CHAPTER.

INTRODUCTIOn

When you sit back and think about it, banks are often a huge part of our lives.
We deposit our paychecks, take out loans, and set up savings accounts, all at a
bank. But what do banks do? What are the different types of banks? Let's start
finding some answers to these questions by looking at the different types of
banks that make up a banking system.

A banking system is a group or network of institutions that provide financial

services for us. These institutions are responsible for operating a payment
system, providing loans, taking deposits, and helping with investments

Banking systems perform several different functions, depending on the network

of institutions. For example, payment and loan functions at commercial banks
allow us to deposit funds and use our checking accounts and debit cards to pay
our bills or make purchases. They can also help us finance our cars and homes.

By comparison, central banks or systems distribute currency and establish

money-related policies. Investment banks or systems conduct trades or deal
with capital markets.

Many banks are profit-seeking entities with stockholders. They obtain profits by
charging more interest for loans and paying less interest on deposits. For
example, a bank may charge a 3.91% interest rate on a 30-year, fixed rate
mortgage, but offer an interest rate of only 0.15% on a savings account of
$100,000.

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Banking systems perform several different functions, depending on the network
of institutions. For example, payment and loan functions at commercial banks
allow us to deposit funds and use our checking accounts and debit cards to pay
our bills or make purchases. They can also help us finance our cars and homes.

By comparison, central banks or systems distribute currency and establish

money-related policies. Investment banks or systems conduct trades or deal
with capital markets.

Many banks are profit-seeking entities with stockholders. They obtain profits by
charging more interest for loans and paying less interest on deposits. For
example, a bank may charge a 3.91% interest rate on a 30-year, fixed rate
mortgage, but offer an interest rate of only 0.15% on a savings account of
$100,000.

IMPORTANCE OF BANKS

The banking sector was always deemed to be one of the most vital sectors for
the economy to be able to function. Its importance as the “lifeblood” of
economic activity, in collecting deposits and providing credits to states and
people, households and businesses is undisputable.

In all economic systems, banks have the leading role in planning and
implementing financial policy. The difference lies with prioritizing goals and
their way of achievement. Based on the neo-liberal model, achieving greater
profits by using all means is an end in itself, while in the socialistic systems
bank operations also aim at improving economy in general and at satisfying
social needs.

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The financial crisis of 2008, and the way the governments chose to save the
banks by laying the burden on taxpayer shoulders while exercising austerity
policies, triggered a cycle of discussion over many crucial issues.

One of the basic questions was bank ownership, especially since banks were
recapitalized using state money.

The European leaders and institutional bodies have been promoting the idea
of total privatization of the production means and state owned enterprises,
among which the bank sector, especially in the countries under memorandum
obligations, because, as they claim, the state cannot be a businessman and
privatization will contribute in reducing the national debt

There is however a strong opposition claiming that state owned enterprises –

particularly those whose character is monopolistic – and among these the
banks that were recapitalized using taxpayer money, must remain under state
control because that is the only way for the economy to really recover, and for
the social interest to be placed over the pursuit of profitability.

In the following lines I will try to prove that there is indeed need for at least
one state bank, especially in the current demanding environment, and I will
address the creation of a proper institutional framework to avoid phenomena
similar to those of the recent past.

Banking plays an important role in the financial life of a business, and the
importance of banks can be seen from the fact that they are considered as to
be the life-blood of modern economy. Although no wealth is created by Bank,

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but their essential activities facilitates the process of production, exchange and
distribution of wealth.

In this way they become the effective partners in the process of economic
development and growth. In the words of Stephenson & Britain “Banks are
the custodians and distribution of liquid capital, which is the life-blood of our
commercial and industrial activities and upon the prudence of their
administration depend the economic well-being of the nation”.

IMPORTANCE OF BANKS FOR BUSINESS

Collections of Savings and Advancing Loans

Acceptance of deposit and advancing the loans is the basic function of

commercial banks. On this function, all other functions depend accordingly.
Bank operates different types of accounts for their customers.

Money Transfer

Banks have facilitated the making of payments from one place or persons to
another by means of cheques, bill of exchange and drafts, instead of cash.
Payment though cheques, draft is more safe and convenient, especially in case
of huge payments, this facility is a great help for traders and businessmen. It
really enhances the importance of banks for business community.

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Encourages Savings

Banks perform an invaluable service by encouraging savings among the

people. They induce them to save for profitable investment for themselves
and for national interest. These savings help in capital formation.

Transfer Savings into Investment

Bank transfer the savings collected from the people into investment and thus
increase the amount of effective capital, which helps the process of economic
growth.

DIFFERENT TYPES OF BANK ACCOUNTS

1)Current Account: Current account is mainly for business persons, firms,

companies, public enterprises etc. and are never used for the purpose of
investment or savings. These deposits are the most liquid deposits and there
are no limits for number of transactions or the amount of transactions in a
day. While, there is no interest paid on amount held in the account, banks
charge certain service charges, on such accounts.

2) Savings Account: Savings Account is meant for saving purposes. Any

individual either single or jointly can open a savings account. Most of the
salaried persons, pensioners and students use Savings Account. The advantage
of having Savings Account is Banks pay interest for the savings. The saving

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account holder is allowed to withdraw money from the account as and when
required. The rate of interest ranges between 4% to 6% per annum in India.

3) Recurring Deposit Account: Recurring deposit account or RD account is

opened by those who want to save certain amount of money regularly for a
certain period of time and earn a higher interest rate. In RD account a fixed
amount is deposited every month for a specified period and the total amount
is repaid with interest at the end of the particular fixed period.

4) Fixed Deposit Account: In Fixed Deposit Account (also known as FD

Account), a particular sum of money is deposited in a bank for specific period
of time. It’s one time deposit and one time take away (withdraw) account. The
money deposited in this account cannot be withdrawn before the expiry of
period.

FUND BASED SERVICES

Working Capital Financing : A firm's working capital is the money available

to meet current obligations (those due in less than a year) and to acquire
earning assets. China trust Commercial Bank offers corporations Working
Capital Finance to meet their operating expenses, purchasing inventory,
receivables financing, either by direct funding or by issuing letter of credit.

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Short Term Financing : The bank can structure low cost credit programmes
and cash flow financing to meet your specific short-term cash requirements.
The loans are structured to enhance your profitability by scheduling the
repayment to match the cash flow available to repay the debt.

Bill Discounting: Bill discounting is a short tenure financing instrument for

companies willing to discount their purchase / sales bills to get funds for the
short run and as for the investors in them. These are customized to suit your
requirement for short-term finance, from the date of sale to the date of
receipt of payment there on. We consider two types of bills facility viz. where
documents are delivered on payment, i.e. D/P Bills and where the documents
are delivered against acceptance i.e. D/A Bills.

Export Credit : We offer short-term working capital finance both at the pre-
shipment and post-shipment stages Pre-shipment finance facility provides
liquidity for procuring raw materials, processing, packing, transporting, meant
for export.
Post-shipment finance is a credit facility extended from the date of shipment
of goods till the realization of the export proceeds. The different types of post-
shipment advances include:

 Export bills purchased/discounted

 Export bills negotiated (against letter of credit)
 Advances against bills sent on collection basis
 Advances against exports on consignment basis

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Structured Finance : Structured Finance describes any "non-standard" way of
raising money. These tailor-made securities go beyond "standard" securities
like conventional loans, debentures, debt, and equity. The reason to structure
a more advanced security may be that conventional securities may be
unattractive, unavailable or too expensive. These products are structured for
both long and short tenor with exit options at intervals for both parties.

Term Lending: CTCB offers very competitive rates for term financing. We also
provide advisory services to companies for syndication of the term loans to a
wide spectrum of financial institutions.
Under Term Finance, china trust Commercial Bank, offers the following:

 Fund Based Finance for capital expenditure acquisition of fixed assets

towards starting or expanding a business to swap with high cost existing
debt from other bank / financial institution
 Non-Fund Based Finance in the form of Deferred Payment Guarantee for
acquisition of fixed assets towards starting / expanding a business or
industrial unit.

NON FUND BASED

Letter of Credit: We offer import as well as domestic Letter of Credit facility to

our clients for procurement of goods on DA/DP basis as per their needs at very
competitive rates. Considering our international network of branches / offices
coupled with worldwide correspondent relationship arrangements, our clients
enjoy market acceptability and comfort in business deals.

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Bank Guarantee : We offer Bank Guarantee facility to our clients
guaranteeing their performance / financial obligations in the domestic as well
as international market.

LC Advising / Confirming Services : In case of Letters of Credit received by

our clients, we offer LC advising as well as LC confirmation services under our
correspondent relationships with domestic as well as international banks.

Co-acceptance facilities : Sometimes in business deals on credit basis, buyers

are required to offer adequate comforts to the sellers such as bank guarantee
or co-acceptance of bills by the bankers. Bank of Baroda offers co-acceptance
of bills facility to the top rated clients.

Banc assurance: Bank of Baroda has tie-up arrangement with National

Insurance Company (NIC), under which we arrange for issuance of general
insurance policies to our clients thereby taking away their worries of timely
and adequate insurance cover of the assets.

Solvency Certificate: We provide Solvency Certificate to our clients in case it

is required for providing to Government authorities, other corporates in
business deals / bids etc.

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Credit Reports: We provide Credit Reports on our clients to other banks/FIs
and we also obtain Credit information required by our clients on their counter
parties, through our correspondent relationship.

Types of Banks

RETAIL BANKS: are probably the banks you’re most familiar with: Your
checking and savings accounts are held at a retail bank, which focuses
on consumers (or the general public) as customers.

COMMERCIAL BANKS: focus on business customers. Businesses need

checking and savings accounts just like individuals do. But they also need
more complex services, and the dollar amounts (or the number of
transactions) can be much larger.

INVESTMENT BANKS: help businesses work in financial markets. If a

business wants to go public or sell debt to investors, they’ll often use an
investment bank. Learn more about investment banks.

CENTRAL BANKS: manage the monetary system for a government. For

example, the Federal Reserve Bank is the US central bank responsible
for managing economic activity and supervising banks. Learn more
about central banks.

CREDIT UNIONS: are similar to banks, but they are not-for-profit

organizations owned by their customers (most banks are owned by
investors). Credit unions offer products and services more or less
identical to most retail and commercial banks.

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LIST OF NATIONALISED BANK IN INDIA (ANY 7)

1 Allahabad Bank

2 Andhra Bank

3 Bank of Baroda

4 Bank of India

5 Bank of Maharashtra

6 Canara Bank

7 Central Bank of India

FUNCTIONS OF BANKS

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A. Primary Functions of Banks: The primary functions of a bank are also known as
banking functions. They are the main functions of a bank.

1. Accepting Deposits: The bank collects deposits from the public. These
deposits can be of different types, such as

a. Saving Deposits
b. Fixed Deposits
c. Current Deposits d. recurring Deposits

SAVING DEPOSITS

This type of deposits encourages saving habit among the public. The rate of
interest is low. At present it is about 4% p.a. Withdrawals of deposits are
allowed subject to certain restrictions. This account is suitable to salary and
wage earners. This account can be opened in single name or in joint names.

FIXED DEPOSITS

Lump sum amount is deposited at one time for a specific period. Higher rate of
interest is paid, which varies with the period of deposit. Withdrawals are not
allowed before the expiry of the period. Those who have surplus funds go for
fixed deposit.

CURRENT DEPOSITS

This type of account is operated by businessmen. Withdrawals are freely

allowed. No interest is paid. In fact, there are service charges. The account
holders can get the benefit of overdraft facility.

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RECURRING DEPOSITS

This type of account is operated by salaried persons and petty traders. A

certain sum of money is periodically deposited into the bank. Withdrawals are
permitted only after the expiry of certain period. A higher rate of interest is
paid.

2. GRANTING OF LOANS AND ADVANCES: The bank advances loans to the

business community and other members of the public. The rate charged is
higher than what it pays on deposits. The difference in the interest rates
(lending rate and the deposit rate) is its profit.

The types of bank loans and advances are:-

a. Overdraft
b. Cash Credits
c. Loans
d. Discounting of Bill of Exchange

OVERDRAFT

This type of advances is given to current account holders. No separate account

is maintained. All entries are made in the current account. A certain amount is
sanctioned as overdrafts which can be withdrawn within a certain period of
time say three months or so. Interest is charged on actual amount withdrawn.
An overdraft facility is granted against a collateral security. It is sanctioned to
businessman and firms.

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CASH CREDITS

The client is allowed cash credit up to a specific limit fixed in advance. It can be
given to current account holders as well as to others who do not have an
account with bank. Separate cash credit account is maintained. Interest is
charged on the amount withdrawn in excess of limit. The cash credit is given
against the security of tangible assets and / or guarantees. The advance is
given for a longer period and a larger amount of loan is sanctioned than that of
overdraft.

LOANS

It is normally for short term say a period of one year or medium term say a
period of five years. Now-a-days, banks do lend money for long term.
Repayment of money can be in the form of installments spread over a period
of time or in a lump sum amount. Interest is charged on the actual amount
sanctioned, whether withdrawn or not. The rate of interest may be slightly
lower than what is charged on overdrafts and cash credits. Loans are normally
secured against tangible assets of the company.

DISCOUNTING OF BILL OF EXCHANGE

The bank can advance money by discounting or by purchasing bills of exchange

both domestic and foreign bills. The bank pays the bill amount to the drawer
or the beneficiary of the bill by deducting usual discount charges. On maturity,
the bill is presented to the drawee or acceptor of the bill and the amount is
collected.

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B. SECONDARY FUNCTIONS OF BANKS: The bank performs a number of
secondary functions, also called as non-banking functions.

1. AGENCY FUNCTIONS: The bank acts as an agent of its customers. The bank
performs a number of agency functions which includes:-

a. Transfer of Funds
b. Collection of Cheques
c. Periodic Payments
d. Portfolio Management
e. Periodic Collections
f. Other Agency Functions

TRANSFER OF FUNDS

The bank transfer funds from one branch to another or from one place to
another.

COLLECTION OF CHEQUES

The bank collects the money of the cheques through clearing section of its
customers. The bank also collects money of the bills of exchange.

PERIODIC PAYMENTS

On standing instructions of the client, the bank makes periodic payments in

respect of electricity bills, rent, etc.

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PORTFOLIO MANAGEMENT

The banks also undertake to purchase and sell the shares and debentures on
behalf of the clients and accordingly debits or credits the account. This facility
is called portfolio management.

PERIODIC COLLECTIONS

The bank collects salary, pension, dividend and such other periodic collections
on behalf of the client.

OTHER AGENCY FUNCTIONS

They act as trustees, executors, advisers and administrators on behalf of its

clients. They act as representatives of clients to deal with other banks and
institutions.

2. GENERAL UTILITY FUNCTIONS: The bank also performs general utility

functions, such as:-

a. Issue of Drafts, Letter of Credits, etc.

b. Locker Facility
c. Underwriting of Shares
d. Dealing in Foreign Exchange

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 e. Project Reports
f. Social Welfare Programmers
g. Other Utility Functions

ISSUE OF DRAFTS AND LETTER OF CREDITS

Banks issue drafts for transferring money from one place to another. It also
issues letter of credit, especially in case of, import trade. It also issues
travellers' cheques.

LOCKER FACILITY

The bank provides a locker facility for the safe custody of valuable documents,
gold ornaments and other valuables.

UNDERWRITING OF SHARES

The bank underwrites shares and debentures through its merchant banking
division.

DEALING IN FOREIGN EXCHANGE

The commercial banks are allowed by RBI to deal in foreign exchange.

PROJECT REPORTS

The bank may also undertake to prepare project reports on behalf of its
clients.

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SOCIAL WELFARE PROGRAMMES

It undertakes social welfare programs, such as adult literacy programs, public

welfare campaigns, etc.

OTHER UTILITY FUNCTIONS

It acts as a referee to financial standing of customers. It collects

creditworthiness information about clients of its customers. It provides market
information to its customers, etc. It provides travellers' cheque facility.

BANKING INDUSTRY CHALLENGES

As the financial markets continue to evolve, financial institutions are working

to grow and maintain profits while adjusting to ever-changing regulations and
the downturn’s effects on profitability and performance.. The main challenges
banking institutions face nowadays can be categorized as follows:

Industry strategic challenges: Banks in Luxembourg have to face significant

strategic challenges. Private banking industry professionals need to reinvent
themselves in order to reinforce Luxembourg as a leading pole in private
banking services. Retail bankers also have to face a growing competition from
abroad as well as from non-traditional institutions.

Industry regulatory challenges: The constant evolution of local and

international regulations is a major driving force in the banking and securities
industry. The likely introduction of Basel III standards, as an example, will have
a major impact on the way institutions run their business..

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Industry operational efficiency challenges: To appropriately address
strategic and regulatory challenges, impeccable execution is a must.
Constantly improving operational efficiency has to be high on the agenda of
bankers. Now more than ever, institutions have to optimize their processes,
control their cost structure, and explore new operating models using all the
tools now at their disposal.

Asset quality: The biggest risk to India's banks is the rise in bad loans. The
slowdown in the economy in the last few years led to a rise in bad loans or
non-performing assets (NPAs). These are loans which are not repaid back by
the borrower.

Capital adequacy: One way a bank tries to ensure it is protected from bad
loans is by setting aside money as a 'provision'. This money cannot be used for
any other purposes including lending. As a result, banks have lower capital
available to use for its various operations.

WEAKNESSES OF BANKING INDUSTRY

Lack Of coordination: The global banking industry faces short-term uncertainty

due to the debt crises that challenge several major economies. Industry assets
stand at $143 trillion (2013)&the EU is the largest regional market, with over
57% of the global market.

Vulnerable to risk: Since this sector deals with finances, it is the most risky
sector which can change the fate of any business/Industry.

High NPA’s: Rise in Retail & corporate NPA’s (Non-performing assets) is the
single major issue this sector is going through worldwide.

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Can’t reach to Under-penetrated market: Due to several conflicting objectives
of government & banks which goes hand in hand, rural areas of developing
nations are still not in the shadow of banks.

Structural weaknesses: such as a fragmented industry structure, restrictions

on capital availability and deployment, lack of institutional support
infrastructure, restrictive labor laws, weak corporate governance, Political
pressure and ineffective regulations.

OPPORTUNITIES OF BANKING INDUSTRY

1. Expansion: Penetrating to the rural markets & bringing the rural masses
under the purview of organized banking will be the objective of the
Banks in decades to come.
2. Changing Socio-cultural & demographic factors: 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.

3. Rise In Private Sector Banking: Banking Industry across the world is

highly regulated &lead by PSU’s with their respective central banks.
With the advent of private sector banks this sector is going through
structural & functional changes mainly due to the adaptation of the
advanced technologies & increased competition thereby benefiting to
the end customers.

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 CHAPTER.2

REVIEW OF LITRETURE ON BANK

A number of studies related to performance of co-operative banking sector in

India have been conducted. Here, an attempt is being made to provide an
overview of various aspects and issues of this study through the review of
existing literature. Some of the main studies selected for review have been
discussed below.

Bhatia (1978), in his study titled, “Banking Structure and Performance − A Case
Study of the Indian Banking System” attempted to analyze the economic
performance of Indian banking system as reflected by its output, price and
profitability during the period 1950-68. He found that profit of the Indian
banking system during the said period had an upward trend. The study
suggested deregulation of interest rates to Enhance the profitability of
financial institutions and to ensure a competitive banking environment which
would ultimately result in better services.

Kulkarni (1979), in his study titled, “Development Responsibility and

Profitability of Banks” stressed upon social responsibilities of banking sector.
He was of the view that looking for profit maximization only was not true
profitability of banks as social benefits arising out of bank operations cannot
be ignored. He observed that while fulfilling the social responsibility, banks
should try to make the basic banking business as successful as possible, reduce
cost, improve banking system and increase the overall profitability.

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Markand (1979), in his book titled, “Social Priority Index of Public Sector
Banks” evaluated the performance of public sector banks. With the help of
performance index consisting six quantitative indicators such as branch
expansion, priority sector credit and wage cost, he concluded that the
priority sector financing was essential, and necessary.

Performance in this sector he suggested that lending power should be

delegated to the branch managers.

Kayaker(1983) in his study titled, “Willful Default in Loans of Co-

operatives “examined the trends in deposits, share capital, working capital,
loans outstanding, advances, over dues and recoveries at the district level
financing institutes. Socio-economic factors responsible in projecting and
promoting future development in the operations and approaches of the co-
operative credit organizations were also considered to examine the specific
progress made by Central Co-operative Bank ofParbhani District. The study
revealed that the cropping intensity, irrigation facility and working capital of
the societies were the major factors for explaining over dues at primary
agricultural credit societies’ level.

Kurulkar (1983), in his published work on agricultural finance in backward

region, reported glaring defects in the set-up of co-operative credit system.
He pointed that out of the ten sample owners who obtained long- term credit
from the co-operative banks, 30% could not secure short- term credit. Lack
of short- term or production credit to the farmers who availed long-term
credit resulted in lower output per acre, thereby resulting in over dues.

Reddy (1985), in his study titled, “Overdoes Appraisal And

Management in Banking” analyses the relationship between the lending and
recovery of an ape bankHis findings suggested that the lending and recovery

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of the apex bank had not been proportionate, i.e., either the apex bank could
not meet the entire credit needs of the primary banks or the latter could not
borrow the funds from the apex bank. The primary banks were constituted
by people not for co-operative services but for their vested interests.

Chopra (1987), in her book, studied operational efficiency of some selected

public sectors banks. She found the lack of professionalism in banking industry
and stressed for the introduction scientific management practices to
enhance profits and profitability of public sector banks. She
recommended comprehensive management of costs as well as earning of the
bank

Divides (1987), in his book titled, “Co-operative Banking and Economic

Development” studied the role of Assam Co-operative Apex Bank Ltd. in
economy of the State. He found that apart from working as a commercial bank
it had to discharge three other functions, i.e., to finance primary credit
societies, to act as banking Centre for primary societies, and to undertake
supervision of primary societies.

Ramachandaran (1992), in his paper titled, “Profit Planning as a Management

Tool for Profit Maximization” tried to analyses profitability position of the
banks. Increasing emphasis on goals, increase in establishment cost, NPAs,
amount locked in sick units, unfavorable deposit mix, compliance to statutory
requirements were some reasons,

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Identified by him, for declining profitability. He suggested the following
measures to redress the said problem:

(i) Diversification of business,

(ii) Interest to be paid by RBI on CRR/SLR balances,

(iii) Opting utilization of scarce resources by asset management,

(iv) Better funds management,

(v) Management of non-performing advances,

(vi) Professionalization of bank management,

(vii) Identification of loss centers,

(viii) Better role of government, and

(ix) Up gradation of skills and mechanism.

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Balister et al. (1994) conducted a study of overdues of loans in agriculture
to examine the repayment performance of defaulters in three blocks of
Agra district in Uttar Pradesh. They found that well-to-do agriculture
families accounted for a largeshare of overdues. They accounted 37 per
cent of total defaulters and 57 per cent of total overdues. Total amount of
overdues and its relative share also increased duringthe period of study.
Lack of proper supervision over end use of loan was identified a major
reason for mis-utilisation of credit which leads to increase in overdues.
Hundekar (1995) suggested following points to improve the productivity
of RRBs:

(a) Profit planning and cost control measures should be improved;

(b) Labour productivity improvement measures to be taken;

(c) To promote customer service by product development and

diversification strategies;

(d) Market development strategies for mobilizing more savings to be

initiated;

(e) Management audit for controlling other administrative costs to be

conducted;

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 (f) Streamline the recovery process; and

(g)The funds of banks should be effectively managed.

Patel (1995), in his paper on viability of rural banking, inferred that low volume
of business per branch and per employee and high level of credit deposit ratio
were twomajor factors causing losses in rural banking system. He observed
that relative share of non-farm sector loans in rural banks was going up.

Murtha and Sara Swati (1996), in their paper titled, “Reducing over dues in
Credit Co-operatives Some Alternatives” undertook a study to evaluate the
Quantitative Progress made in respect of supply of Institutional Credit.
Using the secondary data made available by RBI in Statistical Statements
relating to Co-operative Movement in India for a period of 6 years from
1978 to 1983 and assessing the Loaning Policies ofGirijan Co-operative
Corporation, Visakhapatnam, the study concluded that the progress in
respect of supply of credit was phenomenal over the period of study but
this progress pales into significance, if the magnitude of over dues was
considered. It pointed out that the most unnerving aspect of institutional
credit was the alarmingly high percentage of over dues,

Making them homogeneous would not result in decline in over dues, as

mere homogeneity was not a sufficient condition. Further, regarding the
Revamping of Loaning Policies, the results were quite impressive as it
resulted in significant improvement in the Recovery Performance.

Satyanarayane (1996) studied productivity beyond per employee business,

and suggested a model to measure overall efficiency of the banks. He
emphasized that the size of the bank should be squared off while measuring
efficiency of bank. According to him, Productivity of bank = (Average index

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market share of all the output factors/Average index market share of all the
input factors) X 100 where, output factors were deposits, non-deposit
working funds, loans & advances, investments, interest spread, non-interest
income and the net profit. The input factors were network of branches,
number of staff, wage bill, non-wage operating expenses, etc. In order to
facilitate comparison of one bank with the other, irrespective of size, the
market share of each factor in percentage terms has to be taken into
account instead of absolute levels.

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 CHAPTER.3

MAIN SERVICES PROVIDED BY AXIS BANK

SAVINGS ACCOUNTS

Axis Bank offers a multitude of savings accounts to cater to the banking needs
of all and sundry. With a range of accounts from regular savings account to
premium accounts, the bank ensures that every type of customer is covered.
The minimum balance requirements of Axis Bank differ from one type of
savings account to another. However, Axis Bank saving account interest rates
remains the same across most savings account types. Let us look at the various
types of Axis Bank savings accounts and the features provided by each of them:

Easy Access Savings Account – A type of savings account apt for those who
are beginning to save. It can be accessed from any part of the country.

Prime Savings Account – An Axis Bank savings account with lot of extra
features such as enhanced access and higher transaction limits.

Future Stars Savings Account – An Axis Bank savings account created

specifically for children below 18 years of age. This savings bank account helps
introduce the basic principles of money management to children.

Women’s Savings Account – Axis Bank women’s savings bank account is

designed for modern independent women.

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FIXED DEPOSIT

Axis bank offers attractive interest rates on Fixed Deposit schemes for
customers to facilitate savings among the masses. Here are the various types
of Fixed Deposit schemes available with the bank.

AXIS BANK FD RATES JULY 2017

Interest Rates for Domestic Deposits less than Rs 5

FD Tenure Crores (in %)

Regular Citizens Senior Citizens

7 days to 14 days 3.50 3.50

15 days to 29 days 3.50 3.50

30 days to 45 days 5.50 5.50

46 days to 60 days 6.00 6.00

61 days < 3 months 6.00 6.00

3 months < 4 months 6.25 6.25

4 months < 5 months 6.25 6.25

5 months < 6 months 6.25 6.25

6 months < 7 months 6.50 6.75

7 months < 8 months 6.50 6.75

8 months < 9 months 6.50 6.75

9 months < 10 months 6.75 7.00

10 months < 11 months 6.75 7.00

11 months < 1 year 6.75 7.00

29
1 year < 13 months 7.00 7.50

13 months < 14 months 7.00 7.50

14 months < 15 months 7.00 7.50

15 months < 16 months 7.00 7.50

16 months < 17 months 7.00 7.50

17 months < 18 months 7.00 7.50

18 months < 2 years 6.50 7.00

2 years < 30 months 6.25 6.75

30 months < 3 years 6.25 6.75

3 years < 5 years 6.25 6.75

5 years to 10 years 6.25 6.75

30
 CREDIT CARD

Axis Bank offers a range of Credit Cards catering to a wide section of the
society. Every individual can avail of a Credit card most suitable to him or her.
The Credit Cards offered by Axis bank promise great rewards from Axis Bank
and exciting offers on Axis Bank Credit Cards along with discounts on spending.

Types of Credit cards

Cards Joining fee Renewal fee Finance charges Add on charges
Axis bank vistara
signature credit
card Rs.3,000 Rs.3,000 2.95% P.M NIL

Axis bank miles &

more world credit
card 3,500 3,500 2.95% P.M NIL

Axis bank
buzz credit card
Rs.750 Rs.750 3.25% P.M NIL

Rs.500 (Waived
Axis bank my upon spends of
Rs.500 3.25% P.M NIL
zone credit card Rs.5000 in 45
days)

31
 DEBIT CARD

Axis Bank is among the third largest private sector banks in the country. It has
a wide array of products and services to cater to the banking needs of all and
sundry in India. Axis Bank was jointly promoted in 1993 by Specified
Undertaking of Unit Trust of India, Life Insurance Corporation of India, National
Insurance Company Ltd, General Insurance Corporation of India, New India
Assurance Company Ltd, Oriental Insurance Company Ltd and United India
Insurance Company Ltd.

Key features and details of Axis Bank Debit Card

Transaction Limit

Debit Cards Daily cash Reward Points

Purchase limit
withdrawal

Burgundy World 2 reward point for every

Rs 2 lakhs Rs 6 lakhs
Debit Card Rs 200 spent

1 reward point for every

Wealth Debit Card Rs 2 lakhs Rs 5 lakhs
Rs 200 spent

Priority Platinum 1 reward point for every

Rs 1 lakhs Rs 2 lakhs
Debit Card Rs 200 spent

Titanium Rewards 5 points for every Rs 200

Rs 50,000 Rs 4 lakhs
Debit Card spent

Rewards+ Debit 5 points for every Rs 200

Rs 50,000 Rs 4 lakhs
Card spent

32
 1 reward point for every
Secure+ Debit Card Rs 50,000 Rs 75,000
Rs 200 spent

2 reward points for every

Display Debit Card Rs 1 lakh Rs 4 lakhs
Rs 200

Youth Debit Card Rs 40,000 Rs 1 lakhs Not Applicable

Ladies First Debit

Rs 40,000 Rs 1 lakhs Not Applicable
Card

Power Salute Debit

Rs 40,000 Rs 1 lakhs Not Applicable
Card

Titanium Prime
Rs 50,000 Rs 1 lakhs Not Applicable
Debit Card

Titanium Prime Plus 1 point for every Rs 200

Rs 50,000 Rs 1 lakhs
Debit Card spent

Smart Privilege 1 point for every Rs 200

Rs 40,000 Rs 1 lakhs
Debit Card spent

33
 CHAPTER.4

LOAN SERVICES PROVIDED BY AXIS BANK

Home Loans

Axis Bank offers Home loans to individuals so that they can own their dream
house without worrying about the necessary finances. Axis offers home loans
under different types which are suitable to a large group of individuals. Here
are the following types of loans and their respective details:

Axis Bank Home Loan Interest Rate 2017

Interest Rate 8.35% onwards

Processing Charges Up to 1% of loan amt.

Loan Tenure Up to 30 years

Loan Amount Rs. 10 crores

Cheque Bounce Charges Rs.500 per instance

Cheque / Instrument Swap

Rs.500 per instance
Charges

Prepayment or Foreclosure
Nil if floating, up to 2% for fixed rate
Charges

Home loans offered by Axis Bank have great features like flexible tenures,
transparent processing and quick service.

Axis Happy Ending Home Loans Axis Asha Home Loans Axis
Empower Home Loans Axis Super Saver Home Loans

34
 EDUCATION LOAN

Axis Bank provides education loans to well-deserved students who wants to go

for higher education within India and abroad. This loan can help students in
achieving their goals in life. Students who have taken admission in Graduation
or Post Graduation courses in India and abroad can avail this loan.

AXIS BANK EDUCATION LOAN ELIGIBILITY

Quantum of Loan:-

Rs. 10 lakhs is the highest loan amount that can be availed by students who took
admission in Graduation/Post Graduation courses in India and Rs. 20 lakhs is
the highest loan amount that could be approved for students studying abroad.
However, loan amount can go higher depending on other conditions.

Margin:-

For loan amounting Rs. 4 lakhs, margin is NIL. In case the loan amount goes
more than Rs. 4 lakhs, for students studying in India, margin will be 5%.
Similarly, if loan amount goes above Rs. 4 lakhs for students studying abroad,
margin will be 15%.

35
Timeline:-

Once all the required documents for loan approval are submitted to the bank, it
will take 15 days in order to process the loan after proper verification by the
bank.

Parent/Guardian’s Role:-

The parent/guardian of the student who will apply for the loan will be the co
applicant of the loan.

Security:-

Collateral Security will be required in cases wherever necessary.

Assignment of LIC Policy is required as additional security in favour of the bank

for the sum assured being at least 100% of the loan amount. Moreover, in
order to meet the EMI obligations, the student’s future income requires to be
assigned as well.

Disbursement:-

Disbursement of educations loan will be done in installments or in full

depending on the amount requirement. It will be done after assessment by the
bank.

36
 CAR LOAN

Features of Car Loan provided by Axis Bank:

 Loan amount up to 85% on-road price

 Loan tenure options ranging from 1 to 7 years
 Value of the car loan is calculated on the ex-showroom price of the car
 On select models, the LTV is available up to 95% of the ex-showroom
price
 Loan amounts offered beginning from Rs. 1 Lakh
 Individuals salaried and self-employed, HUF, proprietorships,
Partnership firms, Limited Liability Partnership Firms, Societies
Companies, and Trusts can avail car loan from Axis bank.
 Priority Banking, Wealth Banking and Privee banking customers can avail
special benefits
 Axis Bank Salary account holders can also avail special schemes on car
loans
 It offers banking surrogate schemes.

The third largest private sector bank in India, Axis Bank offers a wide range of
financial services to its customers. Axis Bank has around 3,120 domestic
branches and 12,922 ATMs that are spread all over the country, making it
easily accessible to all. Axis bank car loans are one of its most popular products
for its incomparable schemes in India, which come with uncomplicated
processing, flexible tenures and superior customer service

37
Interest Rate on Axis Bank Car Loan

sought after car loan rates in India today. The car finance plans themselves are
very affordable, and give the customer flexible options for repayment. Axis
Bank car loan interest rates make it one of the best car loans in India, ensuring
that you have to pay less every month. Moreover, you can also get a used car
and a pre-owned car loan from Axis Bank.

Axis car loan Interest Rate is 11.50% and the processing fee (inclusive of service
tax) is charged up to Rs.5500 with documentation charges (inclusive of service
tax) of Rs.300/-

Rate of Interest Processing Fee Documentation Charges

11% p.a. to 12% p.a. Rs.3500 to Ra.5500 Rs.300

DOCUMENTATION REQUIRED FOR AXIS BANK CAR LOAN

1. Completely filled application form, signed with a passport size photograph

2. Identity Proof

3. Age proof

4. Proof of Residence

5. Bank statement of the past 6 months

6. Additional documentation by salaried applicants:

38
  Last 3 months salary slips
 Form 16 or proof of Income Tax Returns

1. Additional documentation by group or self-employed applicants

 Last 3 years Income Tax Returns with computation of Income

 Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss
Account statement

Why Axis Bank Car Loan?

Availing an Axis bank car loan involves simple and transparent process. Axis
Bank offers affordable car loans at low interest rates and the option of flexible
repayment tenures. Plus, the bank provides very unique and quick customer
service and a dedicated, customer centric approach.

Axis bank car loan on Paisa Bazaar

Anybody can apply for an Axis bank car loan through Paisa Bazaar. We are
associated with all the major banks and financial institutions and provide
accurate and reliable information on Axis car loan options for our customers.
Customer can compare the car loan amount eligibility, interest rates, pros and
cons and different schemes available from Axis and other similar banks on
Paisa Bazaar. Our user friendly interface saves a lot of time for the customers
as they are able to get the required information well organized at the same
place. Prospective car loan customers can easily check their eligibility as well as
monthly EMI to be paid, easily through our loan Eligibility and loan EMI
calculators, respectively.

39
Other reasons for applying for an Axis Bank Car Loan through us are:

 We are one stop solution for a range of Products, offering multiple

choices of car loans for every requirement specified.
 PaisaBazaar keeps you updated with the lowest available interest rates
on Axis car loans and other products offered by the best banks of the
market.
 By letting you fill up an online form about the kind of loan you desired,
Paisa Bazaar evaluates the perfect loan options for you.
 In order to decide the best for you, you can compare loans from
different Banks against each other for parameters like rate of interest
offered, EMI options available, processing fees charged, customer
feedback, etc.
 Personal information is treated with high regard and kept very
confidential at Paisa Bazaar. The information you provide is only shared
with your chosen lender, and never shared with a third party for any
reason whatsoever.

40
 PERSONAL LOAN

Axis Bank offers a range of loan products to suit every individual’s needs and
requirements. Axis Bank offers Personal loans to meet big-ticket expenses like
taking a vacation or paying off for a child’s education, marriage in the family,
etc. The bank’s personal loan comes in handy in all these and related situations
by providing the necessary cash when you need it.

FEATURES OF AXIS BANK PERSONAL LOAN

 Loans are issued to salaried individuals only. So, applicants who are
employees and draw a salary or professionals who are employed and draw a
salary can avail the loan. However, self-employed individuals or professionals
who earn their income are not given Personal Loan from the bank.

 Loans are available in the range of Rs.50, 000 to Rs.15 lakhs. So individuals
can avail a loan for any amounts from Rs.50, 000 up to a maximum limit of
Rs.15 lakhs. Beyond the stated limit, loans are not available. The bank also
decides on the maximum amount of loan sanctioned to an applicant within the
maximum limit taking into consideration the applicant’s details like his
requirement and eligibility, income and the applicant’s repayment capacity. The
bank takes into consideration all these points to make sure that the loan issued is
completely and duly repaid by the applicant without any financial hiccups.

 The repayment tenure allowed for payment of the loan is 12 months to 60

months. Thus, the individual availing the Axis Bank Personal loan can choose
any tenure for repayment provided the loan is repaid within the maximum
permissible tenure of 5 years. A lower tenure can also be chosen if the
minimum period is 12 months.

41
 Interest rate for Axis Bank personal loans is competitive with best in-class
rates. The interest rate that the bank charges is in tandem with that charged by
other banks and is completely competitive so that customers may prefer Axis
Bank rather than other banks.

AXIS BANK PERSONAL LOAN INTEREST RATE

For Salaried For Self-Employed

Interest Rate 11.49% onwards 11.49% onwards

Loan Tenure Up to 5 years Up to 5 years

Min. Rs. 50,000/Max. Rs. 15 Min. Rs. 50,000/Max. Rs. 15

Loan Amount
lakhs lakhs

Processing Fee Up to 2% of loan sanctioned Up to 2% of loan sanctioned

Pre-payment
NIL NIL
Charges

Foreclosure
NIL NIL
Charges

Axis Bank Personal Loan Eligibility

Axis Bank offers Personal Loans only to individuals who meet the required
eligibility criteria as laid down by the bank. Not all and sundry can avail a loan
at their whim. There are necessary criteria requirements for personal loans
which are to be fulfilled before the bank grants you a loan and every applicant

42
is required to match the stipulated criteria. Below is the eligibility criteria that
the applicant needs to fulfill in order to apply for an Axis Bank personal loan:

 The loan is issued to salaried doctors, employees of select Multi -

National Corporations (MNCs), public and private limited companies,
Government sector employees including Public Sector Undertakings
(PSUs) and Local bodies. So anyone who is an employee be it a general
employee or a professional employee, both can apply for this personal
loan. However, self-employed individuals and professionals who are
working independently rendering their services individually are not
eligible for availing a personal loan from the bank. Government
employees include any individual working for any government
organization whether it is a local organization; state based organization
or a central organization as long as they draw a salary.
 The individual should be between 21-60 years of age. So anyone who is
aged 21 years and above can easily avail the loan if he or she matches
the other mandated criterion. However, the upper limit on age is 60
years and for people aged 60 or above loan is not allowed as per the
bank’s loan policy. So the age group is limited to 21-60 years and
individuals falling in this age group are allowed to avail a Personal Loan
 The monthly net income required for Axis Bank Personal Loan should be
a minimum of Rs.15, 000 which means that an employee in his current
job must at least earn a net income of Rs.15, 000 per month and not
lower than that. The income criterion is listed as an Axis Bank Personal
Loan eligibility pointer simply because of the fact that the bank wants to
determine the loan repayment credibility of the individual.

43
 Gold Loan

Axis bank gold loan offers a quick and hassle free financial solution to those
who are in sudden financial exigency and own any gold ornament. The Gold
Loans offered by Axis bank is available with multiple payment option and
longer tenure. The Two variants of Gold Loan Schemes offered by Axis bank
are: Axis Gold Loan and Axis Power Gold Loan.

AXIS BANK GOLD LOAN INTEREST RATE

Interest Rate Starting from 14.50% to 17%
Gold Loan Processing
1% of loan sanctioned
Fees
Repayment Period 6 months to 3 years
Min./Max. Loan Amount Rs.25001/Rs.20 lakhs
Prepayment Charges ZERO
2% over original loan interest rate on overdue
Penal Charges
amount

AXIS GOLD LOAN SCHEME

 High quantum of Loan amount from minimum Rs.25001 up to Rs

20,00,000/-
 The Loan is offered against pledged Gold Ornaments
 The tenure for axis bank gold loan is between 6 months to 36 months
 The gold loan in Axis Bank is offered only against gold jewellery and no
loan is provided against gold coins.

44
  Having a co-applicant is not mandatory while applying for axis bank our
Loan Against gold.
 Same day disbursal of gold loans post receiving the loan application and
all the requisite documents and Gold jewelry as pledged security.
 A non-refundable charge in form of processing fee and Valuation fee is
applicable for every Gold Loan application.
 Axis Bank calculates simple interest on Gold Loan
 Quick and hassle free processing with same day Loan sanction.
 The loan is available to anyone aged between 18 years and 75 years
 The minimum amount offered on Axis Bank Gold loan is Rs.25, 001 up to
Rs. 20 lakhs.
 Axis bank ensures safety of the Gold at bank’s vaults and state of the art
security systems.
 Customer may earn edged loyalty points over the Gold Loans availed
from axis bank
 150 reward points when applicant takes a gold loan
 Currently the Rate of Interest on Axis bank gold loan is between 14.50%
up to 17.00%.

QUANTUM OF LOAN

 The key factors for considering quantum of loan in axis bank are
 Applicant’s requirement and the gross valuation of Gold excluding value
and weight of ant stone attached
 Applicant’s repayment capacity
 Any existing relationship with axis bank.

45
APPLICABLE FEES & CHARGES

 1 % Processing Fee & Nil Foreclosure charges

 Rs. 500 /- as Valuation charges
 Other Charges such as Part Payment charges is Nil and the Penal Interest
for any Emi default is 2% on overdue amount per month.

INTEREST RATE

 Axis banks offers gold loan on interest rate for both option i.e. fixed and
floating rate.
 The Interest rate varies between 14.50% and 17%.
 The interest component includes various components such as Rate of
interest i.e. fixed rate or floating rate and is finally computed on factors
such as amount of loan availed , existing relationships of customer with
the bank etc.
 The Mean rate offered is the sum of rate of interest offered of all loan
accounts divided by the number of total loan accounts.
 The APR (Annual Percentage Rate) is a way to derive annualized cost of
credit including interest rate and the loan origination fee.

46
 CHAPTER.5

FINDING CONCLUSION AND SUGGESTIONS

CONCLUSION

First chapter comprises introduction about Indian banking industry, its

development, technology more particularly e-channels. The Indian banking
industry is explained under various reforms taken place, phases of transformation
and role of technology in banking gains more attention.

Chapter highlights various e-channels along with benefits to customers and banks.
The discussion demonstrates the profile of various private bank and their banking
services. Second chapter explains the growth & technological development in
banking.

It also explain the development of ICT based products / services, Changes in

banking system and services, Impact of IT in banks, opportunities, emerging
challenges and issues faced in adopting banking technology.

Third chapter reviews the literature about all the aspects of study. Various
researches have been taken at national and international levels. Many studies
have been conducted on computerization of banking sector, Impact of
Information Technology in the Banking Industry;

Benefits of IT enabled banking services. Fourth chapter explains the research

methodology, objectives, hypothesis of the study. It also explains the sources of
data collection, sample design,

47
Sample size and limitation to the study. Fifth chapter comprises of customer’s
opinion towards adoption of banking technology in private sector banks. 500
customers were survey through structured questionnaire out of that 403 replied
it. Kruskal Wallis & Chi square test are used. Based on the customers’ perception,
following findings have been summarized in this chapter

The Indian banking industry has come from a long way from being a sleepy
business institution to a highly proactive and dynamic entity. The banking system
is one of the few institutions that impinge on economy and affect its
performances better or worse.

Banking Sector being the heart line of the financial market, their up gradation and
financial strength is more vital for an efficient financial system. Banks play a very
crucial and dynamic role in the development of economic life.

They are important constituent of the money market and their demand deposits
serve as money in the modern community. They have control over a considerable
part of the stock of money. Banks are the pivots of modern commerce. Industrial
innovations and business expansions become possible through finance provided
by banks. Banks mobilize the dormant capital of the country for productivity
purposes.

48
Now, the Indian banking industry is going through a period of intense change,
where global a trends are affecting the banking business increasing competition,
liberalization, rising customer expectations, shrinking spreads, increasing
disintermediation, competitive pricing and possibilities macro-volatility.

Profitability, productivity and financial efficiency have, as a result become critical

objective to be aimed at. In today‟s markets, credit risk along with market risk
and operational risk are the real challenges before banks

FINDINGS

The present analytical study related to analysis of labour productivity, branch

productivity, capital productivity and profitability of Selected Public Sector and
Private Sector banking for the period of 5 years (2005-„06 to 2009-‟10). Major
findings on the basis of the study are as under:

The world has become a global market. The impact of globalization, privatization

and liberalization has totally changed the style of banking sector in India. Banks
are essential instruments of accelerated growth in a developing economy.
Banking system plays a very important role in the economic life of the nation

Computerization of banking has received high importance in recent years due to

technological advancement that are taking place in the financial systems world
over

49
The global banking industry, one of the most important and profitable industries
of the world economy, has witnessed innumerable trends. The global banking
industry has been undergoing deep transformation

The review of literatures, albeit in brief, is likely to provide a bird’s eye view of the
work done in India and abroad relating, directly or indirectly, to the subject-
matter of the present study After nationalization of banks, there was a growing
concern on the deteriorating of banking sector’s efficiency in several spheres.

The RBI constituted a number of committees, notably Tendon committee (1975),

Chakra borty committee (1986) and Narsimham committee (1991) which inter-
alia examined various parameters of efficiency and given a number of suggestions
to improve the efficiency of the bank in India.

The performance of the modern banks (Foreign and New Private Sector Banks)
was much superior to the traditional banks (Public Sector and Old Private Sector
Banks).

The Indian banking industry experienced sub stained productivity growth, driver
mainly by technological progress.The competitive is increased productivity and
profitability. Indian banks especially the public sector banks and the old private
sector banks are lagging far behind their competitors in terms of both productivity
and profitability with the exception of the State bank of India and its associate. .
The other public sector banks and old private sector banks need to go for the
major transformation program for increase their productivity and profitability.

50
 BIBLOGRAPHY

The Economics Times, Aug 24, 2017.

 Present project financing ways must change: ICICI Bank's Chanda Kocher.
 Bank of India slashes interest to 3.5% for deposits up to Rs. 50 lakh.
 Cabinet approves plans to merge some state-run banks.

Hindustan Times, Aug 24, 2017.

 Here are 17 features of new Rs. 200 banknote to be launched by RBI tomorrow

News 18.com, Aug 24, 2017.

 Rs. 200 Note to be launched by RBI Tomorrow. Here's How It Looks

51
 WEBLOGRAPHY

https://www.paisabazaar.com/axis-bank

https://www.Introduction-of-Banking-Industry

www.businessstudynotes.com/others/banking-finance/discuss-importance-banks-detail.

https://www.affairscloud.com/different-types-bank-accounts/

http://www.chinatrustindia.com/index.php/corporate-banking/fund-based-services

http://www.chinatrustindia.com/index.php/corporate-banking/non-fund-based-services

https://www.thebalance.com/types-of-banks-315214

http://kalyan-city.blogspot.in/2011/04/functions-of-banks-important-banking.html

https://www.marketing91.com/swot-analysis-of-banking-industry/

http://shodhganga.inflibnet.ac.in/bitstream/10603/4270/9/09_chapter%202.pdf

http://economictimes.indiatimes.com/industry/banking/finance/banking

http://www.hindustantimes.com/banking-news/

www.news18.com/

52
 REFERANCES

Books Name with Authors Name and Editions

 Dr. C. Satyadevi ( S. Chand Publication)- Financial Services Banking and insurance

 E. Gordon , P.K Gupta ( Himalaya Publication )- Banking And Insurance
 H R Machiraju ( New Age International publication)- Modern Commercial Banking
 Sonali Jain ( First Published on July 2014)- Banking Industry in India
 G Gopal Krishna Murthy- Customer Services In Indian Banks An Overview-
 R.K Uppal ( First Edition July 2008)- Banking Services And IT The Indian Experience
 Design , Development & Implementation of information System 2nd Edition 2007,
Banking Course book, Indian Institute of banking & Insurance Macmillan.
 Giriappasomu (2002)” impact of IT on banks” “ Mohit Publication.

53
54