COMMERCIAL BANKING IN INDIA

PGP II
2009-11 batch
ELECTIVE TERM IV
CREDITS 3

COURSE RELEVANCE

Services sector has long since over taken Industry and Agriculture as the prime mover of
the Indian economy. In addition it has also contributed substantially to the employment of
skilled persons in a big way. Banking sector has led the way in this explosive growth.
Though traditionally banking has always been the corner stone of any economy, the free
market Policies practiced in the last 15 years have helped this major financial
intermediary grow into an effective instrument of development..

The growth in banking business has been made possible by the use of IT in a significant
way. Interestingly the growth of Indian IT sector has been made possible by the demands
from banking sector world wide and post economic melt down by Indian banking sector’s
massive investments in technology.

Another significant change observed is the move away, made possible due to IT
interventions, from elitist banking to mass banking. The diversification of the asset
portfolio into loans of higher risk is another change.

Today banking industry is compared with FMCG sector and competition, service
delivery, customer management etc are more in use .In other words, this sector has been
the user of tested management practices and theory which has helped it to manage itself
more efficiently than before.

Internationalization of Indian banking is moving ahead apace. Entry barriers are the main
issue and this is being addressed in a limited way. Already many global practices,
products have come to India, thanks to globalization. Despite the recent slow down due to
global financial melt down, this practice will pick up in the coming years. There would
be newer and complex products accompanied by greater deregulation. This will add
newer and complex risks which institutions would need to manage.
At policy level many interventions are likely to happen shortly by way of greater
internationalization and more sophisticated products and processes and these will change
the banking scenario in the country.

Recommendations of the Percy Mistry committee on making Mumbai as an international

financial center as well as that of Raghuram rajan committee on Financial Sector reforms
when implemented will deepen the financial markets

Thus Banking sector offers opportunities for professional managers in Risk management,
Marketing, Information Technology, HR etc

COURSE OBJECTIVES

The course aims at providing domain overview of commercial banking in India in the
context of the regulatory and market changes that are taking place.

Since banks are financial intermediaries’ managing risk, the various risks that banks
come across, such as operational risk, interest rate risk, credit risk etc will be touched
upon.

Capital requirements in the context of the various BASLE accords will also be analyzed.

Profit/profitability drivers in banking business, Balance sheet structure, etc will come up
for discussions.

With banking becoming product driven, the role of markets and marketing will be
covered.

The importance of interest rates and their movements in planning the profits of the bank
as well as product pricing will also be taken up.

The need and scope of fee based products and services like FOREX, Bills etc will also be
looked up.

The course aims at giving all those dealing with banking sector, directly or indirectly, an
understanding of the nuances of this business.
PEDEGOGY
Lectures, quiz, report presentations etc.

ATTENDENCE

Since the course covers a large number of diverse but connected topics absences from
even one class may make it difficult to appreciate the full picture clearly. In any case
there will be down grading of marks for absence.

EVALUATION

Quiz : 20%

End Term : 30%

Individual Term Paper : 30%

Economic scenario forecasting : 20%

COURSE OUTLINE

Commercial banking in India. An overview.

Products and services offered by Indian banks.

Indian Financial market—globalization issues

Macro economic issues affecting banks, the importance of tracking and understanding
interest rate movements, exchange rate movements, foreign fund flows.
Role of regulators in Banking, Impact on the Balance sheet and profitability of banks

BASLE accord, role of capital and its mobilization

Liquidity and Asset Liability management

Operations management, Risk issues,

Basics of Negotiable instruments act and other Banking related laws, ombudsman etc.

Credit risk issues

Management of credit, supervision and follow-up issues

Rural banking, credit and business issues

FOREX and related matters

Management of stressed assets, restructuring, asset sale etc

Marketing of banking services

TERM PAPER

After the last class, 10 days time will be given for the submission of the term paper. It is
to be noted that the term paper is required to be submitted individually and original
work only will be reckoned. Cut and paste of any kind and writing with out
acknowledging the source will be rejected.
The student is free to select a topic in consultation with the instructor. The topic
selected should relate to bank management, be it treasury, risk, capital, specific
customer segment like micro finance, retail , etc.
The title of the topic selected should be advised to the faculty through the C R with
in 10 days of the class commencement.
READINGS

Books

Management of Banking and Financial services- by Justin Paul & Padmalatha

Suresh

Bank management- by Timothy W. Koch & S.Scott MacDonald

There are several books related to credit risk management, treasury management
and related topics in the library which can be sourced.

Web sites of RBI, SBI, ICICI bank , IMF, and other banks,
Mckinsey report, Tara pore committee on convertibility, Percy Mistry report, Raghuram
Rajan report on CFIR, etc

Faculty can be contacted at rnagarajan@gim.ac.in

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX