INDIAN BANKING SYSTEM

Presented by
Agraj
Jasmine
Hitesh
Karthick
Navin
Santhosh
Swarna
Viswadharshini
 BANKING
 Bank - Financial
institution that accepts
deposits and channels
those deposits into
lending activities
 Origin of the word -
“banco” Italian word
 HISTORY OF BANKING
 Phase-1:

Early phase from 1786 to 1986 of Indian banks

 Phase-2:

Nationalization of Indian bank and up to 1991 prior to Indian banking

sector reforms

 Phase-3:

New phase of Indian banking system with the advent of Indian

financial and banking sector reform after 1991
PHASE - 1
General bank of India 1786(first bank)
Reserve bank of India 1935
Slow growth and periodic failure
People mostly save in postal deposits
Public had less confidence in
banks
The Banking Company Act 1949
 PHASE - 2
Nationalization of imperial bank of India and formation of
state Bank Of India (1955)
Nationalization of SBI and subsidiaries (1960)
Branches 800%
Advances took a huge jump  11,000%
Implicit faith and immense confidence
PHASE - 3
M Narasimham committee
Entry of Foreign Banks
Phone banking and net banking
System become more convenient and swift
Time is given more importance than money
Customer oriented
 FUNCTIONS OF BANK
Accepting deposit from public/ others (deposit).
Lending money to public (loans).
Transferring money from one place to another.
Acting as trustees.
Keeping valuable in safe custody
Government business
WHO CONTROLS OVER BANKS?
RESERVE BANK OF INDIA (RBI)
History:
Become operational on April 1, 1935
Nationalized in the year 1949

Major objectives:
Issuing bank notes
Supervisory body
Administers governments monetary policies
Granting license for new banks
 SWOT ANALYSIS

STRENGTHS

Valuable contributor to GDP over a period of years and of
pivotal importance to the country’s economic development.

High standard regulatory environment.

Personal client service (Relationship Banking)

Growing Bank Index

Growing Customers
WEAKNESS

Internal operational elements the banking industry needs to
improve upon.

Lack of sales and marketing strategy.

Lack of house hold savings.

Fluctuation of interest rates due to Inflation and Deflation

Government Intervention during recession and crisis
 CHALLENGES(THREATS)

Volatility in product prices
internationally

Adopting International
Standards

Fiscal Deficit (financial
intermediation)

Human resource
development in banks

Economic Changes
 OPPORTUNITIES


Technology Advancement

Rural Banking

Attracting NRI

Huge domestic market

Entry of new firms

Going International
 Types of Bank in India
Other Banks
Commercial Banks
1) Co-operative Banks
1) Public Sector Banks
2) Rural Banks
2) Private Sector Banks
3) Specialized Banks
3) Foreign Banks
4) Development Banks
5) Non Banking
Financial Companies
 Public sector bank
• Public Sector Bank is one in which the Govt of India
Holds the major stake.
• United Bank of India is one of the 14 major banks which
were nationalised on July 19, 1969.
• And so, it is the first public sector bank in India
• Currently the market leader in Public sector bank is State
Bank of India

• State Bank of India has 7 associate Banks and has the

largest network of banks in India.
• It include state bank of (Travancore, Indore, Saurastra,
Hyderabad, Mysore and ‘Bikaner & Jaipur’)
 Private sector bank
• Private Banks originated first in Switzerland, it means Banks that are
not incorporated.
• The first Private bank in India to be set up in Private Sector Banks in
India was IndusInd Bank.
• It is one of the fastest growing Bank Private Sector Banks in India.

• The first Private Bank in India to receive an in principle approval

from the Reserve Bank of India was Housing Development Finance
Corporation Limited, to set up a bank in the private sector banks in
India as part of the RBI's liberalisation of the Indian Banking
Industry.

• IDBI ranks the tenth largest development bank in the world as

Private Banks in India and has promoted a world class institutions in
India.
 Co operative banks in india
• A co-operative bank is a financial entity which belongs to its
members, who are at the same time the owners and the customers
of their bank.
• Co-op Bank is 100 years old in India.
• The Anyonya Co-operative Bank in India is considered to have been
the first cooperative bank in Asia.
• It operates in 3 levels in India

A. Primary Credit Societies

B. Central Co-operative Banks

C. State Co-operative Bank

 Development Banks
• Business often requires medium and long-term capital for
purchase of machinery and equipment, for using latest
technology, or for expansion and modernization.
• Such financial assistance is provided by Development Banks.
They also undertake other development measures like
subscribing to the shares and debentures issued by
companies, in case of under subscription of the issue by the
public.
• Industrial Finance Corporation of India (IFCI), State Financial
Corporations (SFCs) are examples of development banks in
India
 Specialized Banks
• Specialized banks are those banks, which cater
to the requirements and provide overall
support for setting up business in specific
areas of activity.
• EXIM Bank and SIDBI are examples of such
banks.
• They engage themselves in some specific area
or activity and thus, are called specialised
banks
 Rural Banking
• Rural banking in India started since the establishment of
banking sector in India.
• Rural Banks initially focussed mainly upon the agro
sector.

• The Haryana State Cooperative Apex Bank Ltd.

commonly called as HARCOBANK plays a vital role in
rural banking in the economy of Haryana State .
• NABARD is a development bank in the sector of
Regional Rural Banks in India. It provides and regulates
credit and gives service for the promotion and
development of rural sectors mainly agriculture, small
scale industries, cottage and village industries,
handicrafts.
 Foreign banks in India
• Foreign Banks in India always brought an explanation
about the prompt services to customers. After the set up
foreign banks in India, the banking sector in India also
become competitive and accurative.
• There are separate policies introduced by RBI for
foreign banks.
1) HSBC
2) Citibank
3) Standard Charted Banks
4) RBS
 Present scenario
• Banks today are market driven and market responsive.

• Commercial Banks together with co operative banks account for

nearly 70 percent of the total assets of Indian financial institutions.

• With the entry of new players and multiple channels, customers

(both corporate and retail) have become more discerning and less
"loyal" to banks. This makes it imperative that banks provide best
possible products and services to ensure customer satisfaction.
• As per the Union Budget 2010, government plans to invest US$ 3.63
billion into public sector banks

They have been managing a world of information about customers -

their profiles, location, needs, requirements, cash positions, etc.
 Contd.
• They are focusing on region-specific campaigns rather than national media
campaigns as effective strategy for a diverse country like India.

• Customer-centricity also implies increasing investment in technology.

• Apart from the Mobile Banking, including of SMS Banking, Net Banking
and ATMs are the major steps taken by the banks in India towards
modernization.

• The RBI, announced that banks should link more branches to the

National Electronic Clearing Service (NECS)

• Currently, over 26,000 branches of 114 banks are enabled to

participate in NECS
 Functions of bank

Functions of Commercial Banks

The functions of commercial banks are of two
types.
• Primary functions
• Secondary functions
 Services and Function

The primary functions of a commercial bank

include:
a) Accepting deposits
b) Granting loans and advances.

And other secondary functions and services

are as follows
 Secondary Functions
• Issuing letters of credit, travelers cheque, etc.
• Undertaking safe custody of valuables, important document
and securities by providing safe deposit vaults or lockers.
• Providing customers with facilities of foreign exchange
dealings.
• .Transferring money from one account to another; and from
one branch to another branch of the bank through cheque,
pay order, demand draft.
• Standing guarantee on behalf of its customers, for making
payment for purchase of goods, machinery, vehicles etc.
 New Services
• Demat account

• Cash management

• Insurance product

• Mutual fund products

• ECS(Electronic clearance system)

• Taxes

• Gold
• Collecting and supplying business information.
•  Providing reports on the credit worthiness of customers.
• Providing consumer finance for individuals by way of loans on
easy terms for purchase of consumer durables like televisions,
refrigerators, etc.
• Educational loans to students at reasonable rate of interest
for higher studies, especially for professional courses
 IT USAGES BY BANKS

Core Banking Systems (CBS)

Internet Banking


Mobile Banking


Mobile Automated Teller Machines (ATMs)



Multifunctional ATMs shared ATM services



Large scale usage of Real Time Gross Settlement (RTGS)



National Electronic Fund Transfer ( NEFT)


Main competitors for banking
sector
• Post offices.
• Mutual fund
• Share market
• Insurance.
• Money lenders
• Family and friends
 FACTS & FIGURES
SBI has 8500+ ATM’s all
over the country
RBI had printed 6,39,948
lakhs crore notes till 6th Nov
2009
Transaction done through
ATM’s is around 70,000 crore
in a year
8 p's
 PRODUCT

 The product mix of a company includes all

different product lines a company offers to its
customers.
 The product line of a bank might easily include
more than 100 different services.
PERSONAL BANKING

 Credit Card


 Savings Account

 Mortgages

 Loan

 Savings

 Investments

 Insurance

 Travel And International

 SAVINGS ACCOUNT

ATM

7 Day Banking

Tele Banking

Internet Banking

Mobile Banking
For credit card holders
 Rewards

 Dial a draft

 24-Hour ATMs

 Credit Limit Increase

 Photo card

 Concession on Personal Remittances

 Overdraft facility

 Free ATM Card

STATE BANK OF INDIA
• SBI Term Deposits

• SBI Loan For Pensioners

• SBI Recurring Deposits

• Loan Against Mortgage Of Property

• SBI Housing Loan

• Loan Against Shares & Debentures

• SBI Car Loan

• Rent Plus Scheme

• SBI Educational Loan

• Medi-Plus Scheme
AGRICULTURAL / RURAL BANKING

 Agricultural  Banking
 Micro Credit
 Rural Banks
Other Products And Services
 NRI Banking

 Foreign Currency Loans

 Finance/ Service To Exporters

 Finance / Service To Importers

 Remittances

 Forex & Treasury Services

 Correspondent Services

 DEMAT Services

 E – Tax

 Public Provident fund

PLACE
Place is the deciding factor to start the branches.

There are number a factors affecting the determination of the

location of the branch of bank.
FACTORS ARE
 The trade area
 Population characteristics
 Commercial structure
 Industrial structure
 Banking structure
 Proximity to other convenient outlets
Contd..

Real estate rates

Proximity to public transportation

Drawing time

Location of competition

Visibility

Access
It is not necessary that all the above conditions have to be
satisfied while selecting the location but it should be tried to
satisfy as many of them as possible.
 
 PRICE

1.customer-focused pricing strategies.

2.New competitors threaten established players.
3.New expectations from customers create new pricing
opportunities.
4.Risk-based pricing is not the optimal approach for retail
banking.
5.Are you segmenting your market for optimal profitability.
6.Plug revenue leakage holes.
7.Use your data more effectively to set prices.
 PROMOTION

Promotion has different aspects for different industries,

products and services. Its final goal is to communicate
positive word of mouth among existing and potential
customers about the corporate, product and service. In
banking the customers must be ensured that services
provided by a particular bank have been designed to
give them maximum value of their money.
 People
• Sophisticated technologies add strength and efficiency to the
service .
• People ( employees ) are more important as they are directly
in contact with customers and they should better understand
the needs and expectation of the customers.
• Image of the company is formed by how these people behave
with the customers
• Personally committed employees
• Technology + committed employee effort = RESULTS
• Human resources can be developed through education,
training and by psychological tests.
• Even incentives can inject efficiency and can motivate people
for productive and qualitative work.
 Process
• The process mix constitutes the overall procedure
involved in using the services offered by the bank.
• Flow of activities: all the major activities of banks
follow RBI guidelines
• It should be customer friendly ie; easy to
understand and follow
• Process can be divided into two
Standardization: banks have got standardized
procedures got typical transactions.
Customization: There are specialty counters at
each branch to deal with customers of a particular
scheme.
 Example : Process for application for a car loan

• Producing of proper documents

• Filling up of application form
• Paying for the initial down payment.

It may fail

• If asked to produce documents that are not necessary

• Incase the application form is lengthy and not in language
understood by the customers .
• Payment mode of the initial payment – options should be
given
• The smaller and simpler the procedure, the better the
process, and the customer will be more satisfied.
 Physical Environment
Physical environment is the overall layout of the place i.e.
how the entire bank has been designed.

Physical environment refers to all those factors that help

make the process much easier and smoother.

It is very necessary that the place be designed in such a

manner so as to ensure maximum convenience to the customer
and cause no confusion to him.
Contd.,
 It includes signage, reports, punch lines, other tangibles,

employee’s dress code etc.

 Signage: Each and every bank has its logo by which a person

can identify the company. It creates visualization and

corporate identity for the banks.

 Tangibles: banks give pens, writing pads to the customers.

 Punch lines: Depicts the philosophy and attitude of the bank.

PRODUCTIVITY

• The rise in banking productivity was associated with

strongly expanding customer services and with advances in
computer technology and their rapid diffusion throughout
the industry.
• The Reserve Bank of India (RBI) has revealed that the
productivity of the employees of Indian banks has seen a
notable increase during the last five-year period.
Which among the above P
dominates?????
 Price

Why.?Because
Marketing strategy of bank

Why Bank
Marketing?
 Products and services
• Deposits

• Investment

• Loans

• Cards

• Demat services

• Net banking

• Merchant banking

• Mobile Banking

• NRI services

• Consumer finance

• ATM

• SWARN MUDRA ( INDIAN BANK PURE GOLD )

 Schemes given by bank to attract customers
• Indian bank Kisan card and kisan credit card plus.

• Golden harvest scheme.

• Financing agriculturists for purchase of tractors.

• Purchase of second hand Tractors by agriculturists

• Indian bank kisan bike scheme.

• Land purchase scheme.

• Vidhya shobha SHG education loan.

• Grih Lakshmi – SHG housing loan.

• Gramin Mahila Sowbhagya scheme.

 Focus areas of marketing effort
Target marketing and Tapped new markets

customer acquisition

Share of wallet

Channel strategy and management

Relationship management and database marketing

Product development & innovation

Credit approval

Superior Financial Services

Designed Innovative Products

Accessed Low cost NRI funds

 Marketing approach
For Urban Areas
The marketing strategy should be based on
customer service and the use of modern
technology in banking.
 Attracting new customers and retaining
existing customers is possible only with
customer service.
 Useof modern technology in urban areas will also go
long way for marketing of banking services. Technology
based service like credit card, debit card, ATM,
anywhere banking, internet banking, and mobile
banking are necessary for urban areas. to attract
business and people.
 To attract businessand wholesale customers, banks
need to adopt technology based product and service
which is suitable to such class of customer. For instance
RTGS, collection of out station cheques, issuing the
cheques at par at any branch in the country, cash
management facility, DD boutiques etc. are necessary.
Contd..

Another strategy for effective marketing is

bank need to change the focus from the
traditional banking to universal banking.
The term ‘universal banking’ in general refers to
the combination of commercial banking and
investment banking, i.e., issuing, underwriting,
investing and trading in securities.
• For Rural Areas:
– For effective rural marketing product
development, promotion and communication
is important.
• Here bank need to innovate product that could
attract the depositors. Various loan schemes that
are suitable for them for getting funds at right time
and also they find convenient to repay.
• Banks need to develop some scheme which would
attract them to bank with. For loans and advances
products which are suitable to farmers, small
traders, small scale agro based rural industries are
already in existence
• Banks need to see that how value addition can be
made to these existing schemes.
• Another potential area which can be explored by the
banks in the rural area is retail banking.
• With the steady increase in the income of the rural
people there is ample scope for retail loan products like
housing loans and loans for consumer durables
Marketing Strategies
Used By Banks
 Targeting
Differentiated Marketing
Strategy

• Tailors its marketing

campaigns to meet the
needs of its target
prospects
• Creates differentiated
product offering for different
segment
• Use of technology
in tracking customer segment
 Distribution Strategy
•Cross selling of products as a major area of focus

• Creation of concept of DSA (Direct Selling Agent)

• Creation of concept of DST (Direct Selling Team)

• Effort on the part of the bank to reach the customer rather than
waiting for the customer

• Use of internet, mobile, ATM’s and other technological device

to reach and serve the customers
 PROMOTION STRATEGY
Corporate branding
Product branding
• Brand: result of customer interactions
As Brand exists in the customers’ mind, Brand is
entirely the product of customer experiences. Every
kind of interaction with the customer that they can
relate to our brand name leaves behind some
perception that contributes to, or detracts from
Brand. Hence, every interface between our company
and the customer is a medium for building Brand.
Product Promotion:
•
Aimed at generating sales
•
Communicates product features and benefits
•
Mainly through print media
•
Point of purchase promotion tools for
different products to reach the relevant
customer segment.
 Internet banking

Centralized Processing Units Derived Economies of

Scale

Electronic Straight Through Reduced Transaction

Processing Cost

Data Warehousing , CRM Improve cost efficiency,

Cross sell

InnovativeTechnology Application Provide new or superior

products
Use of technology for both internal and external processed

Process are system driven and independent of the people

handling it
 Standardization of service across the branches

Extensive investment in software solutions for process

systemization
 OUT-DOOR ACTIVITIES

Need to be seen…everywhere!!’
 Events at corporate campus
 Promotional material at channel partner outlets
 Billboards
 Signage's
 Kiosks in residential and commercial complexes
 OTHER Methods

Co-Branding Initiatives

– Alliance with Amway India for launch of the international credit card. The card
will enable Amway distributors to purchase Amway products and earn and
redeem reward points

• Indian Railways Catering And Tourism Development Corporation, in conjunction

with ICICI Bank, announced the launch of mobile payments and ticketing system,
offering IRCTC customers to book railway tickets via SMS and make payments
through their ICICI Bank account

• Young Stars Account – Promotion through tie-up with Cartoon Network, and in-
series promotion through Tom & Jerry

• Seminars in partnership with media channels

 Technology
alone does not helps bank do all
•Increase market share in India’s expanding
banking and financial services industry by
following a disciplined growth strategy
focusing on quality and not on quantity and
delivering high quality customer service.
•Orientation towards customer service
• Division of SME, Personal Banking and other
functions at the branch level
• Effort towards providing sophisticated and
modern image of the bank through its people.
•Continue to develop products and services
that reduce bank’s cost of funds.
•Maintain current high standards for asset
quality through disciplined credit risk
management.
•Setting up call centers and outbound sales
force to secure new customers
•cross sales of other products.