Banking Industry Tufail Khan

7/30/2019 Banking Industry Tufail Khan

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Banking means the accepting, for the purpose of

lending or investment, of deposits of money fromthe public, repayable on demand or otherwise,and withdrawal by cheque, draft, order orotherwise.

"Banking organization" means any org. whichtransacts the business of banking in India.

Explanation: Any company which is engaged in the

manufacture of goods or carries on any trade and whichaccepts the deposits of money from public merely for thepurpose of financing its business as such manufacturer ortrader shall not be deemed to transact the business ofbanking within the meaning of this clause."


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PRESENTATION PATH

History of banking in India

Nationalization of Banks in India

Scheduled Commercial Banks in India

Global scenario

Technology in banks

Current position of banking in India

Services by banks

Central bank of India


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GLOBAL SCENARIO

Growing sector Largest bank=city group

Tier 1 capital =$74billion

Assets = $1484billion

Number of banks=1569

1st country in banking=
http://en.wikipedia.org/wiki/Image:Citibank_Chinatown.jpghttp://en.wikipedia.org/wiki/Image:Citibank_Chinatown.jpg


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The first bank in India was established in 1786. From 1786 till today,the journey of Indian Banking System can be segregated into threedistinct phases. They are as mentioned below:

Early phase -- from 1786 to 1969

From 1969 to 1991

New phase of Indian Banking System (IndianFinancial & Banking Sector Reforms after 1991. )


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* The General Bank of India was set up in the year 1786.

* The East India Company established Bank of Bengal(1809), Bankof Bombay (1840) & Bank of Madras (1843)

* In 1865 Allahabad Bank was established and first timeexclusively by Indians.

* Punjab National Bank Ltd. was set up in 1894 with headquartersat Lahore.

* Reserve Bank of India came in 1935.

IBA was formed on the 26th September, 1946 with 22 members.functioning of IBA To promote sound & progressive bankingpractices

* 1949 : Enactment of Banking Regulation Act.

1955 : Nationalization of SBI

1959 : Nationalization of SBI subsidiaries.*


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It formed SBI to act as the principal agent of RBI and tohandle banking transactions of the Union and State Govt. allover the country.

14 major commercial banks in the country was nationalized.

It was the effort of the then PM of India, Mrs. Indira Gandhi.

2nd phase of nationalization Indian Banking Sector Reformwas carried out in 1980 with 6 more banks(having asset of200 crore).

This step brought 80% of the banking segment under Govt.ownership.


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The following are the steps taken by the Govt. of India toRegulate Banking Institutions in the Country:

1975 : Creation of regional rural banks.1980 : Nationalization of 7 banks with deposits over 200

crore

After the nationalization of banks, the branches of the PSBIndia rose to approximately 800% and advances took a huge

jump by 11,000%

Banking in the sunshine of Govt. ownership gave the publicimplicit faith and immense confidence about thesustainability of these institutions.


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Under the chairmanship of M Narasimham, a committee was set up which

worked for the LIBERALIZATION of banking practices.

1993____guidelines for setting private banks are issued

1994____UTI(axis) received license to 1st private sector bank

1994____RBI issue guidelines regarding CAR(capital adeq.)

1994____OBC become 1st nationalized bank to access capital mkt. To raisefund(387.24 crore)


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TECHNOLOGY DEVELOPMENT IN NEW PHASE

The country is flooded with foreign banks & theirATM stations.

Customer oriented services

Centralized computer tech . (became moreconvenient and swift.)

Phone Banking , Net Banking & plastic money isintroduced.

Merchandised banking concept and NEFT


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Pervasive Branch

Network

Mass Transaction

& Items Processing

Global Operations

Complex Credit

Calculations

Why technology in banks


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Benefits of Technology

Increased operational efficiency, profitability &productivity

Superior customer service

Multi-channel, real-time transaction processing

Better cross-selling ability

Improved management and accountability

Efficient NPA and risk management

Minimal transaction costs


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Core

Banking (CBS)

ATMs

Card

Management

Any BranchBanking

DocumentManagement

Risk

Management

Resource

Management

MIS &

Intranet

Corporate

Network

Electronic

Banking

BANKS BUSINESS

RAI

SINGD

EP

OSITS

LOANS&

MISC.SE

RVICES

BANKS BUSINESS


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Payments by credit card

TYPE 2004 2005 2006 2007

CREDITCARD

17663 25666 33886 41361

DEBITCARD

---- --- 5897 8172

Total number of transaction in 2006-07=2297.13 lack


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NATIONALIZATION is act of taking an industry into the

public ownership of a national govt. by acquiring their sharesor stock or control by any other way.

1955 : Nationalization of SBI1959 : Nationalization of SBI 7 subsidiaries

.

.

1969 : Nationalization of 14 banks1980 : Nationalization of 6 other banks(15/4/80)

OBJECTIVE OF NATIONALIZATION

Provide strengthen to banking system as well aseconomy

Increase public confidence

Secure public fund

Equal availability in different area


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Distribution of branches

year No. of branches

of commercial

banks

No. of branches in

rural sector

% of total

branches

1969 8262 1833 22.13%

1980 32419 15105 46.59

1991 60220 35206 58.46

2001 65933 32547 49.36

2006 69417 30750 44.30


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The commercial banking structure in India consists of: SCHEDULED COMMERCIAL BANKS UNSCHEDULED BANKS

SCHEDULED BANKS constitute those banks which havebeen included in the Second Schedule of RBI Act-1934. RBIin turn includes only those banks in this schedule whichsatisfy the criteria laid down vide section 42 (6) (a) of the

Act.

Total number of scheduled bank in India=198


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ACCORDING TO OWNERSHIP & /OR NATURE OF OPERATION

(i)SBI & its associates(ii) Nationalized Banks,

(iii) Regional Rural Banks

(iv) Foreign Banks(v) Other Indian Sh. Commercial Banks (in the private

sector).

Scheduled Co-operative Banks

Scheduled State Co-operative Banks

Scheduled Urban Co-operative Banks


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year credit

1970-71 10.3

1980-81 17.6

1990-91 20.5

2000-01 24.2

2004-05 35.3

2005-06 42.7


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AGGREGATE DEPOSITS VS. GDP


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COMMERCIAL BANKS

Year

1999 89

2000 298

2001 300

2002 297

2003 292

2004 290

2005 289

2006 222

Year deposits GROWTH

RATE

1999 722203

2000 85159317.91602

2001 98914116.15185

2002 113118814.36064

2003 1311761

15.96313

2004 150441614.68675

2005 170019813.01382

2006 210904924.04726


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CURRENT SITUATION ACCORDING TO A REPORT BY ICRA LIMITED, 88 scheduled commercial banks

28 public sector banks 29 private banks (no govt stake; they may be publicly

listed and traded on stock exchanges)

31 foreign banks,

Combined network of over 69,000 branches &17,000 ATMs

the PSBs hold over 75 % of total assets of thebanking industry,

the private & foreign banks holding 18.2% & 6.5% oftotal assets respectively

Over 18500 branches of 53 bank having NEFT tech.

SBI l t i l b k


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SBI largest commercial bank

ICICI 2nd largest commercial bank

Nationalized bank having 2.8 lack employees,over 9 lack in schedule banks

Contribution in GDP =35%

Growth of banking sector=15-17%

FDI in public sector bank=24%

FDI in private sector bank=74%

CAR require to maintain=9%

The overall level of NPLS around rs. 1,20,000

crore. 50,000 crore on account of thecorporate sector, the rest by the rural and

cooperative sector.


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Standard Chartered Bank, Citibank & HSBC are the top 3 foreign banksin India with more than 65% of the total assets of foreign banks

Most global players in banking & financial services - Morgan Stanley,

Merrill Lynch, JP Morgan, Deutsche Bank, UBS, ABN Amro, Barclays,Calyon etc. - are in India

5 largest bank of India include SBI, ICICI, PNB, CANARA BNAK, BANKOF INDIA (basis of assets)

In top 1000 India has 20 representatives SBI=82

ICICI=268

PNB=313

CANARA BNAK=425 BANK OF INDIA=477

SBI 6.4*SBICHINABANK


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1. Private Sector Banks:Not more then 10%of the total voting rights

2. Nationalized Banks:Not more than 1%

ofthe total voting rights

3. SBI: Not more than 10% of the issued

capital.

4. SBI Associates :Not more than 1%.


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FOREIGN BANKS GOING TO SET UP BUSINESS ININDIA Royal Bank of Scotland

Switzerland's UBS

US-based GE Capital

Credit Suisse Group

Industrial and Commercial Bank of China


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EMPLOYEE DISTRIBUTION WITHIN INDIA

Northern Region

17%

North-EasternRegion

2%

Eastern Region

16%

Central Region16%

tern Region21%

Southern Region

28%

Northern Region

North-Eastern Region

Eastern Region

Central Region

Western Region

Southern Region


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i) UP =8591

II) MAHARASHTRA =6845

III) ANDRE PRAD. =5621

PUNJAB = 2823 (11TH)

DELHI =1812 (13TH)

HARYANA=1758 (14TH)


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SERVICES OF BANK

Personal Banking Gold Banking NRI Banking Corporate Banking Small Scale Industries Small Business Finance Rural Banking Government Business

Home Loans


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RESERVE BANK OF INDIA

Central bank of India

Proposed by HILTON YOUNG COMMISSION

Established in1931, active since 1935

RBI act-1934

Share capital=5 crore

Chairman=

Gold value held by RBI=4699.79 CRORE(2006) Foreign Securities=345244(2005), 399769(2006)


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Function of RBI


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CENTRAL BOARD OF RBI

RBI affairs are governed by a central board ofdirectors.

appointed by the Govt in keeping with the RBIAct.

Appointed/nominated for a period of 4 years

Constitution:1. Official Directors

2. Full-time : Governor and not more than four DeputyGovernors

3. Nominated by Government: 10 Directors fromvarious fields and one government Official

4. Others: four Directors - one each from four localboards


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NEWS OF RBI

i) RBI transfered of shareholding in SBI to Govt inJune,2007 amount to be determined on market price inaccordance with the SEBI guidelines.

ii) Transfer of ownership of shareholding of RBI in NABARDand NHB to Government of India in June, 2008 at book

value.iii) RBI has increase CRR by 50 basis points

iv) RBI revised guide lines for implementation of new carframework has hiked the tier-I ratio from 4.5 to 6% (by2010)


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TOP BANKS IN INDIA State Bank Of India (SBI) ICICI

PNB

CANARA BANK

BANK OF INDIA HDFC Bank

HSBC Bank

IDBI

Allahabad Bank American Express Bank

In India

Andhra BanK Central Bank Of India

CITI Bank

Standard Chartered

Bank United Bank Of India

Bank Of Baroda
http://finance.indiamart.com/investment_in_india/top_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/top_banks_india.html


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SBI came into existence by an act of Parliament assuccessor to the Imperial Bank of India

Nationalized in 1955

SBI is India's largest commercial bank

Chairman= Mr.OM PRAKASH BHATT

On the basis of assets, its global position last year was 84;on profits on average capital, 104, and return on assets, 407.

Even within Asia, its rank was 11.

On the strength of its balance sheet, the bank ranked 93rdamong top global banks.


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serves to 90 million customers through a network of9,000Branches (approximat 14% of all bank branches)

commands 20% of deposits & loans of all scheduledcommercial banks.

offers -- either directly or through subsidiaries -- a widerange of banking services

SBI HAS ISSUED 3 CRORE DEBIT CARD

SBI Credit Card is acceptable over 1,05,000 merchants inIndia and Nepal


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SBI Group includes a network of eight banking subsidiaries & several

non banking subsidiaries offers

Bank in SBI group inclued:1-State Bank of Bikaner and Jaipur (SBBJ)2-State Bank of Hyderabad (SBH)3-State Bank of India (SBI)

4-State Bank of Indore (SBIR)5-State Bank of Mysore (SBM)6-State Bank of Patiala (SBP)7-State Bank of Saurashtra (SBS)8-State Bank of Travancore (SBT)

SBI has in 34 countries. SBI serves theinternational needs of its foreign customers,

in addition to conducting retail operations.


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SHARE HOLDING IN SBI


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FINANCIAL ANALYSISBVS

0

100

200

300

400

500

600

700

YEAR

2002

YEAR

2003

YEAR

2004

YEAR

2005

YEAR

2006

YEAR

2007

BVS

5.63

4.5

3.48

2.65

1.881.56

0

1

2

3

4

5

6

YEAR

2002

YEAR

2003

YEAR

2004

YEAR

2005

YEAR

2006

YEAR

2007

NPA

NPA


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ICICI Bank(ICICI 1955)

India's largest private sector bank in marketcapitalization

second largest overall in terms of assets.

total assets of about USD 79 Billion (end-Mar2007),

a network of over 950 branches, about 3600 ATMs,and 24 million customer

ICICI Bank offers a wide range of banking productsand financial services to corporate and retail

ICICI Bank's equity shares are listed in India onstock exchanges at Kolkata , BSE and the NSE

2002 f ICICI ith ICICI B k


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2002--- merger of ICICI,with ICICI Bank

2004 ICICI opens a office in Bangladesh to tap the extensive tradebetween that country

2005 ICICI acquires I-K Bank , a Russia bank with about US$4mn inassets,

ICICI Bank offers a high-interest (5.4% gross) internet savings accountto UK customers

ICICI establishes a branch in Dubai International Financial Centre & inHong Kong.

2006 ICICI Bank opens a branch in Belgium. ICICI opensrepresentative offices in Bangkok, Jakarta, and Kuala Lumpur.

2007 ICICI amalgamates Sangli Bank, which is headquartered inMaharashtra and which has 158 branches in Maharashtra and another31 in Karnataka.


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First Bank in India to launch website 1996First Bank in India to launch Internet Banking 1997

FOR YEAR ENDING 31-3-07

Profits: USD 715 mln (prev. USD 569 mn)

Assets: USD 79 bn (prev. USD 56.3 bn)

Employees: over 33,000 (prev. 25,384)


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PNB PNB was set up in 1894 with headquarters at Lahore.

PNB is serving over 3.5 crore customers through4540 Offices

PNB with 112 year tradition of sound & prudent

banking is one among 300 global companies & 7Indian companies

The Banker, the leading magazine in London, has

placed PNB at the 248th position

Bank has set up representative offices at Almaty:Kazakhistan, Shanghai: China and in London.Besides, Bank has opened a full fledged Branch in

Kabul, Afghanistan.

HDFC BANK


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HDFC BANK The bank was promoted by the housing development finance

corporation limited ( 1977)

Incorporated in 1994

754 branch and 1800 ATMs in 327 cities.

All branches of the bank are linked on an online real-time

total income of the bank for the quarter ended September 30,

2007 grew by44.0% to Rs.2,845.1 crores.

deposits increase of 43.5% from September 2006

CAR as of September 30, 2007 14.9%


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CSR BY INDIAN BANKS


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CSR BY INDIAN BANKS

Directors established a basic policy.

Each group co. that earns over 300 million yen, donates 1% of its profitto the Children's Social Welfare Corp.

Charitable activities took hold.SBI donated 167.1 million yen to children's homes and infant homes

SBI established the SBI Child Welfare Corp.SBI became the first enterprise to make use of stock options andsecurities as donations

SBI Child Welfare Corp. became fully active.

SBI representatives visit child welfare facilities across Japan to learnabout child welfare facilities.

ICICI donated Rs 11.5 million towards GujaratEarthquake.


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TOP BANKS OF WORLD

CITI GROUP

JP MORGAN CHASE

HSBC HOLDING

BANK OF AMERICA

CREDIT AGRICOLE

ROYAL BANK OF SCOTLAND

MITSUBISHI TOKYOHBOS

BNP PARIBUS


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STRENGTH

Growing economy

Support by government

Huge pool of skilled professionals

Existence of related industry High population

Growing saving-investment ratio


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WEAKNESS

Lack of networking among bank branches(the rural and semi-urban banks have still to see information

technology as an enabler. Complete integration of branch networkinvolves huge investments for creating IT and communicationinfrastructure.)

Low savings rate Restriction by govt regarding investment


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OPPORTUNITY

Data mining

Banks have a huge customer database which has to beproperly leveraged. Target segments should beidentified and tapped.

Wide distribution networks of banks provides a greatopportunity to sell insurance products through banks

Another potential area of growth of bancassurance is

exploiting the corporate customers and tying up forinsurance of the employees of corporate clients


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THREAT

Human Resource Challenges Success in bancassurance venture requires a

change in mindset. Though we have a large talentpool, the inability to sell complex insurance

products on the part of bank professionals and theirreluctance to learn can be severe setback. Therehas to be a change in the thinking, approach andwork culture.

Non-response from the target groups can also posea challenge as it happened in the USA in 1980s.


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EASY BANKING--This section is fullydedicated to the Tech banking, include mobile

banking, SMS banking, net banking & ATMs.

CORE BANKING is all about knowing

customers' needs. Provide them with the rightproducts at the right time through the rightchannels 24 hours a day, 7 days a week.

Proxy banking (see in notes)Mercantile banking in law note book

FUTURE IN INDIA


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FUTURE IN INDIA Fast growth & more employment

Centre is planning to raise the upper limit onforeign equity in PSB

PSU raise rs. 31300 crore by march 2009

IBA proposal to lower the minimum dividendpayment requirement for PSB

The government is seeking proposal to splitting

of share to improve liquidity of bank stockNational banks will raise rs.14728 crore equity

2% decline in wages and salary compare to

14% growth of employment


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THANKS!!!


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QUESTIONS

what isPresidency Banks

Diff b/w banksand NBFI

Interest checkingaccount (NOW)

checking account(NOW)


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EXTRA POINT

actual acquisition cost for the stake transferis likely to be around Rs. 40,000 crore.

The NEFT, was introduced in 2005. Since its

inception the coverage of NEFT hasincreased. Currently it is available in 28000+bank branches, through 67 banks at 3000+

centers. The first regular institution resembling what

we call a Bank, was establishedat Venice,

nearly 700 years ago.


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BANGING SECTOR


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BANGING SECTOR

Banking Industry Tufail Khan

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