less frequent (generally, once a month). The state bank group and
nationalized banks are together referred to as the public sector banks (PSBs).

List of Nationalized Banks operating in India:

   Allahabad Bank   State Bank of Hyderabad

   Andhra Bank   State Bank of India (SBI)

   Bank of Baroda   State Bank of Indore

   Bank of India   State Bank of Mysore

   Bank of Maharashtra   State Bank of Patiala

   Canara Bank   State Bank of Saurashtra

   Central Bank of India   State Bank of Travancore

   Corporation Bank   Syndicate Bank

   Dena Bank   UCO Bank

   Indian Bank   Union Bank of India

   Indian Overseas Bank   United Bank of India

   Oriental Bank of Commerce   Vijaya Bank

   Punjab & Sind Bank   IDBI Bank

   Punjab National Bank

  State Bank of Bikaner & Jaipur  

 

OVERVIEW OF BANKING STRUCTURE IN PAST FEW YEARS

The last decade has seen many positive developments in the Indian banking sector. The
policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and
related government and financial sector regulatory entities, have made several notable efforts
to improve regulation in the sector. The sector now compares favorably with banking sectors
in the region on metrics like growth, profitability and non-performing assets (NPAs). A few
banks have established an outstanding track record of innovation, growth and value creation.
This is reflected in their market valuation. However, improved regulations, innovation,
growth and value creation in the sector remain limited to a small part of it. The cost of 
banking intermediation in India is higher and bank penetration is far lower than in other
markets. India‟s banking industry must strengthen itself significantly if it has to support the
modern and vibrant economy which India aspires to be. While the onus for this change lies
mainly with bank managements, an enabling policy and regulatory framework will also be
critical to their success. 

The failure to respond to changing market realities has stunted the development of the
financial sector in many developing countries. A weak banking structure has been unable to
fuel continued growth, which has harmed the long-term health of their economies. In this
“white paper”, we emphasize the need to act both decisively and quickly to build an enabling,
rather than a limiting, banking sector in India.
 

GOOD PERFORMANCE, QUESTIONABLE HEALTH

Indian banks have compared favorably on growth, asset quality and profitability with other
regional banks over the last few years. The banking index has grown at a compounded annual
rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market
index for the same period. Policy makers have made some notable changes in policy and
regulation to help strengthen the sector. These changes include strengthening prudential
norms, enhancing the payments system and integrating regulations between commercial and
co-operative banks.

However, the cost of intermediation remains high and bank penetration is limited to only a
few customer segments and geographies. While bank lending has been a significant driver of 
GDP growth and employment, periodic instances of the “failure” of some weak banks have
often threatened the stability of the system. Structural weaknesses such as a fragmented
industry structure, restrictions on capital availability and deployment, lack of institutional
support infrastructure, restrictive labour laws, weak corporate governance and ineffective
regulations beyond Scheduled Commercial Banks (SCBs), unless addressed, could seriously
weaken the health of the sector. Further, the inability of bank managements (with some
notable exceptions) to improve capital allocation, increase the productivity of their service
platforms and improve the performance ethic in their organizations could seriously affect
future performance.
 

OPPORTUNITIES AND CHALLENGES FOR PLAYERS:

The bar for what it means to be a successful player in the sector has been raised. Four
challenges must be addressed before success can be achieved. First, the market is seeing
discontinuous growth driven by new products and services that include opportunities in credit
cards, consumer finance and wealth management on the retail side, and in fee-based income
and investment banking on the wholesale banking side. These require new skills in sales &
marketing, credit and operations. Second, banks will no longer enjoy windfall treasury gains
that the decade-long secular decline in interest rates provided. This will expose the weaker
banks. Third, with increased interest in India, competition from foreign banks will only
intensify. Fourth, given the demographic shifts resulting from changes in age profile and
household income, consumers will increasingly demand enhanced institutional capabilities
and service levels from banks.

ONE OF THREE SCENARIOS WILL PLAY OUT BY 2010 :

The interplay between policy and regulatory interventions and management strategies will
determine the performance of Indian banking over the next few years. Legislative actions will
shape the regulatory stance through six key elements:

1)  Industry structure and sector consolidation

2)  Freedom to deploy capital
3)  Regulatory coverage
4)  Corporate governance
5)  Labour reforms and human capital development
6)  And support for creating industry utilities and service bureaus.
 

Management success will be determined on three fronts:

1)  Fundamentally upgrading organizational capability to stay in tune with the changing
market
2)  Adopting value-creating M&A as an avenue for growth
3)  And continually innovating to develop new business models to access untapped
opportunities.

Through these scenarios, we paint a picture of the events and outcomes that will be the
consequence of the actions of policy makers and bank managements. These actions will have
dramatically different outcomes; the costs of inaction or insufficient action will be high.
Specifically, at one extreme, the sector could account for over 7.7 per cent of GDP with over
Rs... 7,500 billion in market cap, while at the other it could account for just 3.3 per cent of 
GDP with a market cap of Rs. 2,400 billion. Banking sector intermediation, as measured by
total loans as a percentage of GDP, could grow marginally from its current levels of ~30 per
cent to ~45 per cent or grow significantly to over 100 per cent of GDP. In all of this, the
sector could generate employment to the tune of 1.5 million compared to 0.9 million today.
Availability of capital would be a key factor the banking sector will require as much as Rs.
600 billion (US$ 14 billion) in capital to fund growth in advances, non-performing loan
(NPL) write offs and investments in IT and human capital up gradation to reach the high-
performing scenario.
 

Three scenarios can be defined to characterize these outcomes :

High performance: In this scenario, policy makers intervene only to the extent required
to ensure system stability and protection of consumer interests, leaving managements free to
drive far-reaching changes. Changes in regulations and bank capabilities reduce
intermediation costs leading to increased growth, innovation and productivity. Banking
becomes an even greater driver of GDP growth and employment and large sections of the
population gain access to quality banking products.

Management is able to overhaul bank organizational structures, focus on industry

consolidation and transform the banks into industry shapers. In this scenario we witness
consolidation within public sector banks (PSBs) and within private sector banks. Foreign
banks begin to be active in M&A, buying out some old private and newer private banks.
Some M&A activity also begins to take place between private and public sector banks. As a
result, foreign and new private banks grow at rates of 50 per cent, while PSBs improve their
growth rate to 15 per cent. The share of the private sector banks (including through mergers
with PSBs) increases to 35 per cent and that of foreign banks increases to 20 per cent of total
sector assets. The share of banking sector value adds in GDP increases to over 7.7 per cent,
from current levels of 2.5 per cent. Funding this dramatic growth will require as much as Rs.
600 billion in capital over the next few years.

Evolution: Policy makers adopt a pro-market stance but are cautious in liberalizing the
industry. As a result of this, some constraints still exist. Processes to create highly efficient
organizations have been initiated but most banks are still not best-in-class operators. Thus,
while the sector emerges as an important driver of the economy and wealth in 2010, it has
still not come of age in comparison to developed markets. Significant changes are still
required in policy and regulation and in capability-building measures, especially by public
sector and old private sector banks. In this scenario, M&A activity is driven primarily by new
private banks, which take over some old private banks and also merge among themselves. As
a result, growth of these banks increases to 35 per cent. Foreign banks also grow faster at 30
per cent due to a relaxation of some regulations. The share of private sector banks increases
to 30 per cent of total sector assets, from current levels of 18 per cent, while that of foreign
banks increases to over 12 per cent of total assets. The share of banking sector value adds to
GDP increases to over 4.7 per cent.
 

Stagnation: In this scenario, policy makers intervene to set restrictive conditions and
management is unable to execute the changes needed to enhance returns to shareholders and
provide quality products and services to customers. As a result, growth and productivity
levels are low and the banking sector is unable to support a fast-growing economy. This
scenario sees limited consolidation in the sector and most banks remain sub-scale.
 

NEED TO CREATE A MARKET-DRIVEN BANKING SECTOR WITH

ADEQUATE FOCUS ON SOCIAL DEVELOPMENT:

The term “policy makers” used in this document, as mentioned earlier, refers to the Ministry
of Finance and the RBI and includes the other relevant government and regulatory entities for
the banking sector. There is need to believe in co-ordinated effort between the various entities
is required to enable positive action. This will spur on the performance of the sector. The
policy makers need to make co-ordinated efforts on six fronts:

  Help shape a superior industry structure in a phased manner through “managed

consolidation” and by enabling capital availability. This would create 3-4 global sized
banks controlling 35-45 per cent of the market in India; 6-8 national banks controlling
20-25 per cent of the market; 4-6 foreign banks with 15-20 per cent share in the
market, and the rest being specialist players (geographical or product/segment
focused).
  Focus strongly on “social development” by moving away from universal directed
norms to an explicit incentive-driven framework by introducing credit guarantees and
market subsidies to encourage leading public sector, private and foreign players to
leverage technology to innovate and profitably provide banking services to lower
income and rural markets.
  Create a unified regulator, distinct from the central bank of the country, in a phased
manner to overcome supervisory difficulties and reduce compliance costs.
  Improve corporate governance primarily by increasing board independence and
accountability.
  Accelerate the creation of world class supporting infrastructure (e.g., payments, asset
reconstruction companies (ARCs), credit bureaus, back-office utilities) to help the
banking sector focus on core activities.
  Enable labour reforms, focusing on enriching human capital, to help public sector and
old private banks become competitive.
 

NEED FOR DECISIVE ACTION BY BANK MANAGEMENTS:

Management imperatives will differ by bank. However, there will be common themes across
classes of banks:

  PSBs need to fundamentally strengthen institutional skill levels especially in sales and
marketing, service operations, risk management and the overall organizational
performance ethic. The last, i.e., strengthening human capital will be the single
biggest challenge.
  Old private sector banks also have the need to fundamentally strengthen skill levels.
However, even more imperative is their need to examine their participation in the
Indian banking sector and their ability to remain independent in the light of the
discontinuities in the sector.
  New private banks could reach the next level of their growth in the Indian banking
sector by continuing to innovate and develop differentiated business models to
profitably serve segments like the rural/low income and affluent/HNI segments;
actively adopting acquisitions as a means to grow and reaching the next level of 
performance in their service platforms.
  Attracting, developing and retaining more leadership capacity would be a key to
achieve this and would pose the biggest challenge.
  Foreign banks committed to making a play in India will need to adopt alternative
approaches to win the “race for the customer” and build a value -creating customer
franchise in advance of regulations potentially opening up post 2009. At the same
time, they should stay in the game for potential acquisition opportunities as and when
they appear in the near term. Maintaining a fundamentally long-term value-creation
mindset will be their greatest challenge.
  The extent to which Indian policy makers and bank managements develop and
execute such a clear and complementary agenda to tackle emerging discontinuities
will lay the foundations for a high-performing sector in the years to come.
 

RURAL BANKING IN INDIA

POSITION OF RURAL AREAS:

As it is always said that India stays in villages because out of the total population stays in
villages and most of the revenue of our country is generated from agriculture and other
related areas, but still if we have a look at the position of rural areas they are quiet
disappointing because they have been always in the neglected areas and very minimal steps
have been taken in order to improve its current standing.

Steps are now been taken in form PSL (Priority Sector Lending) and through Financial
Inclusion because now banks have slowly realized that rural areas are the untapped areas and
also are highly competent areas to achieve growth, so now steps have been taken to reach
rural areas as quickly as possible because it will be very beneficial to reach first and try to
make an impression and win the hearts of the people to bring in more business. For the
complete growth our country it is very important to ensure rural growth simultaneously
because to make the dream come true of becoming the Super Power in the next ten years will
compulsorily need growth from rural areas because a country cannot develop with one its part
developing in an impressive manner and the other part remaining stagnant.

Traditionally rural and semi-urban areas have been looked upon as requiring help and lacking
in competent management. This mindset in policy formulation, regulations, and procedures
governing the rural banking system has left the rural system ailing. Liberalization of 
RRBs‟activities has permitted them to participate in more profitable businesses. A single,
strong, merged RRB setup would bring to the rural economy a well-directed banking
apparatus to take care of infrastructure, export financing, and traditional businesses.

Some rural areas are potential candidates for development into export centers for which
modern banking facilities should be made available, instead of making the customers
commute to urban centers to meet their international banking needs. Banks can offer financial
solutions to the agricultural sector and put to use expertise in private equity, venture funding,
and corporate finance to tap the potential of agro-based businesses in India.
 

People in the rural areas have always been deprived from using bank‟s facilities and due to
which there has always been exploitation observed in remote areas and it is now high time to
feel the need to bring them closer to advanced bank facilities so that even they can make
optimum use of the same.

For changing this scenario the government hopes to bring 73,000 villages under the banking
net that will lead to over five crores new bank accounts in rural areas. The intention is to
cover at least 73,000 new habitations which have population of over 2,000 and will open at
least five crores new accounts by March 2012.

The figures pointed out that only 38 percent of the total 85,300 bank branches in India were
in rural areas. Only 40 percent of Indians have access to banking facilities. Though the total
number of bank branches have increased from 8,700 at the time of nationalization in 1969 to
85,300 now, rural areas have only 32,000 branches, adding directions that all public sector
banks to increase their presence in rural areas.

A financial inclusion campaign called "Swabhimaan" has also been launched. The campaign
is aimed at encouraging people in rural areas to open bank accounts and use banking
facilities. It is one of the first campaigns to make targeted and concerted efforts to ensure ease
of access of organized financial system for the common people.

Though India has one of the largest banking networks in the world, it is a matter of great
concern that only 40 percent of people in India have access to banking services. This
revolutionary campaign seeks to correct that imbalance by establishing a new medium to
ensure greater availability of full spectrum of financial services and organized banking to all
the citizens regardless of which part of the country they may reside.
 

 
 

BANK OF BARODA

Bank of Baroda started in the year 1908 from a small building in Baroda to its new hi-rise
and hi-tech Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise, financial
prudence and corporate governance. It all started with a visionary Maharaja's uncanny
foresight into the future of trade and enterprising in his country. On 20th July 1908, under the
Companies Act of 1897, and with a paid up capital of Rs 10Lacs started the legend that has
now translated into a strong, trustworthy financial body, THE BANK OF BARODA. It has
been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of 
helping others grow, and growing itself in turn.

The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of 
this nature will prove a beneficial agency for lending, transmission, and deposit of money and
will be a powerful factor in the development of art, industries and commerce of the State and
adjoining territories."

Between 1913 and 1917, as many as 87 banks failed in India. Bank of Baroda survived the
crisis, mainly due to its honest and prudent leadership. This financial integrity, business
prudence, caution and an abiding care and concern for the hard earned savings of hard
working people, were to become the central philosophy around which business decisions
would be effected. This cardinal philosophy was over years of its existence, to become its
biggest asset. It ensured that the Bank survived the Great War years. It ensured survival
during the Great Depression. Even while big names were dragged into the Stock Market scam
and the Capital Market scam, Bank of Baroda continued its triumphant march along the best
ethical practices.
 

Mission:

To be a top ranking National Bank of International Standards committed to augmenting stake

holders' value through concern, care and competence.

Logo:

Bank of Baroda‟s new logo is a unique representation of a universal symbol. It comprises

dual „B‟ letterforms that hold the rays of the rising sun. It is called the Baroda Sun. 

The sun is an excellent representation of what bank stands for. It is the single most powerful
source of light and energy – its far reaching rays dispel darkness to illuminate everything they
touch. Bank of Baroda seeks to be the source that will help all their stakeholders realize their
goals. To their customers, bank seeks to be a one-stop, reliable partner who will help them
address different financial needs.

The single-colour, compelling vermillion palette has been carefully chosen, for its
distinctiveness as it stands for hope and energy. Bank also recognizes that they are
characterized by diversity. Bank‟s network of branches spans geographical and cultural
boundaries and rural-urban divides. Bank‟s customers come from a wide spectrum of 
industries and backgrounds. The Baroda Sun is a fitting face for brand because it is a
universal symbol of dynamism and optimism – it is meaningful for many audiences and
easily decoded by all. Bank‟s new corporate brand identity is much more than a cosmetic
change. It is a signal that the banks recognize and are prepared for new business paradigms in
a globalised world. At the same time, we will always stay in touch with their heritage and
enduring relationships on which the bank is founded. By adopting a symbol as simple and
powerful as the Baroda Sun, they hope to communicate both.
 

BANK OF BARODA PRESENCE:

Area No. of Branches

Metro 756
Urban 639
Semi-Urban 844
Rural 1172
Total (Indian)……..A 3411
Foreign (Overseas)………..B 85
Total (Global)…..(A+B) 3496

REPRESENTATIVE
BRANCHES   SUBSIDIARIES  JOINT VENTURE 
OFFICES 

• Bahamas • Botswana • Zambia • Australia

• Bahrain • Ghana • Malaysia
• Belgium • Guyana • Thailand
• China • Kenya
• Fiji Islands • New Zealand
• Hong Kong • Tanzania
• Mauritius • Trinidad &
• Republic of  Tobago
South Africa • Uganda
• Seychelles
• Singapore
• Sultanate of 
Oman
• United Arab
Emirates
• United Kingdom
• United States of 
America
 

LEARNINGS

As per instructions my joining at Bank of Baroda, Bhayandar (west) Geeta Nagar branch was
on 18th May 2011 and the branch timings are 10.00 a.m. to 04.00 p.m. The staff working at
this respective branch comprises of 9 people excluding 1 security guard who is not an
employee of the bank. This branch is just 3 years old but over the period of these 3 years
branch has done really well in creating a good database of customers.

The branch provides with different types of accounts such as Savings, Current, Recurring. On
Savings account the bank provides 3.5% interest and as per new guidelines the interest is
calculated on the present value held in the account on daily basis and the accumulated interest
is paid at the end of every six months.

Under recurring deposit account the main purpose is to develop a habit of savings among
people so that they save at least some money and deposit in the bank on which they can earn
the same interest which is applicable on fixed deposit, the only difference is that recurring
deposit does not allow the tenure which is of some odd days like recurring does not provide
to open an account for 444days, it is usually in the time frame of 5years or 6years but never
in between. Bank provides the customers to open this recurring account with the starting
minimum balance of Rs.50/- for people from rural areas and Rs.100/- for the people who
belong to proper city. And every month depositing of minimum of Rs.50/- and 100/-
respectively. With the help of this facility with such low amount people can deposit their
money at their comfort level and as per their earning power. Also after opening the recurring
deposit account the customer can avail the facility of overdraft up to 95% of the value
available in the account.
 

The branch to promote more and more savings have also come up with a scheme namely
Yathashakti scheme under which the customer can start his account with minimum Rs.100/-
and then he can again deposit Rs.100/- every month and I case if he/she wishes to deposit
more money than he can deposit 3times of the value introduced at the inception of the
account. For example if the customer has opened the account with the initial value of 
Rs.1000/- then in future he can deposit only up to Rs.3000/-, the rate of interest provided on
this deposit is same as the interest provided on recurring deposit.

All the funds which are received in a day are called as Receipts and all the withdrawals done
by the customers are called as Payments. All these transaction are recorded in a register under
the respective heads and at the end of the day both the receipts and payments are tallied that
there is no difference between the figures. Every day the cash in main lockers are counted the
money kept in lockers at the end of the day becomes the closing balance for that day and the
same balance becomes the opening balance for the next day. This is one of the most
important feature which is to be carried out every day on a regular basis because it is a
practice that officers from Zonal Basis can come anytime to visit the branch and even the
Auditors who come for the audit at the branch desires to go through the register stating about
the balance funds with the branch and tallies whether the written figures are in there in actual
terms or not.

The branch also provides the Fixed Deposit facility where the rate of interest varies as per
the tenure of the fixed deposit. Apart from the standard rate of interest Bank of Baroda has
come up for their namely Baroda Utsav deposit customers with a scheme of 444 days where
they provide customers with 9.35% and on all forms of Fixed Deposit, Bank of Baroda
provides 0.50% higher in addition to the standard rates to the senior citizens whose age is
above 65years. Apart from this the maturity ranges from minimum 7days to maximum
10years. The interest is calculated on a daily basis on the principal amount for which the
Fixed Deposit is created and the same procedure continues till the maturity period it the
customer does not intends to withdraw the F.D. amount in case of need.
 

As the guidelines prescribed by RBI that interest earned on F.D. should not be more than
Rs.10000/- in a year and if the income exceeds the limit then the income gets eligible for tax
deduction. But since an F.D. is a medium of investing money so therefore to avoid deductions
government has prescribed that in case the income exceeds Rs.10000/- then the customer has
to fill up Form 15G and 15H to show the investment and then the interest is saved from tax
being charged. Form 15G is for the people who are not more than 60 years of age and 15H is
for people more than 60years of age. In case where the customer has submitted his/her PAN
card details then the tax is deducted @10.30% and in case where PAN card details are not
fulfilled tax is charged at 20%. Tax which is deducted when the income exceeds the limit is
charged on the full value of F.D. and not the amount which has exceeded. Once the tax being
deducted in case of non submission of 15G / 15H then the customer has to file a return with
the documents such as the certificate that tax has been deducted on other required documents
once these formalities are fulfilled the deducted amount is rolled back.

Bank of Baroda has also come up with scheme called as ASBA Facility which is Application
supported by Blocked Amount. This facility enables the customers during IPO/FPO/NFO, the
core idea is that the customer can apply to IPO/FPO/NFO and does not have to make
immediate payment. The application amount remains blocked in the investors bank account
and is released in a proportionate amount and on allotment of shares. The benefits of this
scheme are:

1.  Simple application form – no need to submit cheque

2.  Continue to earn the income on the locked amount
3.  No worry of refunds
4.  ASBA application forms are accepted at over 1200 designated branches of BOB.
 

Another such added services comprises of  BSIP which is Baroda Pioneer Systematic
Investment Plan. BSIP is a simple and time honored investment strategy for accumulation of 
wealth in a disciplined manner over a long period. Under this scheme the desired customer
has been given an option that they can even start by investing as low as Rs.1000/-

It offers the below advantages to the customers:

1.  Disciplined approach: If the customer does not have an immediate access to a large
amount of ready cash, he/she has the option in investing in small amounts. The can
commit any amount of their choice (minimum 1000/-) to be invested every month in
one of the bank‟s schemes. This way the customer can be benefited when there is rise
or fall in the market.
2.  Risk and Volatile Management: Stock markets are volatile and therefore prediction
is difficult. Investors can focus on their financial goals and leave the job of managing
the market volatility to professional investment managers.
3.  Rupee Cost Averaging: Investors get more units at low NAV. Market‟s performance
does not matter because when the market falls you benefit by being allocated more
units and when market rises, the investments are averaged out. Investors buy stock at
a lesser price typically and sell them when prices are high. Timing the market is time
consuming and risky.
4.  Power of Compounding: Principal of compounding is applied. In earlier times when
the customer use to invest the more time the investment will have to grow by
compounding. The interest earned on investment also earns interest. Increases the
value of the investment. Averages out concerns of timing the market and short term
volatility.

The bank has always been emphasizing on various other facilities which can make
customer‟s work easier and faster. Facilities such as RTGS, NEFT. These are different type
of medium which are used for quick money transfer with minimum charges. The staff has
always been guiding the customers to avail this facility because it is in their best interest.
 

Also it saves their money spent in availing this facility because the charges are less as
compared to other facilities which performs the same function.

RTGS is Real Time Gross Settlement and it is used when the amount to be transferred is
more than Rs. 2lacs. And NEFT is National Electronic Money Transfer and this facility is
used when the amount to be transferred is less then Rs. 2lacs. The basic procedure followed
in both of these functions can be well explained in the form of a diagram. But first let‟s take
an example where the customer wants to send across funds from Bank of Baroda to some
other bank. These transfers are done with the help of codes which are stated on the cheques
issued to the customer. The process works in the below form:

BOB Customers Branch

BOB Main Branch

RBI Hub

Other Bank’s Main Branch 

Other Bank Customers Branch

 

As shown in the above diagram the procedure begins from the branch where the customer has
the account and if the customers has appropriate balance in the account the requested money
is then transferred and sent to bank of Baroda‟s main branch, from there the transaction
money is forwarded to RBI where RBI acts as a hub and from there RBI forwards the funds
to the main branch of that bank where the transfer is requested and in the end the main branch
forwards the money to the ultimate branch. Ideally it takes 2hours maximum to complete this
process. To save time and money these two medium are very useful from the point of view of 
a customer.

Almost the same procedure is followed in case of International Transfer of funds but since
this is a small branch international transfer is not undertaken at this branch but done at only
authorized branches. Te only difference in carrying out the international transfer is that there
is a process of carrying out the currency valuation as to what is the current value of the
currency since its value keeps on fluctuating in the international market. For carrying the
international transaction earlier in the absence of these mediums it was a bit time consuming
since a lot of formalities had to be carried out manually and it use to take approximately
15days to complete the whole procedure apart from that regular follow up was also very
necessary, but now with the help of the advanced mechanism the transfer can be carried out
within 1day or maximum 2days if everything remains in order.

Apart from these facilities the branch also provides loans, this is one of those areas from
where bank earns most of its revenues, currently most of the income which the bank earns
through loan is earned by providing the Auto loan and Home loan. But now slowly bank is
also taking an initiative to help the customer with Traders Loan. The customers records here
are very good and so far bank has not faced any NPA‟s, the branch has done really well in
maintaining good relationship with the customers and also done well in relation to the
investigation part before granting loan. Branch has always been on their toes in informing
their customers if there are any changes in the policies of the scheme which they have
availed, any changes in the rate of interest or changes in anything which might affect their
interest.
 

The customers have also by accepting their responsibility has not troubled the branch they
have always been ready to help whenever needed. So up till now it‟s like win -win situation
on both the ends the customers as well as the branch have been benefiting by the facility.

To keep the work in order for the loans which are granted the branch maintains a Due date
diary which consist two sections. Section 1 consists of those customers who have chosen to
pay through PDC (Post Dated Cheques). Under this method the customer who has availed the
loan issues certain number of cheques in the favor of the bank and directs to drop the cheque
every month as EMI. The bank starts dropping cheques for payment after one month of the
disbursement of the loan.

The cheques are dropped and the customer‟s account gets debited as soon as the cheque gets
cleared. It is the responsibility of the bank to drop the cheques reasonable days before the due
date since cheque clearing also requires certain minimum number of days, and if the cheques
are not deposited as per schedule the bank can charge penalty to the customer but then since
the bank has committed the mistake the penalty has to be waived.

Under Section 2 customers who have given standing instructions to the bank to debit the
customers saving account with the bank and take it as EMI. No cheques are issued in this
form the bank simply debits the customer‟s account the EMI which includes the principal
amount and the interest amount.

Once the loan is granted the loan count has to be reviewed after every one year that how it
was it behaved during the last year whether the EMI were received on time, if not then what
were the reasons behind delay in payment, whether the customer furnished the details on time
or was there a delay what has been the track record, all these and many such things are
evaluated at the end of the year. These details are maintained in the books as well as on the
system so that there is always back up available. While making the review it is very
important to obtain LAD (Letter of Acknowledgement of Debt), with the help of this
document all the documents which were obtained while granting the loan gets renewed.
 

Documents such as Power of Attorney get renewed. With the help of LAD being renewed
regularly in case when the borrower makes a default the bank has the right to approach
legally to make the loss good. But when the LAD is not renewed then the bank‟s right to
recovery remains but the right to approach legal system is lost.

In case when the loan amount is above Rs.5lacs and the borrower makes a default the whole
report along with the review documents are sent to the RM when the LAD is not renewed.
For the loan whose value is above Rs.5lacs such proposals are sent to the RM at the
Jogeshwari branch for approval.

Another area from where bank earns its revenue is from Lockers. In all the branch has got
138 lockers varies o the basis of their sizes which are arranged in the ascending order namely
A,B,C,D,E,F,H,E,L. Branch charges rent in return and the rent varies as per the size i.e.
Higher charges for bigger Lockers. Apart from the rent which the customer pay they are also
suppose to pay service charge charged by the bank which is around 10.30%. To operate the
lockers there are in all 3 keys out of which one remains with the customer, one remains bank 
and the remaining one remains with bank officer who handles the locker transaction.
Whenever the customer desires to operate his/her locker the bank officer goes along and both
the customer and the branch representative will have to insert the key together to open the
locker.

The bank is not entitled to know what the customer has kept in their locker, so therefore as
soon as the locker has been opened the branch‟s representative will have to leave the
customer alone so that the later can use the same. The key which remains with the bank is
nothing but a “MASTER KEY” which they are suppose to use only during emergency cases.
Currently there is a very heavy demand for lockers by the customers but due to space
constraints the branch is not able to bring in more lockers. To track the details of the locker
the branch maintains a register so that in case when frequent details are required it can be
referred.
 

The register contains details such as:

1.  DATE
2.  M.L. No. And R.R. No
3.  NAME OF THE LOCKER HOLDER
4.  ADDRESS
5.  PERIOD
6.  RENT
7.  DUE DATE
8.  INITIALS
9.  RENEWED AND SURRENDERED
10. INITIALS

To bring more business and spread more awareness the Branch Manager usually goes to meet
the clients to make them understand different type‟s policies and schemes which the bank 
provides so that more and more customers can open their account and the branch can expand
their business. The areas which can be concentrated are like schools, colleges, people
working at fire brigade all of them can open their account, the agencies who regulate the local
business can also open their account which are big customers bringing in more cash reserves
which can be lent to the people who approach for loans and in return the bank can earn
interest on the same. For all the expenses like the printing and stationary expenses, electricity
bill, telephone bill, security guards compensation and such other expenses which incurs the
branch maintains a register where in all these details are written to track the overall
expenditure.
 

RECOMMENDATIONS

Technological advancement: 

For every organization it is very important to have an advanced technology backing your
employees so that the work can be done faster and can be done in the most efficient manner.
With the help of the latest technology it gives the employees a helping hand and comes out to
be very useful in cases where the work load is very high and the available people to complete
the assigned tasks are comparatively low, in such cases if the organization is able to
compensate the low work force with advanced technology then it is helpful for both the
employees as well as the organization.

Many nationalized banks use software called FINACLE and the usual work is carried on with
the help of the same designed software, and it is actually more than sufficient to undertake
duties performed at the bank such as making cash receipt entry, making payment, issuing
Demand draft, Issuing Fixed deposit certificate, account holders transaction details, pass book 
printing, transfer of money, the loan which are sanctioned to the customers all the details
related to it such as the amount for the EMI, if there are any changes in the interest rate then
what will be the revised EMI and such related details can easily inserted and referred when
required.

But then Finale acts core software on which the whole staff works so if in case there is some
problem with the server the whole work gets stand still which is not a good sign for such an
esteemed bank, so in such a case bank should take some serious steps to ensure that there is
no as such problem with regards to the server issues and even if any such problem occurs
then there should be some reliable alternative available with them which they can use during
adverse situation, and also the alternative is important because the frequency of customers
visiting the branch is always high, and the customers visit the branch even for those issues
which they can also solve on their own but due to lack of awareness they regularly visit the
branch and if the branch is facing such operational issues it can also lead to arguments
amongst the customers and the staff because sometimes it becomes very difficult to make the
customers understand why the same problem arises again and again so in keeping all these
things in mind a proper software should be developed so that the same can be used in case of 
critical situation so that the work remains unhampered.
 

Along with this some major steps should be taken in order to make the core software so
efficient that regular problems can be avoided.

Apart from Finacle there are some other software‟s which are very useful in day to day
workings such as Microsoft Office, which can help in many ways such as drafting letters,
diagrams, maintaining excel reports, preparing power point presentation, making diagrams
and such other activities which can make work easier and also this software is very safe to
use, most recommended, and very small in size easy to use and can really improve the
efficiency.
 

Work Force:

In all forms of organization the work force majorly decides about the success of the
organization, because the more efficient work force one has got more are the chances it has
got to reach the top so it is very important for the organization to choose the work force
carefully and should use the talent and skills of the available employees at their optimum
capacity and should make sure that the employee are doing what they do the best.

With respect to nationalized branches the staff members should be very polite and humble to
the customers and above all they should always have intentions to help the customer in the
best possible manner and which is best suited to them without being selfish. All the staff 
members should be well equipped with basic knowledge through which they can help the
customers which they usually come across and almost everyday. It is very important for
branches to maintain a good customer base and putting in efforts to increase it everyday and
the figures should show the same, the staff should be very polite with the customers because
a better treatment would make people prefer the place most where they get respect and better
facility.

But the problem also arises when there is absenteeism in the staff which leads to increase in
the work load on the other employees and things are somehow managed where some or the
other person takes up the responsibility of taking care of extra work but it also increases the
pressure on that respective employee because then he/she has to take care of two different
types of work at the same time. In case when there is high absenteeism it tends to increase the
problems because it makes things unstable, and with the increasing customer database every
day the banks really needs more people who can help them which will reduce unnecessary
pressure and will help in appropriate allotment of work.

Appointing new officers will give a helping hand to the branch people which will allow the
superior officers to give more time to important matters and can also think about ways how
they can attract more and more customers to increase business. Appointing an officer will
reduce burden from higher officials.
 

Infra structure:

Infra structure though does not seems that important but even it has got its own importance,
the structure of the bank, how well built it is, its interiors, the sitting space and many other
things attract the customers a lot because say for example if a customer enters the branch for
the first time and as soon he/she enters and sees everything unorganized, walls leaking, dirty
floor what impression would the customer carries and there is very less possibility that he/she
would open its account with the bank because it‟s not just about opening an account but it‟s
all about building relationship.

Building relationship with not only with the people who are working there but also the
customer is building the relationship with the place where they have to come very often. So
the structure of the branch is very important from the customer‟s and increasing the business
point of view, bank has to think from both the perspective so that both are benefited.

All the things in the branch should be kept in such a manner that all the required things are in
place and under the reach when required. The structure formation should be done
systematically in such a way that the customers should be restricted up to a certain limit and
does not give them access to roam around the whole branch because it is risky to both the
customers and for the branch workings. Banks are one of the most risky places to work and
any carelessness can lead to trouble. If the customer is given access to whole branch it can
lead to loss of information, confidential data, atm cards, debit cards, credit cards with their
pins can be stolen which can turn out as very huge problem for the bank and then any one can
be suspect for the loss.

The same can happen with the customer as well, say for example if the customer
unknowingly entered a cabin where he should not be and all of a sudden there is a loss of 
confidential data then the customer will surely become a suspect even if he has not done
anything. So it is very important to plan things really well so that such unnecessary troubles
can be avoided beforehand. Proper formation also ensures safety within the branch. Apart
from this the most sensitive thing is Cash, because while collecting cash and making payment
if any customer gets an access to bank‟s cash reserves then it can be very devastating.
Lockers and so many sensitive things are always present on the branches which are to be
taken care of.
 

Therefore if the branches can adopt systematic approach towards working it can be very
useful. All the counters where maximum number of customers appears should be brought out
as front office and verification work, system entry which can be done without the presence of 
the customers can be shifted towards the back side.

And another important thing is giving the customer access to the branch allows them to enter
completely into the branch and through which customers with cruel intentions can have
access to all the security triggers and also can undertake other fraudulent activities.

Efforts should be made that the customers should be kept at the front office and try to help
them there itself and until and unless they do not have genuine reason to go in like operating
lockers etc they should not be allowed to move inside the branch. All the other facilities like
providing with water, helping with their doubts should be entertained outside and care should
be taken with each and every branch.
 

Training and Development:

Training and Development plays a very important role in success of every organization
because it is the labour force of every organization whose has got the key behind achieving
pre-decided goals or leading the organization towards failures. It is always said that the
selection procedure should be carefully done because one wrong selection of an employee
can lead to disaster. The reason being, once the employee has been recruited company spends
a lot of money behind the employee, expenses such as training, conducting induction
programme, and other such related expenses. Therefore selecting one wrong person can lead
to loss of funds and loss of time.

Every company frames the goals and targets after taking into consideration their labour force
and if the labour force itself is not efficient then how the organization will achieve its
objectives. It is usually seen in case of many banks that staff working in their respective
banks has got knowledge only about their own work and when the situation arises such as
absenteeism, sickness the other existing staff members have to back the employee and
complete his/her pending work, for this it is very important that the employees are well
versed with all types of works being performed by all the staff members it makes work easy
during adverse situation and keeps the bank prepared to adapt themselves as per the situation.

Sharing knowledge with everyone is good exercise it should be done in such a way that the
staff members should enjoy it and it such exercises should not come on them as a burden.
Once in a month such initiatives should be taken in form of quizzes, short power point
presentations. In such a manner that learning is done in form of enjoyment which at the end
creates an efficient labour force having at least basic knowledge about everything.

Training programmes should be conducted at training centres after regular duration of time so
that people get to know each other and they can share their views and opinion on different
aspects which can help them in future. At the end it is necessary that the employee takes
training and development programmes seriously and make the most use of it because it will
also help them in their own overall development and also their own growth with the
organization.
 

With respect to banks, there is always a need for specialized people, who have gained some
special skills in certain areas through education or from some special courses or through
experience. To illustrate as an example in all the branches the functions are carried on with
the help of various software which is installed in different machines, now it is very important
to have a person who is specialized in I.T. sector in a branch so that he/she can handle such
equipments, tackle different problems, can sort out problems with the technical team, keeps
the system and machines updated as per the need and also help other staff members with the
same. It also helps the branch to stay I touch with the most advanced technologies available
in the market and select the best which can be useful to them in their everyday workings. Out
of all the available software choose the best which will serve them the best.
 

Awareness about the services:

With modernization in almost all the sectors even banks have indulged themselves in various
facilities apart from the traditional ones like accepting deposits and lending them. Now the
banks are adopting various types of facilities such as paying utility bills, shares trading,
payments of taxes, using advanced methods of transferring money such as RTGS, NEFT, and
then depositing money in the account which is specifically opened for the payment of shares
applied, well in this case the customer who desire to buy shares of any company can apply
and deposit the share value money with the bank. Till the time the company does not issue
shares to him/her the customer can earn money on the money deposited with the bank and
then can when the company allots the shares the bank makes the payment as and when it is
due, all these facilities are so well framed that the customer is always at a very good position
but the point is how many customer are aware about such schemes, because till the time there
are not aware they will not be able to avail the services.

Banks after every certain period of time make efforts to come with such innovative services
for the customer but it is also important that customers are aware about the same. Proper
methods should be adopted in order to make people educated so that they can use the services
to the core and derive maximum benefit out of it. The banks should take steps such as
sending circulars to the customers at their residence, distribute pamphlets, display hoardings
where the frequency of people is very high, then at the branch level where the customers visit
the most, the bank authorities should set up suitable advertisement boards and on such places
where the customer somehow get an eye and they can go through the manual understand the
concept and use the services because it is always believed that “EYE LEVEL IS BUY
LEVEL”.

It should also be note that the language used in hoardings, boards, pamphlets and other
advertisement methods should be easy to understand by everyone, should be under the reach
of everyone, all the reference material should be framed in English, Hindi and in the local
language. Use of technical language should be avoided because as and when the customer
finds it difficult to understand he/she stops reading and that is where a customer is lost.
Language should be easy, simple and basic.
 

Bank authorities should also take steps such as training the staff at the branches in relation to
all the services which they provide so that if the customer has any doubt in understand things
there should always be a bank representative to clear his/her doubts politely make their
concept clear.

One things is what every customer expects is good service and personal attention, if these
two things are delivered to the customer then the customer becomes loyal to the bank forever
and even the bank will have the family members, relatives, friends because word of mouth is
the best form of advertisement. It is very important to show concern towards the customer
that even bank is also interested in providing services and wants the customer to benefit from
it.