Volume 4, Issue 1(3), January 201 International Journal of...

Volume 4, Issue 1(3), January 2015 International Journal of Multidisciplinary

Educational Research

Published by Sucharitha Publications Visakhapatnam – 530 017 Andhra Pradesh – India Email: [email protected] Website: www.ijmer.in

Editorial Board Editor-in-Chief Dr. Victor Babu Koppula Faculty, Department of Philosophy Andhra University – Visakhapatnam -530 003 Andhra Pradesh – India

EDITORIAL BOARD MEMBERS

Prof. S.Mahendra Dev Vice Chancellor Indira Gandhi Institute of Development Research Mumbai

Prof.Y.C. Simhadri Vice Chancellor, Patna University Former Director Institute of Constitutional and Parliamentary Studies, New Delhi & Formerly Vice Chancellor of Benaras Hindu University, Andhra University Nagarjuna University, Patna University

Prof. (Dr.) Sohan Raj Tater Former Vice Chancellor Singhania University, Rajasthan

Prof.K.Sreerama Murty Department of Economics Andhra University - Visakhapatnam

Prof. K.R.Rajani Department of Philosophy Andhra University – Visakhapatnam

Prof. A.B.S.V.Rangarao Department of Social Work Andhra University – Visakhapatnam

Prof.S.Prasanna Sree Department of English Andhra University – Visakhapatnam

Prof. P.Sivunnaidu Department of History Andhra University – Visakhapatnam

Prof. P.D.Satya Paul Department of Anthropology Andhra University – Visakhapatnam

Prof. Josef HÖCHTL Department of Political Economy University of Vienna, Vienna & Ex. Member of the Austrian Parliament Austria

Prof. Alexander Chumakov Chair of Philosophy Department Russian Philosophical Society Moscow, Russia

Prof. Fidel Gutierrez Vivanco Founder and President Escuela Virtual de Asesoría Filosófica Lima Peru

Prof. Igor Kondrashin The Member of The Russian Philosophical Society The Russian Humanist Society and Expert of the UNESCO, Moscow, Russia

Dr. Zoran Vujisiæ Rector St. Gregory Nazianzen Orthodox Institute Universidad Rural de Guatemala, GT, U.S.A

Swami Maheshwarananda Founder and President Shree Vishwa Deep Gurukul Swami Maheshwarananda Ashram Education & Research Center Rajasthan, India

Prof.U.Shameem Department of Zoology Andhra University Visakhapatnam

Dr. N.V.S.Suryanarayana Head Dept. of Education, A.U. Campus Vizianagaram

Dr. Momin Mohamed Naser Department of Geography Institute of Arab Research and Studies Cairo University, Egypt

I Ketut Donder Depasar State Institute of Hindu Dharma Indonesia

Prof. Roger Wiemers Professor of Education Lipscomb University, Nashville, USA

Prof. G.Veerraju Department of Philosophy Andhra University Visakhapatnam

Prof.G.Subhakar Department of Education Andhra University, Visakhapatnam

Dr.B.S.N.Murthy Department of Mechanical Engineering GITAM University –Visakhapatnam

N.Suryanarayana (Dhanam) Department of Philosophy Andhra University Visakhapatnam

Dr.Ch.Prema Kumar Department of Philosophy Andhra University Visakhapatnam

Dr.S.V Lakshmana Rao Coordinator AP State Resource Center Visakhapatnam

Dr.S.Kannan Department of History Annamalai University Annamalai Nagar, Chidambaram

Dr. Barada Prasad Bhol Registrar, Purushottam Institute of Engineering & Technology Sundargarh, Odisha

Dr.E. Ashok Kumar Department of Education North- Eastern Hill University, Shillong

Dr.K.Chaitanya Postdoctoral Research Fellow Department of Chemistry Nanjing University of Science and Technology People’s Republic of China

Dr.Merina Islam Department of Philosophy Cachar College, Assam

Dr R Dhanuja PSG College of Arts & Science Coimbatore

Dr. Bipasha Sinha S. S. Jalan Girls’ College University of Calcutta Calcutta

Dr. K. John Babu Department of Journalism & Mass Comm Central University of Kashmir, Kashmir

Dr. H.N. Vidya Government Arts College Hassan, Karnataka

Dr.Ton Quang Cuong Dean of Faculty of Teacher Education University of Education, VNU, Hanoi

Prof. Chanakya Kumar University of Pune Pune

© Editor-in-Chief, IJMER Typeset and Printed in India

www.ijmer.in IJMER, Journal of Multidisciplinary Educational Research, concentrates on critical and creative research in multidisciplinary traditions. This journal seeks to promote original research and cultivate a fruitful dialogue between old and new thought.

C O N T E N T S

Volume 4 Issue 1(3) January 2015

S. No

Page No

1. Customer Oriented Services by Banking Sector in India– A Study of the Post Reforms Period (1991-2011)

Chanchal Mukherjee

1

2. A Study on Pradhan Mantri Jan Dhan Yojana – WithReference to Nationalized Banks

N.Murali Krishna and N.Gopala Krishna

18

3. Banking Sector in India and Its Recent DevelopmentsT. Radha Krishna

24

4. Emerging Trends in Indian Banking Services –Challenges and Opportunities

Raju Paila

30

5. Banking in Balance with the EnvironmentPakki Roja

39

6. Customers Perception on Usage of Internet BankingJaladi Ravi,G.Venkata Rama Krishna Rao

and K.Venkata Muralidhara Rao

51

7. Payment and Settlement SystemsN. R. Narayana Murthy

57

8. Role of Information Technology in the Indian BankingPayment System

Gowry Shankar Kondra

65

9. Progress of Banking in IndiaS.Sita Rama Murty

73

10. Recent Advances in Indian Banking SectorVinay Chaitanya Ganta and Chittabbai Vanumu

80

11. Recent Trends in Indian Banking – Some Issues ofConcern

D.Narayana Rao

90

12. Recent Trends in Indian Banking IndustryD. Siva Satyanarayana,V.S.J. Ramachandra

Murthy and P. Satyanarayana

96

13. Recent Trends in Indian Banking SectorG.Divya and G.Chandra Mouli

101

14. Trends in Indian Banking –Opportunities & ChallengesValluri.Vijayalakshmi

105

15. Role of FDI in Banking, in Generating Wealth to IndianEconomy

K.Ravi Kumar and G.Chandra Mouli

110

16. Recent Trends in Indian Banking:-A Special Referenceto State Bank of Hyderabad

C.Sarada

117

17. Leeway of The ‘E-Way’ in Indian BankingG.V.V.S.V.Prasad Babu

122

18. Trends and Developments in Banking Sector of IndianCh. Vishnu Murthy and P. Venkateswarlu

132

19. Recent Trends in Indian BankingV.Chittabbai, G.Raj Kumar

and B.Ramachandra Rao

136

20. Adoption of Information and CommunicationTechnology in the Banking Sector: ServicesAugmentation of the ATM Marketplace as a CustomerChannel in Kerala

K.Chaitanya Krishna Sai

141

Editorial ……..

Provoking fresh thinking is certainly becoming the prime purpose of International Journal of Multidisciplinary Educational Research (IJMER). The new world era we have entered with enormous contradictions is demanding a unique understanding to face challenges. IJMER’s contents are overwhelmingly contributor, distinctive and are creating the right balance for its readers with its varied knowledge.

We are happy to inform you that IJMER got the high Impact Factor 2.972, Index Copernicus Value 5.16 and IJMER is listed and indexed in 34 popular indexed organizations in the world. This academic achievement of IJMER is only author’s contribution in the past issues. I hope this journey of IJMER more benefit to future academic world.

In the present issue, we have taken up details of multidisciplinary issues discussed in academic circles. There are well written articles covering a wide range of issues that are thought provoking as well as significant in the contemporary research world.

My thanks to the Members of the Editorial Board, to the readers, and in particular I sincerely recognize the efforts of the subscribers of articles. The journal thus receives its recognition from the rich contribution of assorted research papers presented by the experienced scholars and the implied commitment is generating the vision envisaged and that is spreading knowledge. I am happy to note that the readers are benefited.

My personal thanks to one and all.

(Dr.Victor Babu Koppula)

INTERNATIONAL JOURNAL OF MULTIDISCIPLINARY EDUCATIONAL RESEARCH ISSN : 2277-7881; IMPACT FACTOR - 2.972; IC VALUE:5.16 VOLUME 4, ISSUE 1(3), JANUARY 2015

CUSTOMER ORIENTED SERVICES BY BANKING SECTOR IN INDIA – A STUDY OF THE POST REFORMS PERIOD (1991-2011)

Mr. Chanchal Mukherjee Assistant Professor

Department of Commerce & Management Studies G V P College for Degree & PG Courses (A)

Visakhapatnam, Andhra Pradesh Introduction:

Government of India took major step in 1969 to put the banking sector into systems and is nationalized in 14 private banks. Section 42(6)(a) of RBI Act 1934 lays down the conditions of scheduled commercial banks.

In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players. The RBI has shown certain interest to involve more of foreign banks than the existing one recently. This step has paved a way for few more foreign banks to start business in India.

The financial services sector in India has witnessed a fundamental transformation since the country was liberalized. Since banking/financial sector reforms of 1991, India has emerged as the one of the most rapidly growing economies across the globe. The financial services market is growing rapidly, and there is significant potential for further growth.

The financial services sector includes broking firms, investment services, national banks, private banks, mutual funds, car and home loans, and equity market.

With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the services provided by banks has become more easy and convenient. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems.

Open bank account - the most common and first service of the banking sector. There are different types of bank account in Indian banking sector. The bank accounts are as follows:

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Bank Savings Account - Bank Savings Account can be opened foreligible person / persons and certain organisations / agencies (asadvised by Reserve Bank of India (RBI) from time to time)

Bank Current Account - Bank Current Account can be opened byindividuals / partnership firms / Private and Public Limited Companies/ HUFs / Specified Associates / Societies / Trusts, etc.

Bank Term Deposits Account - Bank Term Deposits Account can beopened by individuals / partnership firms / Private and Public LimitedCompanies / HUFs/ Specified Associates / Societies / Trusts, etc.

Bank Account Online - With the advancement of technology, the majorbanks in the public and private sector has faciliated their customer toopen bank account online. Bank account online is registered through aPC with an internet connection. The advent of bank account onlinehas saved both the cost of operation for banks as well as the time takenin opening an account.

Note :- A minor account can be opened but jointly with a guardian and only the guardian would is allowed to operate the account.

Credit cards in India is gaining ground. A number of banks in India are encouraging people to use credit card. The concept of credit card was used in 1950 with the launch of charge cards in USA by Diners Club and American Express. Credit card however became more popular with use of magnetic strip in 1970.

Credit card in India became popular with the introduction of foreign banks in the country.

Credit cards are financial instruments, which can be used more than once to borrow money or buy products and services on credit. Basically banks, retail stores and other businesses issue these.

Major Banks issuing Credit Card in India

State Bank of India credit card (SBI credit card)

Bank of Baroda credit card or BoB credit card

ICICI credit card

HDFC credit card

IDBI credit card

ABN AMRO credit card

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Standard Chartered credit card

HSBC credit card

Citibank Credit Card

The following are some of the varieties of credit cards in India

ANZ - Gold

ANZ - Silver

Bank Of India - Indiacard

Bol - Taj Premium

Bol - Gold

BoB - Exclusive

BoB - Premium

Canara Bank - Cancard

Citibank - Gold

Citibank - Silver

Citibank WWF Card

Citibank Visa Card for Women

Citibank Cry Card

Citibank Silver International Credit Card

Citibank Women's International Credit Card

Citibank Gold International Credit Card

Citibank Electronic Credit Card

Citibank Maruti International Credit Card

Citibank Times Card

Citibank Indian Oil International Credit Card

Citibank Citi Diners Club Card

HSBC - Gold

HSBC - Classic

ICICI Sterling Silver Credit Card

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ICICI Solid Gold Credit Card

ICICI True Blue Credit Card

SBI Card

Stanchart - Gold

Stanchart - Executive

Stanchart - Classic

Thomas Cook Standard Chartered Global Credit Card

Standard segregation of credit cards

Standard Card - It is the most basic card (sans all frills) offered byissuers.

Classic Card - Brand name for the standard card issued by VISA.

Gold Card/Executive Card - A credit card that offers a higher line ofcredit than a standard card. Income eligibility is also higher. Inaddition, issuers provide extra perks or incentives to cardholders.

Platinum Card - A credit card with a higher limit and additional perksthan a gold card.

Titanium Card - A card with an even higher limit than a platinumcard.

The following are some of the plus features of credit card in India

Hotel discounts

Travel fare discounts

Free global calling card

Lost baggage insurance

Accident insurance

Insurance on goods purchased

Waiver of payment in case of accidental death

Household insurance

Some facts of credit cards

The first card was issued in India by Visa in 1981.

The country's first Gold Card was also issued from Visa in 1986.

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The first international credit card was issued to a restricted number ofcustomers by Andhra Bank in 1987 through the Visa program, aftergetting special permission from the Reserve Bank of India.

The credit cards are shape and size, as specified by the ISO 7810standard. It is generally of plastic quality. It is also sometimes knownas Plastic Money.

Debit cards, also known as check cards look like credit cards or ATM cards (automated teller machine card). It operate like cash or a personal check. Debit cards are different from credit cards. Credit card is a way to "pay later," whereas debit card is a way to "pay now." When we use a debit card, our money is quickly deducted from the bank account. Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants. Its an alternative to carrying a checkbook or cash.

With debit card, we use our own money and not the issuer's money. In India almost all the banks issue debit card to its account holders. Features of Debit Card

Obtaining a debit card is often easier than obtaining a credit card.

Using a debit card instead of writing checks saves you from showingidentification or giving out personal information at the time of thetransaction.

Using a debit card frees you from carrying cash or a checkbook.

Using a debit card means you no longer have to stock up on traveler'schecks or cash when you travel.

Debit cards may be more readily accepted by merchants than checks,especially in other states or countries wherever your card brand isaccepted.

The debit card is a quick, "pay now" product, giving you no graceperiod.

Using a debit card may mean you have less protection than with acredit card purchase for items which are never delivered, are defective,or were misrepresented. But, as with credit cards, you may disputeunauthorized charges or other mistakes within 60 days. You shouldcontact the card issuer if a problem cannot be resolved with themerchant.

Returning goods or canceling services purchased with a debit card istreated as if the purchase were made with cash or a check.

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Tips for responsible use of Debit Card

If your card is lost or stolen, report the loss immediately to yourfinancial institution.

If you suspect your card is being fraudulently used, report itimmediately to your financial institution.

Hold on to your receipts from your debit card transactions. A thief mayget your name and debit card number from a receipt and order goodsby mail or over the telephone. Your card does not have to be missing inorder for it to be misused.

If you have a PIN number, memorize it. Do not keep your PIN numberwith your card. Also, don't choose a PIN number that a smart thiefcould figure out, such as your phone number or birthday.

Never give your PIN number to anyone. Keep your PIN private.

Always know how much money you have available in your account.Don't forget that your debit card may allow you to access money thatyou have set aside to cover a check which has not cleared your bankyet.

Keep your receipts in one place -- for easy retrieval and betteroversight of your bank account.

Due to the unequal distribution of wealth, India has arrived at a situation where the affluent class gets richer and richer and the underprivileged becomes poorer. To bridge this financial gap and to satisfy their day to day requirements, Bank plays a vital role by offering various loans to the finance seekers. Hence every borrower should have prior knowledge on the various Bank Loans in India, which are eligible for meeting their financial objectives.

Types of bank loans offered by banks in India

The various Loans offered by Banks in India are mentioned as under: Personal Loans

Personal Bank Loans are the credits which a bank offers to its customer to meet his instant personal requirements ranging from home renovation to purchasing of new laptop, a getaway with family or for reimbursing the credit card liabilities, for buying a new car or for child's education, etc. Personal loan simplifies the cash flow of the customer besides handling its immediate needs.

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Personal Loans

Eligibility For salaried Individuals For Self-Employed Individuals

Minimum and Maximum Age

21 years and 58 years respectively


Maximum Annual Income ` 1,20,000 ` 1,50,000

Minimum years in service/business 1 year 3 years

Loan Amount ` 50,000 to ` 15,00,000

---- ` 50,000 to ` 15,00,000

Loan Tenure 1 years to 7 years 1 years to 7 years

Interest Rates 12-24%. 12-24%.

Mode of Repayment Post-dated cheques or Standing orders to debit from personal A/c

Post-dated cheques or Standing orders to debit from personal A/c

Home Loans

To buy a dream home is the dream of every person. Home Loan has helped in changing every Indian's dream into reality. However, the every increasing property rates and escalating rates of interest sometimes act as an obstacle. Therefore, before opting for a home loan it is advisable to check every prospect of the product.

Home Loans


Minimum and Maximum Age 21 years and 65 years respectively



Minimum years in service/ business

1 year 3 years

Loan Amount ` 2,00,000 to ` 2,00,00,000

---- ` 2,00,000 to ` 2,00,00,000


Interest Rates 9-16% 9-16%

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Tax Benefits on Home Loans: Any person who opts for home loan is entitled for tax benefits under Income Tax Act, 1961 on principal and the interest amount in the form of deductions from the chargeable earnings.

Bank Loans against Property

Property Loan or Loan against property is a kind of loan which is allowed by the bank on the condition of keeping the customer's current assets as a security with them. These loans are very useful when other resources of financing get exhausted.

It is significant to recognize that a loan against property is not similar to mortgage. While loan against property is obtained from the bank by allocating customer's current assets as a security against the credit, a mortgage is an instrument for purchasing an asset. On the basis of the current market situations, the paid up cost of the asset and other aspects, the cost of the credit against asset can range anywhere from 40% to 60% of the asset costs.

Loans against Property

Eligibility For salaried Individuals

For Self-Employed Individuals





Minimum years in service/ business 1 year 3 years

Loan Amount ` 2,00,000 to ` 1,50,00,000

---- ` 2,00,000 to ` 1,50,00,000


Loan to cost ratio 60% of residential cost 50% of commercial cost

60% of residential cost 50% of commercial cost

Tax Rebate NIL NIL

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Business Loans

Before starting a business, the entrepreneur should be mentally and financially prepared to encounter the fiscal setbacks during the process. To bail the companies out from the fiscal crunch, several banks in India offers business Loans both for meeting urgent official growth and expenses. Other details of Business Loans offered by Banks in India are: Car Loans

Every individual want to own a car. Hence, the need for car loans emerges at some point or the other. While selecting a car loan it is always wise to scrutinize the various options accessible in the market besides analyzing its fiscal suitability.

Car Loans





Maximum Annual Income ` 1,00,000 ` 60,000

Loan Amount ` 1,00,000 (new) and ` 50,000 (old) to ` 20,00,000

---- ` 1,00,000 (new) and ` 50,000 (old) to

` 20,00,000


Loan to cost ratio 85-90% of car cost 85-90% of car cost

Education Loans

Education Loans offered by various banks in India provide much required assistance to fund your child's education when all other resources of finance get exhausted. Education Loans are offered by almost every Indian bank thus providing ample opportunity to students to undergo higher education both in India and abroad.

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Education Loans

Eligibility For Students

Minimum and Maximum Age 16 years and 26 years respectively

Expenses covered course and examination fee, refundable deposits, procurement of books, travel expenses

Loan Amount for studies in India Upto ` 10,00,000

Loan Amount for studies abroad Upto ` 20,00,000

Repayment Period 5-7 years

Agricultural loans are available for a multitude of farming purposes. Farmers may apply for loans to buy inputs for the cultivation of food grain crops as well as for horticulture, aquaculture, animal husbandry, floriculture and sericulture businesses. There are also special loans to finance the purchase of agricultural machinery such as tractors, harvesters and trucks. Construction of biogas plants and irrigation systems as well as the purchase of agricultural land may also be financed through special types of agricultural finance. Here is some information about the kind of agricultural credit and loans provided by public sector banks in India.

State Bank of India

State Bank of India presents a wide range of financial schemes for agriculturalists. These schemes include crop loans, Produce Marketing Loan Scheme, Loan Against Warehouse Receipts, Kisan Credit Card Scheme, agricultural term loans, Land Development Scheme, Minor Irrigation Scheme, Farm Mechanisation Scheme, Financing Of Combine Harvesters, Kisan Gold Card Scheme, Land Purchase Scheme, Krishi Plus Scheme, Arthias Plus Scheme, Dairy Plus Scheme, Broiler Plus Scheme, Finance To Horticulture, Lead Bank Scheme and Agri Business Heads Scheme. The Bank also provides Micro Finance through Self Help Groups and loans through 30 regional rural banks.

State Bank of Bikaner and Jaipur (SBBJ)

State Bank of Hyderabad (SBH)

State Bank of Indore (SBIR)

State Bank of Mysore (SBM)

State Bank of Patiala (SBP)

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State Bank of Saurashtra (SBS)

State Bank of Travancore (SBT)

Schemes of Nationalised Banks

1. Allahabad Bank - offers the Kisan Credit Card and Kisan Shakti YojanaScheme. The Kisan Credit Card offers the Kisan Credit Card and Kisan ShaktiYojana Scheme. The Kisan Credit Card is a unique scheme for farmers throughwhich they can draw a cash loan for crop production as well as domestic needsfrom the card-issuing branch within the sanctioned limit. The Kisan ShaktiYojana provides farm investment credit, as well as personal/domestic loansincluding repayment of debt to moneylenders. The permissible loan limit will be50 per cent of the value of land or 5 times the net farm income, whichever islower, less the outstanding amount, if any, in Agril.

2. Andhra Bank - provides facilities to farmers like AB Kisan Vikas Card, ABPattabhi Agricard, AB Kisan Chakra, rural godowns, agri clinics, agri servicecentres, self help groups and solar cookers. They also provide other schemessuch as Kisan Sampathi, tractor financing, Kisan Green Card, Surya Sakhti andloans to dairy agents.

3. Bank of Baroda - offers farmers the Baroda Kisan Credit Card. It also hasschemes for the purchase of agricultural implements, heavy agriculturalmachinery like tractors, irrigation and other infrastructure. Bank of Baroda alsofinances the development of agri industries like horticulture, sericulture,fisheries, dairy and poultry.

4. Bank of India - has a Kisan Credit Card Scheme that helps farmers raise short-term funds for agriculture and other farm-based activities, on an on-going basis,with very flexible and friendly repayment terms. It also offers an agriculturalloan for development of agriculture related industries, purchase of machineryand other agricultural purposes.

5. Bank of Maharashtra - offers agriculturists a Mahabank Kisan Credit Cardand financial schemes for digging new wells, purchasing harvesters, livestock,vehicles and land. Repayment terms for different agricultural loans range fromthree to fifteen years.

6. Canara Bank - provides Kisan Credit Cards. Limits up to 50,000 have nomargin while those above 50,000 have a margin of 15 to 20 percent. Other thanthis, Canara Bank provides a wide array of financial schemes for differentagricultural purposes.

7. Central Bank of India - The Central Kisan Credit Card is a credit serviceprovided to farmers on the basis of their holdings for purchasing agriculturalinputs. Only those farmers having a good track record for the past 2 years withthe bank as a borrower or depositor and who are not defaulters to any creditinstitution would be considered for loans.

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8. Corporation Bank - offers a range of loan schemes to farmers. They are theCorp Gram Mitra Yojana, Corp Arthias Loan Yojana, Corp Kisan Tie-Up LoanScheme, Corp Kisan Farm Mechanisation Scheme and Corp Kisan Vehicle LoanYojna.

9. Dena Bank - Dena Bank has sponsored 2 Regional Rural Banks namely DenaGujarat Gramin Bank in Gujarat and Durg Rajnandgaon Gramin Bank (DRGB)in Chhattisgarh. The bank has set up a Rural Development Foundation fortraining unemployed youth in rural areas. Other financial schemes of the bankare the Dena Swacch Gram Yojana, Dena Kisan Gold Credit Card Scheme andthe Dena Bhumiheen Kisan Credit Card Scheme.

10. Indian Bank - has a wide range of schemes for agriculturalists such asSwarojgar Credit Card, Gramin Mahila Sowbhagya Scheme, Kisan Bike LoanScheme, Yuva Kisan Vidya Nidhi Yojana and Indian Bank Kisan Card Scheme.

11. Indian Overseas Bank - offers agri business consultancy services that includeconducting feasibility and market studies, preparation of detailed project reportsand formulation of rehabilitation packages for sick agro units.

12. Oriental Bank of Commerce - It has two agricultural projects - the GrameenProject and the Comprehensive Village Development Programme. The GrameenProject involves disbursing small loans ranging from Rs.75 onwards to mostlywomen. Training is also provided in villages in using locally available rawmaterial to produce pickles and jams. The Comprehensive Village DevelopmentProgramme focuses on providing an integrated package of rural finance tovillagers to build up their village.

13. Punjab and Sind Bank - offers a range of financial schemes for farmers likethe Zimidara Credit Card, tractor finance scheme, drip irrigation scheme, KhetiUdyog Khazana Yojana, vermi composting scheme, horticulture clinic andprivate veterinary clinic with dairy unit scheme.

14. Punjab National Bank - This bank has a special website called PNB Krishifor agriculturalists. It gives details on crop practices, plant protection, farmmachinery, market prices and other farming news and activities. The websitealso provides a list of financial schemes offered by Punjab National Bank onproduction credit, investment credit, composite loans, animal husbandry andfarm mechanization.

15. Syndicate Bank - offers a wide range of agricultural loan products such as theSynd Jai Kisan Loan Scheme, Jewel Loan Scheme for Agriculture, SyndicateFarm House Scheme, Finance for Hi-tech Agriculture, Development ofIrrigation Infrastructure scheme, Syndicate 2/3/4 Wheelers Scheme and theSyndicate Kisan Credit Card (S.K.C.C).

16. UCO Bank - This Bank provides the UCO Hirak Jayanti Krishi Yojana to meetthe long-term credit needs of the farming community in rural areas foragriculture, allied activities as well as for personal purposes. Only farmers

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below 60 years are eligible to apply. Minimum quantum of the loan is Rs.25,000/- and the maximum is Rs.5 lakhs.

17. Union Bank of India - Facilities provided to farmers include Kisan ATMCards and special Kisan ATM Machines. These ATM's are easy to operate anddo not require farmers to have a high level of literacy. They are voice enabled inthe local language, have a touch screen monitor and work on a bio-metricauthentication system like finger print verification.

18. United Bank of India - The range of financial schemes offered toagriculturalists include the United Krishi Laghu Paribahan Yojana, UnitedKrishi Sahayak Yojana, United Gramyashree Yojana, Gramin BhandaranYojana and the United Bhumiheen Kisan Credit Card.

19. Vijaya Bank - This bank offers one comprehensive financial scheme known asthe Vijaya Krishi Vikas (VKV) Scheme. This scheme provides a simple packageto farmers to meet entire agricultural credit requirements such as cropproduction, investment credit and consumption credit. All farmers includingowners, tenant cultivators, leased land farmers and sharecroppers are eligible forthis scheme.

Schemes of Cooperative Agricultural Banks

1. National Bank for Agriculture and Rural Development or NABARD - isresponsible for refinance disbursement to commercial banks, State cooperativebanks, State cooperatives, rural development banks, Regional Rural Banks(RRBs) and other eligible financial institutions. It also sanctions money throughits Rural Infrastructure Development Fund for projects covering irrigation, ruralroads and bridges, health and education, soil conservation and drinking waterschemes. NABARD also offers a Kisan Credit Card Scheme and crop loans underthe Rashtriya Krishi Bima Yojana.

Banks and RRB's introduced the Kisan Credit Card Scheme of NABARD in their areas of operation. In this scheme eligible farmers are provided with a Kisan Credit Card and a passbook or card-cum-pass book. The revolving cash credit facility allows any number of withdrawals and repayments within the limit. This limit is fixed on the basis of operational land holding, cropping pattern and the scale of finance. Sub-limits may be fixed at the discretion of banks.

This Kisan Credit Card is valid for 3 years subject to annual review. As incentive for good performance, credit limits may be enhanced to take care of increase in costs, change in cropping pattern, etc. Each drawl should be repaid within a maximum period of 12 months. Conversion or rescheduling of loans is allowed in case of damage to crops due to natural calamities. Security, margin, rate of interest and other details are fixed according to RBI norms.

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2. Bihar State Co-operative Bank Limited (BSCB) - Offers a range of loans andfinancial schemes to agriculturalists.

3. Haryana State Co-operative Apex Bank Limited (HARCOBANK) - The bankoffers crop loans, Kisan Credit Cards, cash credit against hypothecation of stocksand interim finance by way of cash credit.

4. National Federation of State Co-operative Banks Limited (NAFSCOB) - Thisfederation offers a range of agricultural loans through member State CooperativeBanks, District Central Cooperative Banks and Primary Agricultural CooperativeSocieties.

5. Orissa State Co-operative Bank Limited (OSCB) - The bank has introducedKisan Credit Cards in the S.T. Cooperative Credit Sector. It also organizesseminars on agri finance. OSCB has 17 Central Cooperative Banks and around810 mini banks in different districts of Orissa.

6. Repatriates Co-operative Finance and Development Bank Limited - Thisbank does not have any specific agricultural loan, but offers a range of financialproducts that can be accessed by people who wish to develop agriculture andrelated activities.

7. Punjab State Cooperative Agriculture Development Bank Ltd - Initially, thebank only gave farmers loans to pay off old debts and purchase land. Today, thebank provides loans for various purposes like improvement of alkaline and salinelands, purchase of tractors, installing tube wells and other modern agriculturalequipment. It also offers financial schemes for poultry development, dairydevelopment, horticulture, floriculture, sheep rearing and inland fisheries.

Andhra Pradesh State Cooperative Bank Limited (APCOB) - has a loan portfolio that covers crop loans, medium term loans and long term loans for agricultural purposes. It also supports government sponsored District Rural Development Agency projects through IRDP loans and cooperative sugar factories, spinning mills, weaver's societies, employees' cooperative credit societies and other organizations. APCOB has also extended finance to apex cooperative institutions in the State such as APCO, MARKFED and GCC.

Beside lending and depositing money, banks also carry money from one corner of the globe to another. This act of banks is known as transfer of money. This activity is termed as remittance business. Banks generally issue Demand Drafts, Banker's Cheques, Money Orders or other such instruments for transferring the money. This is a type of Telegraphic Transfer or Tele Cash Orders.

It has been only a couple of years that banks have jumped into the money transfer businesses in India. The international money transfer market grew 9.3% from 2003 to 2004 i.e. from US$213 bn. to US$233 bn. in 2004. Economists say that the market of money transfer will further grow at a

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cumulative 10.1% average growth rate through 2008. With the use of high technology and varieties of product it seems that "Free" money transfers will become commonplace. We will see more bundling of tailored money services by banks and non-traditional entrants that will include "free" money transfers. Many banks will even use money transfer services as loss-leaders in order to generate account openings and cross-sell opportunities. The price evolution of money transfer products for banks will be similar to that of consumer bill pay-the product is worth giving away as an account acquisition tool to win overall market share and establish banking relationships. ATM money transfer card products have had terrible bank adoption rates since being introduced in the last three to four years. Remitters who are highly educated and have been already been exposed to ATM technology in receiving countries tend to have an interest in this product. Money transfer to India is one of the most important part played by the banks. This service provide peace of mind to either the NRIs or to the visitors to India. Many Indian banks have ATM'S (automatic teller machine), enable to draw foreign currency in India. Apart from banks few financial institutions and online portals gives services of money transfer to India. Some of them are as under:

Western Union Money Transfer

Union Money Transfer

IKobo Money Transfer

Cash2india.com

Remit2india

Samachar Money Transfer

Timesofmoney.com

Wells Fergo International Money Transfer

Travelers Express

Money Gram International

This section is fully dedicated to the Tech Banking. A decade before, it was tough to belief that banking sector will be at a finger tip. Now it's possible. A mobile hand set with a connection is the only instrument needed to make a gateway to your banking transaction, the latest innovation of 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. With all these devices and systems, there is a complete freedom to experience.

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Check your account, transfer your fund, make payments and what more, do anything of everything what has been followed in physical banking since ages. But this time no standing for hours in front of cash counter and no time boundation in withdrawing your own money.

Almost all the Indian Banks provide services to the NRIs. There are different types of accounts for them. They are:

Non-Resident (Ordinary) Account - NRO A/c

Non-Resident (External) Rupee Account - NRE A/c

Non-Resident (Foreign Currency) Account - FCNR A/c

An Indian resident who is earning forign exchange can also maintain Foreign Currency account in the country with an authorised dealer bank but only to the maximum limit of 50% of such foreign exchange earnings under the Exchange Earners Foreign Currency Account (EEFC) Scheme.

a. The special features are as under:

NRO A/c.: The funds, credited to this account, cannot be repatriatedoutside India in foreign exchange, without prior permission of theReserve Bank of India. Interest, earned is eligible for repatriationoutside India, net of Indian taxes. The remittance of interest (net oftaxes) will be permitted by the authorised dealer who maintains theaccount, if the account holder makes an application to the authoriseddealer, in the prescribed form. No RBI permission is required forremittance of interest.

NRE A/c.: The funds, standing to the credit of this account, as well asinterest earned thereon, are remittable outside India in free foreignexchange, without permission of the RBI. The interest income is notsubject to Indian Income-tax. Credits to the accounts should be in theform of remittance in foreign exchange from outside India, as well asother funds, which are eligible to be remitted outside India, in freeforeign exchange. Funds, emanating from local sources, are not eligibleto be credited to these accounts, unless these funds are otherwiseremittable outside India, in terms of the existing Exchange ControlRegulations.

FCNR A/c.: These accounts can be opened in four foreign currencies:

o Pounds Sterling;o US Dollars;o Japanese Yen;o Euro.

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For the purpose of opening an account, remittance in foreign exchange, in the same currency, should be received in India. The accounts can be opened only as fixed deposits, with a minimum maturity of one year and, a maximum Indian villages were miles away from mutual funds, insurance and even equity trading. Thanks to Internet Kiosk and the ATM duo which has made it possible for rural India. This kiosk has been set up by ICICI Bank in partnership with network n-Logue Communications in remote villages of Southern part of the country. This is known as Proxi Banking. With the help of fibre optic cables, this kiosk works on wireless in local loop technology.

Reasons for setting-up of Proxi Banking

58% of rural households still do not have bank accounts. Only 21% of rural households have access to credit from a formal

source. 70% of marginal farmers do not have deposit account. 87% households have no formal credit. Only 1% rural househlods rely on a loan from a financial intermediary.

· The loans take between 24 to 33 weeks to get sanctioned. Consumers bribe officials to get loans approved which varies between

10 and 20 per cent of the loan amount. Branch banking in rural is a loss-making.

Benefits to rural

Small loans given for buying buffaloes. Loans for setting up a tea shop. Life and non-life insurance provided. Weather insurance given to farmers. Insurance policies sold to farmers like groundnut, castor, soya, paddy

crop, etc.The Proxy Banking is an innovative approach to rural lending and will add to the government's expanding base of kisan credit cards and the good old guidelines for agricultural lending.turity of three years. The principal, as well as interest, earned on these accounts, is remittable outside India, in the same currency or, in other convertible currency, as desired by the account holder. The interest, earned on these deposits, is exempt from Indian Income-tax.

I take it privilege to congratulate the organizers of this seminar for selecting an apt topic in regards to banking sector for the one day UGC sponsored national seminar. I think my paper can contribute something in this regard.

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A STUDY ON PRADHAN MANTRI JAN DHAN YOJANA – WITH REFERENCE TO NATIONALIZED BANKS

Introduction

Financial Inclusion is delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups. The Financial Inclusion Plan aims at providing easy access to financial services to those sections of the society who are deprived of it so far at affordable cost thereby bringing them into the mainstream financial sector. Implementation of Financial Inclusion is not a new concept for your Bank. Financial Inclusion activities are being implemented by your Bank since inception through various government-sponsored programmes, lending to the poorest of the poor, lending to the minority communities, lending to SC/ST, lending to

priority sectors, etc. However, the RBI formalized the concept of Financial Inclusion in 2005, when it permitted rendering of banking services through Business Correspondent (BC) channel. It then advised all commercial banks in the year 2010 to submit Board-approved Plan for providing banking services in rural unbanked areas under Financial Inclusion.

Review of Literature

According to Indian institute of banking and finance, “financial inclusion is delivery of banking services at an affordable cost ('no frills' accounts,) to the vast sections of disadvantaged and low income group. Unrestrained access to public goods and services is the sine qua non of

N.Murali Krishna Lecturer in Computer Applications

Dr.V.S.Krishna Govt.Degree College (A)

Visakhapatnam

N.Gopala Krishna Lecturer in Computer Science

Govt.Degree College Ravulapalam, E.G.Dt

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an open and efficient society. As banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of the public policy." According to Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India, financial Inclusions the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by main stream institutional players.

Need for Financial Inclusion

Creating a platform for inculcating the habit to save money – The lower income category has been living under the constant shadow of financial duress mainly because of the absence of savings. The absence of savings makes them a vulnerable lot. Presence of banking services and products aims to provide a critical tool to inculcate the habit to save. Capital

formation in the country is also expected to be boosted once financial inclusion measures materialize, as people move away from traditional modes of parking their savings in land, buildings, bullion, etc.

Providing formal credit avenues

So far the unbanked population has been vulnerably dependent of informal channels of credit like family, friends and moneylenders. Availability of adequate and transparent credit from formal banking channels shall allow the entrepreneurial spirit of the masses to increase outputs and prosperity in the countryside. A classic example of what easy and affordable availability of credit can do for the poor is the micro-finance sector.

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Plug gaps and leaks in public subsidies and welfare programmes

A considerable sum of money that is meant for the poorest of poor does

not actually reach them. While this money meanders through large system of government bureaucracy much of it is widely believed to leak and is unable to reach the intended parties. Government is therefore, pushing for direct cash transfers to beneficiaries through their bank accounts rather than subsidizing products and making cash payments. This laudable effort is expected to reduce government’s subsidy bill (as it shall save that part of the subsidy that is leaked) and provide relief only to the real beneficiaries. All these efforts require an efficient and affordable banking system that can reach out to all. Therefore, there has been a push for financial inclusion.

Support from RBI for Financial Inclusion

RBI set up the Khan Commission in 2004 to look into financial inclusion and the recommendations of the commission were incorporated into the mid-term review of the policy (2005–06) and urged banks to review their existing practices to align them with the objective of financial inclusion. RBI also exhorted the banks and stressed the need to make available a basic banking 'no frills' account

either with 'NIL' or very minimum balances as well as charges that would make such accounts accessible to vast sections of the population Of the many schemes and programmes pushed forward by RBI the following need special mention.

Initiation of no-frills account

These accounts provide basic facilities of deposit and withdrawal to accountholders makes banking affordable by cutting down on extra frills that are no use for the lower section of the society. These accounts are expected to provide a low-cost mode to access bank accounts. RBI

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also eased KYC (Know Your customer) norms for opening of such accounts.

Banking service reaches homes through business correspondents

The banking systems have started to adopt the business correspondent mechanism to facilitate banking services in those areas where banks are unable to open brick and mortar branches for cost considerations. Business Correspondents provide affordability and easy accessibility to this unbanked population. Armed with suitable technology, the business correspondents help in taking the banks to the doorsteps of rural households.

EBT – Electronic Benefits Transfer

To plug the leakages that are present in transfer of payments through the various levels of bureaucracy, government has begun the procedure of transferring payment directly to accounts of the beneficiaries. This “human-less” transfer of payment is expected to provide better benefits and relief to the beneficiaries while reducing government’s cost of transfer and monitoring. Once the benefits starts to accrue to the masses, those who remain unbanked shall start looking to enter the formal financial sector.

Models used by Nationalized Banks for FI

Your Bank has adopted various models for providing banking services

under financial inclusion such as:

• ICT (Information & Communication Technology) based BC modeland POS (Point of Sale/Service)

• Kiosk

• Mobile Van

• Brick & Mortar Branches

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Latest Trend -Pradhan Mantra Jan Dhan Yojana

Pradhan Mantri Jan Dhan Yojana is an ambitious scheme for

comprehensive financial inclusion launched by the Prime Minister of India, Narendra Modi on 28 August 2014. He had announced this scheme on his first Independence Day speech on 15 August 2014. In a run up to the formal launch of this scheme, the Prime Minister personally mailed to CEOs of all banks to gear up for the gigantic task of enrolling over 6.0 crore (75 million) households and to open their accounts. In this email he categorically declared that a bank account for each household was a "national priority". The scheme has been started with a target to provide 'universal access to banking facilities' starting with Basic Banking Accounts with overdraft facility of Rs.5000 after six months and RuPay Debit card with inbuilt accident insurance cover of Rs.1 lakh and RuPay Kisan

Card. In next phase, micro insurance & pension etc. will also be added.Reports said on August 28, more than 1.5 crore bank accounts were opened in a single day.

Within a few days of the PM's address on Independence Day, this bank had received a directive on the scheme.

On August 28, the bank's branches in Ghaziabad, Noida and Greater Noida, had been given a target to open more than 10 lakh accounts under the scheme.

The Prime Minister said that though the initial target of PMJDY was to open bank accounts for 7.5 crore families in one year, he had exhorted the concerned officials to complete the task before the next Republic Day.

On the inauguration day of the scheme, 1.5 Crore (15 million) bank accounts were opened. Bank’s Board had approved a Financial

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Inclusion Plan (FIP) for implementation by your Bank within a period of three years commencing from 2010-11. The plan had envisaged covering 20,000 villages in a span of three years under Financial Inclusion utilizing various technology based initiatives. Thereafter, Ministry of Finance and RBI advised your Bank to cover the

villages having population above 2,000 by March 2012. Accordingly, your Bank was allotted 2,855 villages which are covered well within the timelines.

References

1. CGAP publications, 2012, ‘Financial Inclusion and the Linkages toStability, Integrity and

2. Protection: Insights from the South African Experience’

3. Dr. Chakrabarty. K.C (2012), ‘Financial Inclusion – Issues inMeasurement and Analysis’ Keynote Address by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India at the BIS-BNM Workshop on Financial Inclusion Indicators at Kuala Lumpur on November 5, 2012.

4. FICCI, ‘Promoting FinancialInclusionCan the constraints of politicaleconomybe overcome?’, UNDP-NABARD Financial Inclusion Project reportunder a Micro Capital Grant toFederation of Indian Chamber of Commerce and Industry.

5. Press Information Bureau, GOI (2008),‘Ministry of FinanceRecommendations of the Committee on Financial Inclusion’

6. RajeshJeganathan(2012), ‘Measures for achieving financial inclusionin India’ Infosys Finacle, Thought paper, pp.1-5.

7. SeshadriT. V.,‘Financial inclusion – not by banks alone’, Businessline, November 8, 2012

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BANKING SECTOR IN INDIA AND ITS RECENT DEVELOPMENTS

T. Radha Krishna Lecturer in Commerce

Dr.V.S.K.Govt.Degree & P.G. College (A) Visakhapatnam

Introduction

Banking sector in India in the modern sense originated in the last decades of the 18th century. The first banks were Bank of

Hindustan (1770-1829) and The General Bank of India, established 1786 and since defunct. The largest bank, and the oldest still in existence, is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955. For many years the presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935.

In 1969 the Indian government nationalized all the major banks that it did not already own and these have remained under government

ownership. They are run under a structure known as 'profit-making public sector undertaking' and are allowed to compete and operate as commercial banks. The Indian banking sector is made up of four types of banks, as well as the public sector undertakings and the state banks, they have been joined since the 1990s by new private commercial banks and a number of foreign banks.

Generally banking in India was fairly mature in terms of supply, product range and reach-even though reach in rural India and to the

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poor still remains a challenge. The government has developed initiatives to address this through the State Bank of India expanding its branch network and through the National Bank for Agriculture and Rural Development with things like microfinance. This also included the 2014 plan by the then prime minister to bring bank accounts to the

estimated 40% of the population that were still unbanked.

Nationalization of banks during 1960s

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India except the State Bank of India (SBI), continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization of the banking industry. (Austin, Granville, 1999)

The Government of India issued an ordinance ('Banking Companies Acquisition and Transfer of Undertakings, Ordinance-1969') and nationalized the 14 largest commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country. A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit

delivery. With the second dose of nationalisation, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalised banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy (Parkash Arya & Tandon (2003).

The Banking sector has been immensely benefited from the

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implementation of superior technology during the recent past, almost in every nation in the world. Productivity enhancement, innovative products, speedy transactions seamless transfer of funds, real time information system, and efficient risk management are some of the advantage derived through the technology. Information technology has

also improved the efficiency and robustness of business processes across banking sector. India's banking sector has made rapid strides in reforming itself to the new competitive business environment. Indian banking industry is the midst of an IT revolution. Technological infrastructure has become an indispensable part of the reforms process in the banking system, with the gradual development of sophisticated instruments and innovations in market practices.

IT in Banking

Indian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons has led to increasing importance of total banking automation in the Indian Banking Industry. The bank which used the right technology to supply timely information will see productivity increase and thereby gain a competitive edge. To compete in an economy which is opening up, it is imperative for the Indian Banks to observe the latest technology and modify it to suit their environment. Information technology offers a

chance for banks to build new systems that address a wide range of customer needs including many that may not be imaginable today. The following are some of the innovative services offered by the banking sector in the recent past:

Electronic Payment Services - E Cheques

Nowadays we are hearing about e-governance, e-mail, e-commerce, e-tail etc. In the same manner, a new technology is being developed in US for introduction of e-cheque, which will eventually replace the conventional paper cheque. India, as harbinger to the

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introduction of e-cheque, the Negotiable Instruments Act has already been amended to include; Truncated cheque and E-cheque instruments.

Real Time Gross Settlement (RTGS)

Real Time Gross Settlement system, introduced in India since March 2004, is a system through which electronics instructions can be given by banks to transfer funds from their account to the account of another bank. The RTGS system is maintained and operated by the

RBI and provides a means of efficient and faster funds transfer among banks facilitating their financial operations. Therefore, money can reach the beneficiary instantaneously and the beneficiary's bank has the responsibility to credit the beneficiary's account within two hours.

Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make payment to another person/company etc. can approach his bank and make cash payment or give instructions/authorization to transfer funds directly from one’s own account to the bank account of the receiver/beneficiary. Complete details of the receiver's should be furnished to the bank at the time of requesting for such transfers so that the amount reaches the beneficiaries' account correctly and faster. In these transactions RBI is the service provider of EFT.

Electronic Clearing Service (ECS)

Electronic Clearing Service is a retail payment system that can be used to make bulk payments/receipts of a similar nature especially where each individual payment is of a repetitive nature and of

relatively smaller amount. This facility is meant for companies and government departments to make/receive large volumes of payments rather than for funds transfers by individuals.

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Automatic Teller Machine (ATM)

Automatic Teller Machine is the most popular devise in India, which enables the customers to withdraw their money 24 hours a day 7 days a week. It is a devise that allows customer who has an ATM card to perform routine banking transactions without interacting with a human teller. In addition to cash withdrawal, ATMs can be used for payment of utility bills, funds transfer between accounts, deposit of

cheques and cash into accounts, balance enquiry etc.

Point of Sale Terminal

Point of Sale Terminal is a computer terminal that is linked online to the computerized customer information files in a bank and magnetically encoded plastic transaction card that identifies the customer to the computer. During a transaction, the customer's account is debited and the retailer's account is credited by the computer for the amount of purchase.

Tele Banking

Tele Banking facilitates the customer to do entire non-cash related banking on telephone. Under this devise Automatic Voice Recorder is used for simpler queries and transactions. For complicated queries and transactions, manned phone terminals are used.

Electronic Data Interchange (EDI)

Electronic Data Interchange is the electronic exchange of business documents like purchase order, invoices, shipping notices, receiving advices etc. in a standard, computer processed, universally accepted format between trading partners. EDI can also be used to transmit financial information and payments in electronic form.

Conclusion

The banking sector today is re-defined and re-engineered with

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the use of Information Technology and it is sure that the future of banking will offer more sophisticated services to the customers with the continuous product and process innovations. Thus, there is a paradigm shift from the seller's market to buyer's market in the industry and finally it affected at the bankers level to change their approach from

"conventional banking to convenience banking" and "mass banking to class banking". The shift has also increased the degree of accessibility of a common man.

References

1. Austin, Granville (1999). Working a Democratic Constitution – AHistory of the Indian Experience. New Delhi: Oxford UniversityPress. p. 215.

2. Kamlesh Bajaj & Dehjaji (2005); E-Commerce, Tata McGraw hillpublications Co. Ltd., New Delhi,2005

3. Parmatam Parkash Arya; B. B. Tandon (2003) Economic

Reforms in India: From First to Second Generation and Beyond.Deep & Deep Publications. P-369

4. S.B. Verma (2008); E- Banking and Development of Banks, Deep& Deep Publications, New Delhi ,2008

5. Various issues of Business week, The Economist, BusinessToday, The Economic times and Financial Express.

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EMERGING TRENDS IN INDIAN BANKING SERVICES – CHALLENGES AND OPPORTUNITIES

Raju Paila Assistant Professor

G.V.P. College for Degree & PG Courses Visakhapatnam

Introduction

Banks constitute an important segment in financial arena of all countries whether developed or developing or underdeveloped. Economic development of every country depends upon financial sector particularly commercial banks. In fact economic development and financial infrastructure go hand in hand. From time immemorial, the

conventional banker, an indispensable pillar of Indian society, giving and taking of credit in one form or another, must have existed as earlier as the Vedic period. Money lending was one of the recognised occupations under Manu's laws' . The history of modem Indian banking goes back to 1683 when the first Indian Bank was established on western lines in Madras. The establishment of the Bank of Calcutta in 1806 marked the beginning of the modern banking era in India. But the present Indian banking system had developed considerably since 1935. RBI has started its operation in 1935 through an Act. A critical review of the growth of banking in India in the pre independence period reveals that the banking system had neither a definite shape nor policy except the creation of RBI in 1935. With the enactment of the Banking Companies Act in 1949, the Indian banking system had undergone substantial changes structurally, geographically and functionally.

The traditional functions of banking are limited to accept deposits and

to give loans and advances. Ever since the liberalisation in India, this sector has been growing without Leaps and bounces and catering to the

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needs of various segments of the society. In recent times, the Banking Sector has been making rapid straights by using information technology as a platform and endeavoring to scale higher heights. Liberalization and Information technology has attracted many foreign banks to India, thereby opening up new markets, new products and efficient delivery channels for the banking industry. In the development of Indian Economy, Banking sector plays a very important and crucial role.

Commercial Banks in India are now becoming a one-stop Supermarket. The focus is shifting from mass banking to class banking with the

introduction of value added and customized products.Banks plays an important role in the economic development of developing countries. Economic development involves investment in various sectors of the economy. The banks collects savings for investment in various projects. In normal banking the banks perform agency services for their customers and helps economic development of the country. The purchase and sales securities, shares, make payments, receive subscription funds and collect utility bills for the Government department. There for banks save time and energy of busy peoples. Bank arranges foreign exchange for the business transactions with other countries. Banking sector are not simply collecting funds but also serve as a guide to the customer about the investment of their money.

Objectives of study:-

1. To explain the changing banking scenario.

2. To analysis of the impact of liberalization Privatization andGlobalization.

3. To explain the challenges of National and commercial banks inchanging banking scenario.

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4. To study the opportunities for the national and commercialbanks in changing banking scenario.

Methodology of study:-

This study is based on the analysis of the changing banking scenario in the India with the help of secondary data collection.

Present scenario:-

Today role of banking industry is very important as one of the leading and mostly essential service sector. India is the largest economy in the world having more than 120 crore population. Today in India the service sector is contributing half of the Indian GDP and the banking is most popular service sector in India. The significant role of banking industry is essential to speed up the social economic development.

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TABLE NO. 1 – PROGRESS OF COMMERCIAL BANKING AT A GLANCE

IMPORTANT INDICATORS

June 1969

March 2005

March 2006

March 2007

March 2008

March 2009

March 2010

March 2011

March 2012

No. of Commercial Banks 89 288 222 183 175 170 169 169 173

(a) Scheduled Commercial Banks 73 284 218 179 171 166 165 165 169

Of which: Regional Rural Banks — 196 133 96 91 86 82 82 82

(b) Non-Scheduled Commercial Banks 16 4 4 4 4 4 4 4 4

No. of Offices of Scheduled Commercial Banks in India

8262 68355 69471 71839 76050 80547 85393 90263 98330

(a) Rural 1833 32082 30579 30551 31076 31667 32624 33683 36356 (b) Semi-Urban 3342 15403 15556 16361 17675 18969 20740 22843 25797 (c) Urban 1584 11500 12032 12970 14391 15733 17003 17490 18781 (d) Metropolitan 1503 9370 11304 11957 12908 14178 15026 16247 17396 Population per office (in thousands)

64.0 16.0 16.0 15.0 15.0 14.5 13.8 13.4 12.3

Source: Basic Statistical Returns of Scheduled Commercial Banks in India - Volume 41,2012

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The present banking scenario provides a lot of opportunities as well as facing lot of challenges also. In the past few years we observed that there was lot of down and up trends in banking sector due to the global finance crisis. In India it has not major affected but in America still the economy is under the pressure of economic crisis. India is being fundamentally strong supported by concrete economic policies, decisions and implementations by the Indian Government i.e. Prime Minister Dr. Manmohan Singh. Banking sector are not major affected but definitely there was reflection on the share market.

To improve major areas of banking sector Govt. of India. RBI, Ministry

of finance have made several notable efforts. Many of leading banks operating in market have made use of the changed rules and regulations such as CRR, Interest Rates Special offers to the customers such as to open account in zero balance. Now days almost all banks entered into all areas of banking services. As a result of innovation banking products are a reality now. Even saving accounts have become subject of innovation. Due to liberalization, Privatization and Globalization, Indian banks going global and many global banks setting up shops in India. The Indian banking system is set to involve into a totally new level. It will help the banking system to grow in strength going into future. Due to liberalization banks are operating on reduced spread main focus is highlighted on consumerism and how to customers linked and remain attached with the bank. Therefore banks are entered these days in non banking products such insurance in which area there

are tremendous opportunities.

Challenges:-

1) Customer Satisfaction:-

Today in sector customers are more value oriented in their services

because they have alternative choices in it. So that each and every bank have to take care about fulfil of our customers satisfaction.

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2) To provide several personnel services:-

The preset times demanded that banks are to provide several services for which they have to expanse in service, social banking with financial possibilities, selective up gradation, computerization and innovative mechanization, better customer services, effective managerial culture, internal supervision and control, adequate profitability, strong organization culture etc. Therefore banks must be able to provide complete personal service to the customers who comes with expectations.

3) Nonperforming assets (N.P.A):-

Nonperforming assets are another challenge to the banking sector. Vehicle loans and unsecured loans increases N.P.A. which terms 50% of banks retail portfolio was also hit due to upward movement in interest

rates, restrictions on collection practices and soaring real estate prices. So that every bank have to take care about regular repayment of loans.

4) Competition:-

The nationalize banks and commercial banks have the competition from foreign and new private sector banks. Competition in banking sector brings various challenges before the banks such as product positioning, innovative ideas and channels, new market trends, cross selling’s ad at managerial and organizational part this system needs to be manage, assets and contain risk. Banks are restricting their administrative folio by converting manpower into machine power i.e. banks are decreasing manual powers and getting maximum work done through machine power. Skilled and specialized man power is to be utilized and result oriented targeted staff will be appointed.

5) Managing Technology:-

Developing or acquiring the right technology, deploying it optimally and then leveraging it to the maximum extent is essential to achieve

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and maintain high service and efficiency standards while remaining cost effective and delivering sustainable return to shareholders. Early adopters of technology acquire significant competitive advances Managing technology is therefore, a key challenge for the Indian banking sector.

6) Other Challenges:-

a) Coping with regulatory reforms

b) Development of skill of bank personnel

c) Customer awareness and satisfaction

d) Corporate governance

e) Changing needs of customers

f) Keeping space with technology up gradation

g) Lack of common technology standards for mobile banking

h) Sustaining healthy bottom lines and increasing shareholders value

i) Structural changes

j) Man power planning

Opportunities:-

Where there are challenges, there must opportunities. Following are the opportunities for the nationalised and commercial banks.

1) Rural area customers:-

Contributing to 70% of the total population in India is a largely untapped market for banking sector. In all urban areas banking services entered but only few big villages have the banks entered. So that the banks must reach in remaining all villages because majority of Indian still living in rural areas.

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2) Offering various Channels:-

Banks can offer so many channels to access their banking and other services such as ATM, Local branches, Telephone/mobile banking, video banking etc to increase the banking business.

3) Good Customer Services:-

Good customer services are the best brand ambassador for any bank for growing its business. Every engagement with customer is an opportunity to develop a customer faith in the bank. while increasing competition customer services has become the backbone for judging the performance of banks.

4) Internet Banking:-

It is clear that online finance will pickup and there will be increasing convergence in terms of product offerings banking services, share trading, insurance, loans, based on the data warehousing and data mining technologies. Anytime anywhere banking will become common

and will have to upscale, Such upscaleing could include banks launching separate internet banking services apart from traditional banking services.

5) Retail Lending’s:-

Recently banks have adopted customer segmentation which has helped in customizing their product folios well. Thus retail lending’s has become a focus area particularly in respect of financing of consumer durables, housing, automobiles etc., Retail lending’s has also helped in risks dispersal and in enhancing the earnings of banks with better recovery rates.

6) Other Opportunities:-

a) To enter new business and new markets

b) To develop new ways of working

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c) To improve efficiency

d) To deliver high level of customer services.

Conclusion:-

Finally the banking sector will need to master a new business model by building management and customer services. Banks should contribute intensive efforts to render better services to their customer, Nationalized and commercial banks should overcome the challenges and to get advantage of opportunities in changing banking scenario.

References

1. N.K. Thingalaya, "Manu, Chanakya and the Rate of Interest",Pigmy Economic Review, Vol. 36, Aug - Oct, 1994, pp. 1-5.

2. Niti Bhasin: (2007)“Banking development in India 1947 to2007” century publication Delhi 110005.

3. c. Kugumakara Hebbar, "Growth of Banking in India Before

Independence", Pigmy Econgmic Review, August 1 9 89, pp .3 -4.

4. Romeo S. Mascarenhas (2008)“Marketing in banking andInsurance” Vipul prakashan Mumbai 400004

5. Uppal R.K. (2007)“Banking services and informationTechnology” New century publications, new delhi.

6. Mishra S.K., Puri V.K.: Economic Environment of Businss,Himalaya Publishing House, 2002, P. 28.

7. www.rbi.org.in

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BANKING IN BALANCE WITH THE ENVIRONMENT

Pakki Roja Assistant Professor in Commerce

Gayatri Vidya Parishad College for Degree and P.G. Courses (A)

Visakhapatnam

INTRODUCTION

Climate change is the most complicated issue the world is facing. India is the world’s sixth largest and second fastest growing country in terms of producing Green House Gases. Delhi, Mumbai and

Chennai are the three of the world’s ten most polluted cities. Each one of us must understand the disastrous impact of recent storms, floods, droughts, and excessive heat and its looming effect and do our bit to better the environment i.e excellent endeveours are needed for creating greener tomorrow.

Many countries have made commitments necessary to mitigate climate change and “Green” is slowly and steadily becoming the symbolic colour of eco-consciousness in the world. As green initiatives flounce across the globe; Indian banks have a major role and responsibility in supplementing Government efforts towards

sustainable reduction in Carbon emission. Banks can provide important leadership for the required economic transformation that will provide new opportunities for financing and investing policies as well as port folio management for the creation of a strong and successful low carbon

INDIA ANNOUNCED A

VOLUNTARY PLAN TO

REDUCE CARBON EMISSION INTENSITY

BY 20-25% BY 2020.

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economy. Thus, Banking In Balance With The Environment takes the form of “GREEN BANKING”.

ORIGIN:

First Green Bank is a commercial bank based in Mt. Dora, Florida, United States commenced its operations in 2009.The company is known for its focus on environmentally friendly banking practices. The Bank staffed with employees who have attained the LEED accredited professional designation, meaning they understand green building practices and provides incentives to consumers purchasing high efficiency vehicles like hybrid automobiles and has a hybrid Toyota Prius as its own courier car.

Green banking is like a normal bank, which considers all the social and environmental/ ecological factors with an aim to protect and conserve the natural resources of the environment. It is also called as an ethical bank or a sustainable bank. They are controlled by the

same authorities but with an additional and extended agenda toward taking care of the Earth's environment/ habitats/ resources.

Green Banking is an umbrella term referring to practices and

guidelines that make banks sustainable in economic, environment, and social dimensions. It aims to make banking processes efficient and effective as possible, with zero or minimal impact on the environment.

Banks should adopt technology, process and products which result in substantial reduction of their carbon footprint as well as develop a sustainable business. The new generation banks are having a missionary zeal to protect the planet. This is done by them both as a part of their corporate social responsibility and as a drive towards

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socially and ethically responsible banking. They are gradually coming to realize that there is an immediate need for a shift from ‘Profit, profit and profit’ motive to ‘planet, people and profit’ orientation for sustainable development in the long run. In fact, the concept of socially responsible banking has grown considerably with the dawn of twenty first century with the growth in green movement and surfacing of a novel generation of environmental activists.

OBJECTIVES OF THE STUDY:

To study concept of 'green banking'.

The environmental impacts of banking.

Indian initiatives.

Global initiatives.

THE ENVIRONMENTAL IMPACTS OF BANKING:

Banking is always considered as a clean, high-tech service industry with minimal environmental and social impacts, but the truth is not the case.

The Internal and External impacts of banks on environment are as follows:

Internal Environmental Impacts:

Caused due to internal operations

Emissions CO2 and other GHG gases

Energy Consumption: Lighting. Heating, PCs and ATMs

Water Consumption

Paper Consumption

Waste

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External Environmental Impacts:

Caused by Banks’ Clients

Covers a wide range including selling financial products, deposit, and lending transaction. These activities are becoming more and more important for the world economic development. At the same time, they also bring severe impacts on biodiversity, climate change, air and water pollution, resource depletion.

Banking Sector is the major source of finance for the major industries in India that cause significant amount of pollution like steel, paper, cement. Chemicals, fertilizers, textiles etc.

THE REASONS FOR “GOING GREEN” ARE:

Increasing energy consumption and energy prices. Emerging stricter regulatory and compliance requirements like

reserve bank of India (RBI) may follow environmentalguidelines for the banks, big investment projects supported byinternational organizations like the world bank and ADBrequire environmental impact assessment (EIA).

Higher expectations by the public on enterprises environmentalresponsibilities.

Growing consumer interest in environment friendly products. Improved brand reputation. Opportunities for innovation.

PERCEIVED BARRIERS: Lack of regulatory framework. Lack of awareness. Lack of technical know-how. Cost implications.

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INITIATIVES TAKEN BY INDIAN BANKS:

The State Bank of India (SBI)

Introduced Green Channel

Counters and no queue banking in over 5000 branches across India.

Supporting the construction of wind farms in India.

Making a commitment that new building will adopt green building standard including utilizing natural lighting and recycled water.

Implementing policies aimed at achieving carbon neutrality.

Online money transfers between United States and India from branch banks.

Other Initiatives :

• Shredding and recycling all paper internally

• Sharing electronic files, voice mail and e-mail instead of papermemos

• Duplexing (two-sided printing) when possible as well aslimiting printed materials/ e-mails/memos to only what is necessary

• Replacing incandescent bulbs with CFLs when they need to bereplaced, internally and externally

• Utilising online “Webinars” for shorter meetings that involvepeople who might otherwise have to travel a long distance.

• Encouraging use of carpool and use public transportation

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The State Bank of India (SBI), as part of its green banking policy, plans to set up captive windmills to generate 15 Mw of power in Tamil Nadu, Maharashtra and Gujarat.

Instabanking: It is the platform that gives the customer

convenience of anytime anywhere bankingthrough Internet banking, i-Mobile banking, IVR Banking. This reduces the carbon footprint of the customers by ensuring they do not have to resort to physical statements or travel to their branches.

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IndusInd Bank inaugurated Mumbai’s first solar-powered ATM as part of its “Green Office Project” campaign titled “Hum aur Hariyali” in 2009 and also introduced thin computing.

Vehicle Finance: Bank offers Auto 50% waiver on processing

fee on car models which uses alternate mode of energy. The models identified for the purpose are: Maruti’s LPG version of Maruti 800, Omni and Versa, Hyundai’s Santro Eco, Civic Hybrid of Honda, Reva electric cars, Tata Indica CNG and Mahindra Logan CNG versions.

Home Finance: Bank offers reduced processing fees to

customers who purchase homes in ‘Leadership in Energy and Environmental Design’ (LEED) certified buildings.

ICICI Bank also initiated a programme to sensitise corporate bodies, institutions, banks and government agencies involved in project planning on issues like biodiversity, wildlife habitats and

environmental laws.

HSBC Global Environment Efficiency Programme.

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Launch of Earth Sciences Forum the first ever Public Private Partnership between HSBC and the

Ministry of Science and Technology and Ministry of Earth Sciences, Government of India to find solutions to climate change.

The HSBC Climate Partnership is a groundbreaking, five-year partnership between HSBC and The Climate Group, Earthwatch Institute, Smithsonian Tropical Research Institute and WWF.

HSBC was the first bank to go carbon neutral in 2005. We have adopted a number of international codes guiding the conduct of our business such as the UN's Principles of Responsible Investment. By signing up two international standards, such as the Equator Principles and the UN Global Compact, signal our aspirations for

sustainable development. Our responsible lending guidelines ensure that HSBC do not invest in projects that harm the environment.

Bhubaneswar RBI office first to get five-star rating.

Bank of India, Goa.

Currently, in India, the concept of green banking is catching up and banks are actively looking for ways to portray themselves as a Green Bank.

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GLOBAL INITIATIVES:

INITIATIVES YEAR PRINCIPAL SPONSOR

GLOBAL SIGNATORIES

EPs 2003

MULTINATIONAL BANKS & THE WORLD BANK’S IFC. 78 FI

32 COUNTRIES

It serves as “a set of voluntary standards for determining, assessing and managing social and environmental risk in project financing” .

UNEP-FI 1977

UNEP-FI

200 FI 40 COUNTRIES

It aims to integrate environmental considerations into present financial services and practices.

GRI 1997

Coalition for Environmentally Responsible Economies & Tellus Institute.

4000 60 COUNTRIES

To make sustainability reporting standard practice by providing guidance and support to organizations.

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CDP 2002 ROCKEFELLER PHILANTHROP

Y ADVISORS 655

It Impels corporations, investors and other organizations to disclose the greenhouse gas (GHG) emissions of their operations and assess their potential exposure to climate change related risks.

UNGC 2000 UNGC

12000 145 countries

Environment PRINCIPLE 7 Businesses should support a precautionary approach to environmental challenges;PRINCIPLE 8 undertake initiatives to promote greater environmental responsibility; and PRINCIPLE 9 encourage the development and diffusion of environmentallyfriendly technologies. Collevecchio Declaration on Financial Institutions 2003

COALITION OF NGOs

102

Six Commitments to Key Principles: Commitment to 1-Sustainability, 2-‘Do No Harm’, 3-Responsibility, 4-Accountability, 5-Transparency, 6-Sustainable Markets and Governance.

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CONCLUSION

Indian banks need to be made fully aware of the environmental and social guidelines to which banks worldwide are agreeing to. They are far behind their counterparts from developed countries. India’s growth story and commitment to cut it’s carbon intensity by 20-25% from 2005 levels by 2020 provides tremendous opportunities for Indian banks – from funding sustainable projects to offering innovative products and services in the areas of green banking.

Leading banks are vaguely conscious of the guidelines, however, the public sector is waiting to be led by the Reserve Bank of India and the private sector banks seem to only want to commit if there is regulation or financial incentive,” it is important that they recognize their responsibilities as global corporate citizens. Banking sector is profit driven, it needs incentives and governmental support to assist environmental protection which is beneficial for the whole economy and society and also to the banking sector itself in the long-run. For

effective green banking, the RBI and the Indian government should pay a proactive role and formulate green policy guidelines and financial incentives. Indian banks should adopt Banking In Balance With The Environment or green banking as a business model without much further delay.

References

1. http://rbidocs.rbi.org.in/rdocs/notification/PDFs/82186.pdf2. RBI Notification on Corporate Social Responsibility, Sustainable

Development and Non Financial Reporting – Role of Banks3. http://www.emt-india.net/NAPCC/NMEEE-

forPublicComments.pdf4. India's National Action Plan on Climate Change Draft National

Mission on Enhancing Energy Efficiency5. http://www.equator-principles.com

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6. http://www.unepfi.org7. http://www.unglobalcompact.org/aboutTheGC/

TheTenPrinciples8. http://www.indusind.com/downloads/Solar_atm_Launch.pdf9. http://www.unpri.org/principles10. http://www.banktrack.org/download/a_challenging_11. http://www.cdproject.net12. http://www.globalreporting.org13. www.thegreengrid.org14. http://www.usgbc.org/leed15. http://www.gbpn.org/databases-tools/bc-detail-pages/india#16. http://www.ewasteindia.com/Policies

17. www.rbi.org.in , www.sbi.co.in, www.hsbc.co.in ,www.yesbank.in

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CUSTOMERS PERCEPTION ON USAGE OF INTERNET BANKING

Prof. Jaladi Ravi Professor

Department of Commerce & Management Studies Andhra University

Visakhapatnam

G.Venkata Rama Krishna Rao Research Scholar

Department of Commerce & Management Studies Andhra University

Visakhapatnam

K.Venkata Muralidhara RaoResearch Scholar

Department of Commerce & Management Studies Andhra University, Visakhapatnam

INTRODUCTION:

The marvelous kinds of innovation in technology and hard line blend of it with information technology made a paradigm shift in the banking industry. Technology itself created its world in the globe of human beings. Advent of Internet banking happened in early 1990. This beginning of Internet Banking created a phenomenal system, Internet banking. Internet banking is a kind of systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through the Internet. Information Technology has become a necessary tool in today’s organizations. Banks today operate in a highly globalized, liberalized, privatized and a competitive environment.

INTERNET BANKING IN INDIA:

Banking is one of the oldest professions known to mankind. It has undergone many a transition and internet banking is the latest in

the list of such transformations. Internet banking has brought about a 360 degree change in the entire banking industry. Such is the change in

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scenario that timing is no longer a constraint and you can finish your

day-today chores and bank leisurely when you have the time. This method has also made shopping and bill payment very easy and convenient. Long queues for these activities have now become history.

TECHNOLOGY IN BANKING SYSTEM:

To transform financial services industry in the net working world to increase operation- efficiency, profitability and productivity, superior customer service, provide services or products across a range of channels to be futuristic and have time value in all its dealings with customers, improved management or accountability and minimal transaction cost.

BENEFITS OF INTERNET BANKING:

E-banking helps us in overcoming the drawbacks of manual system, as computers are capable of storing, analyzing, consolidating, searching and presenting the data as per the user requirements with a lot of speed and accuracy. Number of benefits accrues to the various parties with the development of e-banking.

FUNCTIONS OF INTERNET BANKING:

An access to account data: Internet banking systems help customers in acting as a medium through which data related to their accounts like transaction details, balance enquiry, status of particular transaction etc. can be accessed from any point where internet facility

is available. This can be further extended to gathering of information related to credit card balances, bill payment date etc. A mode of operational interaction, perhaps one of the popular functions of internet banking, is that it can transfer funds. This includes transfer of money from a customer’s account to another person’s account in a different or same bank, payment of utility bills ie., telephone, gas, electricity etc. or any other transfer where the bank has channels with

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the point where the money is supposed to reach. These operations

require instructions from the account holder and this instruction or request can be made through internet.

NEW TRENDS IN INDIAN BANKING SYSTEM:

Today, we have a fairly well developed banking system with different classes of banks. Some of them have engaged in the areas of consumer credit, credit cards, merchant banking, internet and phone banking, leasing, mutual funds etc. A few banks have already set up subsidiaries for merchant banking, leasing and mutual funds and many more are in the process of doing so.

ELECTRONIC PAYMENT SERVICES (E-CHEQUES):

India, as the harbinger to the introduction of e-cheque, the negotiable instruments act has already been amended to include truncated - cheque and E-cheque instruments.

REAL TIME GROSS SETTLEMENT (RTGS):

It was introduced in India since March 2004. It is a system through which electronics instructions can be given by banks to transfer funds from their account to the account of another bank. The RTGS system is maintained and operated by the Reserve Bank of India and provides a means of efficient and faster funds transfer among banks facilitating their financial operations.

ELECTRONIC FUND TRANSFER (EFT):

Electronic Fund Transfer is a system whereby anyone who wants to make payment to another person or company etc. can

approach his bank and make cash payment or give instructions or authorization to transfer funds directly from his own account to the bank account of the receiver or beneficiary. Reserve Bank of India is the service provider of Electronic Fund Transfer.

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ELCTRONIC CLEARING SYSTEM (ECS):

Electronic Clearing System is a retail payment system that can be used to make bulk payments or receipts of a similar nature

especially where each individual payment is of a repetitive nature and of relatively smaller amount. The facility is meant for companies and government departments to make or receive large volumes of payments rather than for funds transfers by individuals.

ATMs:

The most popular device in India, enables the customers to withdraw their money 24 hours a day 7 days a week. ATMs can be used for payment of utility bills, funds transfer between accounts, deposit of cheques and cash into accounts, balance enquiry etc.

TELE BANKING OR MOBILE BANKING:

Tele Banking or Mobile Banking does entire non-cash related banking on telephone. Under this device automatic voice recorder is used for simpler queries and transactions. For complicated queries and transactions, manned phone terminals are used.

POINT OF SALE TERMINAL:

Computer terminal that is linked online to the computerized customer information files in a bank and magnetically encoded plastic transaction card that identifies the customer to the computer.

ELECTRONIC DATA INTERCHANGE (EDI):

Electronic exchange of business documents like purchase order, invoices, shipping notices, receiving advice etc. in a standard, computer processed, universally accepted format between trading partners. It

can also be used to transmit financial information and payments in electronic form.

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RISKS INVOLVED IN INTERNET BANKING:

There are many threats that deter a person from using internet banking. These threats are also being faced by banking channels of

developed countries. The names of such threats include Phishing, viruses, theft of user identity and password through other means etc. There are few basic points a customer has to remember when it comes to use of internet banking facility. The net banking facility should be availed from personal computer only and not at cyber centers or any other places. The address of the site of the bank should be noted by the customer and it is good to type the address of site instead of reaching the site through other links. It is good to provide relevant details of the user ID and password only in relevant pages of banking site.

CONCLUSION:

Internet banking helps in improving the relationship between bankers and customers. The bankers expressed confidence that such bonds would bring improvement in the overall performance of banks. About different promotional measures adopted by banks to promote e-banking, the study discloses that banks mostly resort to the use of print media followed by internet, SMS on mobile, outdoor advertisements and television. Majority of the bankers believe that banks are wanted

in providing sufficient guidance to customers for using internet banking services. In case of the consumers who don’t use Internet banking services, having all facilities at their disposal, technology was not the biggest issue. The first thing that all bankers should concern about is the requirement of awareness. Even though these people are inclined towards the manual banking, these can be turned to potential customers, it is a well proven thing, which says the surroundings influence the individual’s behavior or in India only environment that surrounds the public determines the behavior and decisions of the individuals. So if a consumer sees most of their colleagues or friends

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who surround him using Internet banking then it may influence his

decision to follow Internet banking option.

References:

1. Aronsohn, Marcus, 2006. E-banking and service qualityonline, Master Thesis, Department of Service Management,Lound Univercity, Helsingborg.

2. Lee, Ming-Chi, 2009. Factors influencing the adoption ofinternet banking: An integration of TAM and TPB withperceived risk and perceived benefit, Electronic CommerceResearch and Applications, 8: 130-141.

3. Moghli, A.R., 2007. Adoption of internet banking amongcustomers in customers of banks in Shiraz, , Journal ofManagement Sciences, 2(7): 81-98.

4. Kaleem A and Ahmad S (2008), “Bankers’ Perceptions ofElectronic Banking in Pakistan”, Journal of InternetBanking and Commerce, Vol. 13, No.1

5. Nyangosi et al. (2009), “The evolution of e-banking: a studyof Indian and Kenyan technology awareness”, InternationalJournal of Electronic Finance, Vol.3, No.2, pp.149-165.

6. Abukhzam M and Lee A (2010), “Factors Affecting BankStaff Attitude Towards E-Banking Adoption in Libya”,EJISDC, Vol. 42, No. 2, pp.1-15.

7. Corrocher, N. (2002), Does Internet banking substitutetraditional banking? Empirical evidence from Italy, WorkingPaper, CESPRI, No. 134, November.

8. Yang Z. & June M. (2002), Consumer perception of e-servicequality: from internet purchase and non purchaseperspectives, Journal business strategies 19 (1), 19-41.

9. Hughes, T. (2001), Market orientation and the response ofUK financial services companies to changes in Marketconditions as a result e-commerce, International Journal ofBank Marketing , Vol.19 No.6, pp.222-231.

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PAYMENT AND SETTLEMENT SYSTEMS

Shri. N. R. Narayana Murthy Chairman and Chief Mentor Infosys Technologies Limited

1. Payment Systems

Efficient and effective payment and settlement systems arecritical for the financial performance of the institutions and arestrategic to the stability of the financial systems.

According to a study by Boston Consulting Group (BCG),payments business in banks represent more than 40% of their

total revenues and 33% of their profits. Payments offer bankssignificant opportunities to increase transaction volumes and feeincome.

2. Payment Systems in India

India has several payment systems, ranging from paper-basedsystems to the most sophisticated electronic fund transfersystems that offer real-time settlement. These payment systemsare managed by multiple entities and are regulated by theReserve Bank of India (RBI).

Based upon the application they could be classified intoSystemically Important Payment Systems (SIPS) and RetailPayment Systems (RPS).

RBI’s thrust on technology in payment systems have resulted invisible improvements in the settlement processes, especially inthe SIPS, where over 70% of the transactions are handledelectronically.

Real Time Gross Settlement (RTGS), a SIPS, accounted for 23%of the total settlements in 2004-05, is emerging as the largest

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among the payment systems.

Retail Payment Systems (RPS) include cheque clearing systems,electronic clearing systems and the card-based systems.

Cheque clearing accounts for over 95% of the retail payment,and more than 70% of cheque clearing is based on Magnetic InkCharacter Recognition (MICR) technology.

Increased acceptance of electronic payment systems resulted inthe growth of retail electronic clearings by 168% in 2004-05.

3. Board for Regulation and Supervision of Payment andSettlement Systems

BPSS was constituted in March 2005, to prescribe policiesrelating to the regulation and supervision of all types of

payment and settlement systems, set standards for the existingand future systems.

To assist BPSS, RBI constituted a Department of Payment andSettlement Services (DPSS).

BPSS had made several important decisions, for example,finalizing the payment and settlement systems bill, whichprovides a legal basis for the payment and settlement systems.

4. Recommendations of BPSS

Following BPSS recommendation that the RTGS system inIndia is benchmarked with the best in the world, a study wasconducted on several RTGS systems across multiple parameters.

The suggestions of the study should be incorporated in theimproving the existing systems.

Retail payments are used by the masses and should providesecure, safe and faster mean of remittance to their customers.

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These systems should ensure proper customer redressal arrangements.

BPSS felt the need for improving the reach of electronic retailpayment systems and creating complaint redressal mechanisms.

BPSS recommended that such payment systems and redressalmechanisms are widely publicized.

5. Imperative for India

Proliferation of modern payment systems have far reachingeconomic and social implications for India where significantpopulation have so far been excluded from the benefits of the

financial systems. Payment systems help in the financialinclusion and improve the quality of their lives.

Implementing such systems increase transparency, lowertransaction costs, improve operational efficiency of trade andcommerce and provide support to the globalization of theeconomy.

6. Payment Systems – Benefits for India

Payment systems improve financial transparency, by bringingcash into the banking system, which would otherwise have beenkept out of the system. Banks can then effectively deployadditional cash flow, thus stimulating business growth andconsumption.

This is especially significant in the Indian context, where, as perNCAER estimates, more than 90% of the consumer spending ishandled by cash basis – money which never enters the paymentsystems.

In fact, according to a study by the McKinsey, India ranks No.4in the world, in terms of currency in circulation. India’s

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currency in circulation is 11.8% of GDP against the OECD average of 6.3%. This could be attributed to the fact that more than half of India’s economic output is produced by small-scale agriculture and some 44 million household businesses.

Mckinsey estimates that improving the payment systems inIndia, by fully moving to electronic systems, could result in an annual savings of close to $6.3 billion.

7. Retail Payment Systems

India, has made visible progress in the high value paymentsystems, However, retail payment systems in India need to be

improved.

Existing retail payment systems should move to more advanced,efficient and reliable systems comparable to global standards.

In order to widen the reach of these systems, participatinginstitutions should develop appropriate applications and userfriendly websites with simple interfaces and local content.

Among the retail payment systems, electronic clearingaccounted for less than 1.5% of total value of transactions in2004-05.

The efficiency of Retail Payment Systems could be improved byincreasing the usage of electronic payment systems, increasingthe reach of clearing systems like Magnetic Ink CharacterRecognition (MICR) or Magnetic Media Based clearing System(MMBCS), and rolling out the cheque truncation system.

8. Efficient cheque clearing systems

Greater efficiency and reliability in cheque clearing systems

could be brought in eliminating the non-MICR cheques and rollout of the Cheque Truncation System (CTS).

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RBI intends to eliminate non-MICR cheques by March 2007.These accounted for over 25% of the cheques transacted in 2004-05.

The CTS – which replaces the paper-based cheque clearingprocess with imaging technology – is slated to commence as apilot by the end of this year. It must be rolled out with a widergeographic reach.

9. Need for wider reach

According to RBI, there are an estimated 48,000 Public SectorBank branches in India, of which over 63% are situated in the

semi-urban and rural areas.

Though over 70% of the bank branches have attained 100%computerization, Real Time Gross Settlement (RTGS) isavailable only in 23,500 branches, while the National ElectronicFunds Transfer (NEFT) covers fewer than 5,000 Braches.

10. Creating world – class payment systems

We need to ensure that payment systems are benchmarked withthe best in the world, in terms of the structure, processes andoperations.

While substantial strides have been made in the SystemicallyImportant Payment Systems (SIPS) by the establishment of theClearing Corporation of India and the RTGS system, the RetailPayment Systems (RPS) are still dominated by paper basedcheque clearing processes.

The RPS is handle by multiple voluntary organizations and nota single entity. RBI recognized this need and is setting up

National Payment Corporation of India (NPCI). This is aprogressive step towards bringing uniformity in the payment

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systems, and would result in significant efficiency enhancements.

The processes of NPCI should be benchmarked with the best inthe world.

11. Increasing use of payment systems

The increased use of payment systems in the retail segment canbe achieved by widening their reach and developing practicalcommercial applications that would directly benefit the users.

To widen the reach and awareness, integration of the semi-urban and rural areas into the electronic clearing system is

required.

Participating institutions like banks have a significant role toplay.

12. Creating applications

Simple and user – friendly websites, with local languagecontents, faster downloadable pages and optimal screens have tobe developed through which users would perform theirtransactions facilitated by secure payment systems.

Areas that could benefit from modern and global paymentsystems, include government purchase and procurement,pension distribution, credit delivery to small businesses, billpayments, ticket booking, remittances etc.

13. How payment systems could benefit

The success of Indian Railway Catering and TourismCorporation Limited (IRCTC) gives a glimpse of the potential ofonline payments in India.

ITCTC launched its online ticket booking facility in August

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2002, making the passenger reservation system available online to the customers. While in August 2002, close to about 3,300 tickets were issued online, today, about 750,000 tickets are issued online every month.

14. Importance of business continuity

In addition, payment systems should have a strong disastercontrol system to provide the required resiliency and businesscontinuity.

Such a system should be designed to mitigate the operationalissues and take into consideration the behavior of the market

participants (banks), and their relative sizes.

Resiliency of a large bank is critical in terms of its share of thepayment flow and in terms of being pivotal in maintaining thecoordination.

15. Fed’s study on wide-scale disruptions

A recent paper by the Federal Reserve Bank of New Yorkexamined the large-scale disruptions of US financial marketsfollowing the 9/11 attacks and examined the key forces that actduring such disruptions.

On 9/11, due to the damage to communication systems, paymentcoordination got impaired, and the mismatch of incoming andoutgoing payments cascaded into a massive liquidity crisis.

16. Disaster Control Systems

The fed stepped in to provide liquidity and ensured increasedcoordination among the participants to synchronize paymentactivities, helping banks to overcome the crisis and mitigatedwide-scale disruption.

The paper notes that the important forces that act during such

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disruptions are operational problems and changes in the participants’ behavior. These must be managed and addressed by effective disaster control systems.

17. Finally

Payment systems are the backbone of the financialinfrastructure of the nation, enhance globalization and act astools of economic empowerment by financial inclusion.

There is a need to create payment systems that are efficient,reliable, affordable and of global standards.

Various recommendations of BPSS have to be looked into and

implemented so that we have safe, secure payment systems withappropriate risk mitigation measures.

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ROLE OF INFORMATION TECHNOLOGY IN THE INDIAN BANKING PAYMENT SYSTEM

Gowry Shankar Kondra Dr. VS Krishna Govt. Degree College (A)

Visakhapatnam

Introduction:

The word ‘bank’ is used in the sense of a commercial bank. It is of Germanic origin though some persons trace its origin to the French word ‘Banqui’ and the Italian word ‘Banca’. It referred to a bench for keeping, lending, and exchanging of money or coins in the market place by money lenders and money changers. Banking in India in the modern sense originated in the last decades of the 18th century. The first banks were Bank of Hindustan (1770-1829) and The General Bank of India established 1786 and since defunct. The largest bank, and the oldest still in existence, is the State Bank of India, which originated from the three presidency banks ( Bank of Calcutta, Bank of Bombay & Bank of

Madras). The use of computers in the banking sector in India has increased many folds after the economic liberalization of 1991 as the country's banking sector has been exposed to the world's market. Indian banks were finding it difficult to compete with the international banks in terms of customer service, without the use of information technology. Adaptation of Information Technology is boosting to the banking sector. Under ECS, Banking Net, ATM, RTGS, NEFT, Mobile banking, Phone Banking, E-Banking and etc are payment ways in the Banking with help of Information Technology.

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Recent Developments in Indian Banking Payment System through IT

(1) Society for Worldwide Inter-bank Financial Telecommunications (SWIFT)

SWIFT, as a co-operative society was formed in May 1973 with 239 participating banks from 15 countries with its headquarters at Brussels. It started functioning in May 1977. RBI and 27 other public sector banks as well as 8 foreign banks in India have obtained the membership of the SWIFT. SWIFT provides have rapid, secure, reliable

and cost effective mode of transmitting the financial messages worldwide. At present more than 3000 banks are the members of the network. To cater to the growth in messages, SWIFT was upgrade in the 80s and this version is called SWIFT-II. Banks in India are hooked to SWIFT-II system. SWIFT is a method of the sophisticated message transmission of international repute. This is highly cost effective, reliable and safe means of fund transfer. This network also facilitates the transfer of messages relating to fixed deposit, interest payment, debit-credit statements, foreign exchange etc. This service is available throughout the year, 24 hours a day. This system ensure against any loss of mutilation against transmission. It serves almost all financial institution and selected range of other users. It is clear from the above benefit of SWIFT that it is very beneficial in effective customer service. SWIFT has extended its range to users like brokers, trust and other agents.

(2) Automated Teller Machine (ATM):

ATM is an electronic machine, which is operated by the customer himself to make deposits, withdrawals and other financial transactions. ATM is a step in improvement in customer service. ATM facility is available to the customer 24 hours a day. The customer is issued an ATM card. This is a plastic card, which bears the customer’s name.

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This card is magnetically coded and can be read by this machine. Each

cardholder is provided with a secret personal identification number (PIN). When the customer wants to use the card, he has to insert his plastic card in the slot of the machine. After the card is a recognized by the machine, the customer enters his personal identification number. After establishing the authentication of the customers, the ATM follows the customer to enter the amount to be withdrawn by him. After processing that transaction and finding sufficient balances in his account, the output slot of ATM give the required cash to him. When the transaction is completed, the ATM ejects the customer’s card.

(3) Cash Dispensers:

Cash withdrawal is the basic service rendered by the bank branches. The cash payment is made by the cashier or teller of the cash dispenses is an alternate to time saving. The operations by this machine are cheaper than manual operations and this machine is cheaper and fast than that of ATM. The customer is provided with a plastic card, which is magnetically coated. After completing the formalities, the machine allows the machine the transactions for required amount.

(4) Bank net:

Bank net is a first national level network in India, which was

commissioned in February 1991. It is communication network established by RBI on the basis of recommendation of the committee appointed by it under the chairmanship of the executive director T.N.A. Lyre. Bank net has two phases: Bank net-I and Bank net- II.

Areas of Operation and Application of Bank net:

The message of banking transaction can be transferred in the form of codes from the city to the other.

Quick settlement of transactions and advices.

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Improvement in customer service-withdrawal of funds is

possible from any member branch.

Easy transfer of data and other statements to RBI.

Useful in foreign exchange dealings.

Access to SWIFT through Bank net is easily possible.

(5) Electronic Clearing Service:

In 1994, RBI appointed a committee to review the mechanization in the banks and also to review the electronic clearing service. The committee recommended in its report that electronic clearing service-credit clearing facility should be made available to all corporate

bodies/Government institutions for making repetitive low value payment like dividend, interest, refund, salary, pension or commission, it was also recommended by the committee Electronic Clearing Service-Debit clearing may be introduced for pre-authorized debits for payments of utility bills, insurance premium and installments to leasing and financing companies. RBI has been necessary step to introduce these schemes, initially in Chennai, Mumbai, Calcutta and New Delhi.

(6) Chip Card:

The customer of the bank is provided with a special type of credit card which bears customer’s name, code etc. The credit amount of the customer account is written on the card with magnetic methods. The computer can read these magnetic spots. When the customer uses this card, the credit amount written on the card starts decreasing. After use of number of times, at one stage, the balance becomes nil on the card. At that juncture, the card is of no use. The customer has to deposit cash

in his account for re-use of the card. Again the credit amount is written on the card by magnetic means.

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(7) Real Time Gross Settlement (RTGS) System

RTGS is a funds transfer systems where transfer of money takes place from one bank to another on a "real time" and on "gross" basis.

Settlement in "real time" means payment transaction is not subjected to any waiting period. "Gross settlement" means the transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments are final and irrevocable. This was introduced in 2004 and settles all inter-bank payments and customer transactions above ` 2 lakh.

(8)Electronic Funds Transfer (EFT)

This retail funds transfer system introduced in 1990s enabled an account holder of a bank to electronically transfer funds to another account holder with any other participating bank. Now it is called as National Electronic Funds Transfer (NEFT) system, in

November 2005, a secure system was introduced for facilitating one-to-one funds transfer requirements of individuals / corporates. Available across a longer time window, the NEFT system provides for batch settlements at hourly intervals, thus enabling near real-time transfer of funds. Certain other unique features viz. accepting cash for originating transactions, initiating transfer requests without any minimum or maximum amount limitations, facilitating one-way transfers to Nepal, receiving confirmation of the date / time of credit to the account of the

beneficiaries, etc., are available in the system.

(9) Internet Banking:

Internet banking enables a customer to do banking transactions through the bank’s website on the Internet. It is a system of accessing accounts and general information on bank products and services through a computer while sitting in its office or home. This is also called virtual banking. It is more or less bringing the bank to your computer. In traditional banking one has to approach the branch in

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person, to withdraw cash or deposit a cheque or request a statement of

accounts etc. but internet banking has changed the way of banking. Now one can operate all these type of transactions on his computer through website of bank. All such transactions are encrypted; using sophisticated multi-layered security architecture, including firewalls and filters. One can be rest assured that one’s transactions are secure and confidential.

(10) Mobile Banking:

Reserve Bank brought a set of operating guidelines on mobile banking for banks in 2008, according to banks which are licensed and supervised in India and have a physical presence in India are permitted to offer mobile banking after obtaining necessary permission from RBI. The guidelines focus on systems for security and inter-bank transfer arrangements through Reserve Bank's authorized systems. On the technology front the objective is to enable the development of inter-operable standards so as to facilitate funds transfer from one account to any other account in the same or any other bank on a real time basis irrespective of the mobile network a customer has subscribed to.

(11) Any where Banking:

With expansion of technology, it is now possible to obtain financial

details from the bank from remote locations. Basic transaction can be effected from faraway places. Automated Teller Machines are playing an important role in providing remote services to the customers. Withdrawals from other stations have been possible due to inter-station connectivity of ATM’s. The Rangarajan committee had also suggested the installation of ATM at non-branch locations, airports, hotels, Railway stations, Office Computers, Remote Banking is being further extended to the customer’s office and home.

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(12)White-Label ATM Facility:

In 2012, RBI issues guideline for White label ATMs; in 2013, RBI gives license/permission to open White Label ATMs. Tata Communications

Payment Solutions Limited is the first company to get RBI’s permission to open White label ATMs. They started their chain under brandname “Indicash”. Other White labels are Muthoot Finance, Srei Infra., Vakrangee Software, Prizm Payments, AGS. More than 15 companies given such permission. Most of the ATMs belong to banks, but the cash dispensing machines which are owned and operated by non-banking companies are called White Label ATMs.

Bio-ATM Facility:

It is an electronic machine, which is operated by the customer himself to withdrawals and other financial transactions by his Thumb Impressions instead of ATM Card in around clock time. Every person has a unique Thumb Impressions. By putting the thumb impressions on the screen of the machine, machine will give authentication report of the customer. Machine allows the customer to enter the amount to be withdrawn by him. After processing that transaction and finding sufficient balances in his account, the output slot of machine give the required cash to him. It is a pace in improvement in customer service.

It is an extension of ATM facility. This may be implemented by the RBI in future in consideration of customer security.

Conclusion:

Indian public sector banks that hold more than 50% of market share do have taken initiative in the field of IT. They are moving towards the centralized database and decentralize decisions making process. They posses enviable quality manpower. Awareness and appreciation of IT are very much there. In the days to come, banks are expected to play a very useful role in the economic development and the emerging market will provide ample business opportunities. Indian Banking Payment

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System may be technologically well advanced by following International

standards of Banking.

References

1. The Book Title “Indian Banking in Electronic Era” author byS.S. Kaptan and NS Choubey.

2. Reserve Bank of India (www.rbi.org) –Payment System.

3. The Book Title “ Modern Banking “ author by D.Muraleedharan.

4. Reserve Bank of India(www.rbi.org)- payment system in india-vision-2009-2012.

5. Reserve Bank of India- Guidelines of White Label ATMs.

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PROGRESS OF BANKING IN INDIA

S.Sita Rama Murty Lecturer in Economics

Govt.Degree College Narsipatnam

Banks are lawful business organizations. They accept deposits from the public. They grant loans and advances to the agriculturalists, industrialists and others. They provide other banking services. They are very important sources of institutional credit in the money market. They play a very important role in the capital formation and the economic development of a nation.

After independence, the Indian banking system has recorded a rapid progress in terms of number of banks, branch expansion, deposit mobilization, credit expansion, priority sector lending etc., In recent times, banks are providing various services like electronic banking, automatic teller machine, debit card, credit card net banking , phone banking etc.,

1) Meaning of Bank

RS Sayers in his book “ Modern Banking’’ contends that banks are institutions whose debts usually referred to as bank deposits are commonly accepted in final settlement of other peoples’ debts.

According to Crowther, a bank is a dealer in the debts, his own or other peoples’.

The Banking Regulation Act of India defines banking means the accepting, for the purpose of lending or investments of deposits of money from the public repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise. According to Crowther, modern banker has three main ancestors, merchant, money lender and gold’s smith.

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2) Functions of Banks:

The functions of a bank are of two types;-1) Primary functions 2) Secondary functions.

I. Primary Functions. 1) Accepting Deposits1) Demand Deposits:a) Saving Depositsb) Current Deposits2) Term Depositsa) Recurring Depositsb) Fixed Deposits

2. Granting loans and Advancesa) Demand loansb) Short term loanc) Cash creditd) Over droughte) Discounting Hundies

3. Creating credit.II Secondary functions

1) Agency functions 1) Collection and payment of cheques, billsof exchange.

2) Trustees and executors of will.3) Purchase and sale of securities.4) Remittances, transactions.5) Correspondent agent and representative.

2) General utility functions.1) Issue of letter of credit2) Issue of drafts, travelers’ cheque3) Dealing in foreign exchange4) Providing Locker facility5) Compiling business information

3) Modern Banking ServicesElectronic Banking

Computers are being used to record banking transactions banking activity carried on through computers and other electronic devices of communication is called electronic banking or e-banking.

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Automatic teller machine

Banks have installed their own Automatic Teller Machine (ATM) throughout the country at convenient locations. By using them, the customers can deposit or withdraw money from their own account at any time.

Debit card

Banks are providing debit card to their customers having saving or current accounts in the banks. The customers can use this card for purchasing goods and services at different places in Iieu of cash. The amount paid through debt card is automatically debited from the customer’s account.

Credit card

Credit card is issued by the bank to a person who may or may not have an account in the bank. It is useful to make payments for purchases, so that the individual does not have to carry cash. Banks allows certain credit period to the credit card holder to make payments of the credit amount. Interest is charged if a card holder is not able to pay back the credit extended to him within a stipulated period. The interest rate is high.

Net banking

With the extensive use of company and internet. The customer having an account in the bank can log into the bank’s website and access his

bank account. He can make payments for bills, give instructions for money transfers, fixed deposits and collection of bills, etc.

Phone banking

In case of phone banking, a customer of the bank having an account can get information of his account; make banking transactions like,

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fixed deposits, money transfers, demand draft, collection and payment of bills, etc. by using telephone.

As more and more people are now using mobile phones, phone banking is possible through mobile phones. In mobile phone a customer can receive and send messages (SMS) from and to the bank in addition to all the functions possible through phone banking.

National Electronic Funds Transfer (NEFT)

National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, individuals, firms and corporate can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the scheme.

4) Role of Banks in Economic Development.

Economic development is not possible without capital. Professor Arthur Lewis in 1950s’ considered the process of economic growth as one of transforming a country from 5 percent saver to 15 percent saver. Modern economists consider 25 to 30 percent of savings in national income are required for the development of a nation. Banks mobilize

the savings of the people and they find their way into profitable investments.

1) Banks encourage saving habits among people and make fundsavailable for productive activities.

2) They provide loans and advances to the agriculturists,industrialists, businessmen and others for short term andmedium term purposes.

3) They help national development by providing credit to farmers,small scale industries, businessmen, self employed people

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which leads to the balanced economic development in the country.

4) They help in raising the standard of living of people in generalby providing loans for purchase of consumer durables, automobiles, houses etc.,

5) They facilitate business transactions and import-exporttransactions.

4) Composition of banking in India.

The banking system in India can be broadly divided into three categories.

1) Reserve Bank of India

2) Commercial Bank

3) Co-Operative Banks

Another classification of banking in India is –

1) Scheduled banks

2) Non-Scheduled banks

The Reserve Bank of India was established in 1935 and was nationalized in 1949. RBI is the supreme monetary authority and banking authority in India. It keeps the reserves of all the Scheduled banks.

Under RBI Act 1934, banks were classified as scheduled banks and non-Scheduled banks. The banks which were included in the 2nd schedule of RBI are called as Scheduled Banks and which were not included are called as non-scheduled banks.

All commercial banks, Indian, Foreign, Regional Rural Banks and State Co-operative Banks are Scheduled banks. Scheduled Banks can be divided into Commercial banks and Co-operative banks Commercial

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banks are based on profit and Co-operative banks are based on Co-operative principles. The commercial bank were nationalized in 1969 and 1980. They are classified as public sector banks and private sector banks. The State Bank Of India and its associates along with another 20 nationalized banks are the public sector banks. The Indian scheduled banks that are not nationalized and the branches of foreign banks operating in India are called private sector banks.

The RRBs’ came into existence in 1975. They are responsible for the development of agriculture, trade, commerce and industry in rural areas. They are commercial banks and their area of operations is limited.

Under co-operative banking system State Co-Operative Bank, District Central Co-operative Bank and Primary Agricultural Credit Societies cater short term credit. State Co-operative Bank and Rural

Development Bank cater long term credit.

5) PROGRESS OF BANKING IN INDIA

The first bank of limited liability managed by the Indians was Oudh commercial bank founded in 1881. Subsequently Punjab National Bank was established in 1894. Swadeshi Movement which began in 1906 encouraged the formation of number of commercial banks. Banking crisis during 1913 -1917 and failure of 588 banks in various states during the decade ended 1949 underlined the need for regulating and controlling commercial banks. The Banking Companies Act was passed in February 1949 which was subsequently amended to read as Banking Regulation Act 1949 for regulation of banking system by the Reserve Bank of India. The largest bank, Imperial bank was nationalized in 1955 and renamed as State Bank of India followed by formation of Seven Associate Banks in 1969.

With a view to bringing banks into main stream of economic development with definite social obligation and objectives, the

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Government of India issued an ordinance on 19th July 1969 acquiring the ownership and control of 14th major commercial banks in the country. Six more commercial banks were nationalized from 15th April 1980.

As certain rigidities and weakness were found to have developed in the banking system during the late eighties, the Government of India felt that these had to be addressed to enable financial system play its role in more ethical and competitive way. Accordingly a high level Committee on Financial System (CFS) was setup on 14th August 1991 to examine all aspects relating to the structure, organization, function and procedures of the financial system. Based on the recommendations of the committee, a comprehensive reform on the banking system was introduced in 1992-93.

In 1993, in reorganization of the need to introduce greater

competition, new private sector banks were allowed to be setup in the banking sector. In 2013, Bharatiya Mahila Bank was setup on the occasion of 96th birth anniversary of former Prime Minister, Smt. Indira Gandhi.

After nationalization of banks in 1969, banking system has recorded a remarkable progress. The total number of banks in our country in 2012 are 173, scheduled banks 169 and Regional Rural Banks 82. The total number of bank branches raised from 8260 in 1969 to 1,01,261 in 2012. The bank deposits increased from Rs.820 crores in 1951 to Rs.74,29,572 crores in 2013. Bank credit increased from Rs.580 crores in 1951 to Rs.58, 79,702 crores in 2013.

Public sector bank deposits increased from Rs.3896 crores in 1969 to Rs.57,45,697 crores in 2013. Bank credit increased from Rs.3036 crores in 1969 to Rs.44, 72,397 crores in 2013. Priority sector

lending as percentage of total bank credit increased from 14.9 % to 33.7%.

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RECENT ADVANCES IN INDIAN BANKING SECTOR

Vinay Chaitanya Ganta Junior Research Fellow Ph.D Department of Commerce &

Management Studies Andhra University

Visakhapatnam

Chittabbai Vanumu Lecturers In Commerce

Dr.V.S.Krishna.Government Degree & P.G. College

Visakhapatnam

I. INTRODUCTION

India’s banking sector is constantly growing. Since the turn of the century, there has been a noticeable upsurge in transactions through ATMs, and also internet and mobile banking. Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in 2012, the landscape of the banking industry began to

change. The bill allows the Reserve Bank of India (RBI) to make final guidelines on issuing new licenses, which could lead to a bigger number of banks in the country. Some banks have already received licenses from the government, and the RBI's new norms will provide incentives to banks to spot bad loans and take requisite action to keep rogue borrowers in check.

Indian economic environment is witnessing path breaking reform measures. The financial sector, of which the banking industry is the largest player, has also been undergoing a metamorphic change. Today the banking industry is stronger and capable of withstanding the pressures of competition. While internationally accepted prudential norms have been adopted, with higher disclosures and transparency, Indian banking industry is gradually moving towards adopting the best practices in accounting, corporate governance and risk management.

Interest rates have been deregulated, while the rigor of directed lending is being progressively reduced.

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During the last 41 years since 1969, tremendous changes have taken place in the banking industry. The banks have shed their traditional functions and have been innovating, improving and coming out with new types of the services to cater to the emerging needs of their customers.

Massive branch expansion in the rural and underdeveloped areas, mobilization of savings and diversification of credit facilities to the either to neglected areas like small scale industrial sector, agricultural and other preferred areas like export sector etc. have resulted in the widening and deepening of the financial infrastructure and transferred the fundamental character of class banking into mass banking.

With the potential to become the fifth largest banking industry in the world by 2020 and third largest by 2025 according to KPMG-CII

report, India’s banking and financial sector is expanding rapidly. The Indian Banking industry is currently worth Rs. 81 trillion (US $ 1.31 trillion) and banks are now utilizing the latest technologies like internet and mobile devices to carry out transactions and communicate with the masses. The Indian banking sector consists of 26 public sector banks, 20 private sector banks and 43 foreign banks along with 61 regional rural banks (RRBs) and more than 90,000 credit cooperatives.

II. THE INDIAN BANKING SECTOR

The history of Indian banking can be divided into three main

phases.

Phase I (1786- 1969) - Initial phase of banking in India when many small banks were set up

Phase II (1969- 1991) - Nationalization, regularization and growth

Phase III (1991 onwards) - Liberalization and its aftermath

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With the reforms in Phase III the Indian banking sector, as it stands today, is mature in supply, product range and reach, with banks having clean, strong and transparent balance sheets. The major growth drivers are increase in retail credit demand, proliferation of ATMs and debit-cards, decreasing NPAs due to Securitization, improved macroeconomic conditions, diversification, interest rate spreads, and regulatory and policy changes (e.g. amendments to the Banking Regulation Act).

Certain trends like growing competition, product innovation and branding, focus on strengthening risk management systems, emphasis on technology have emerged in the recent past. In addition, the impact of the Basel II norms is going to be expensive for Indian banks, with the need for additional capital requirement and costly database creation

and maintenance processes. Larger banks would have a relative advantage with the incorporation of the norms.

III. INFORMATION TECHNOLOGY IN BANKING

Indian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons has led to increasing importance of total banking automation in the Indian Banking Industry. Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets.

The bank which used the right technology to supply timely information will see productivity increase and thereby gain a competitive edge. To compete in an economy which is opening up, it is imperative for the Indian Banks to observe the latest technology and

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modify it to suit their environment. Not only banks need greatly enhanced use of technology to the customer friendly, efficient and competitive existing services and business, they also need technology for providing newer products and newer forms of services in an increasingly dynamic and globalize environment. Information technology offers a chance for banks to build new systems that address a wide range of customer needs including many that may not be imaginable today.

The increasing use of technology in banks has also brought up ‘security' concerns. To avoid any pitfalls or mishaps on this account, banks ought to have in place a well-documented security policy including network security and internal security. The passing of the Information Technology Act has come as a boon to the banking sector,

and banks should now ensure to abide strictly by its covenants. An effort should also be made to cover e-business in the country's consumer laws.

Role of Information Technology and Customer Relationship Management in Banking

IT plays an important role in the banking sector as it would not only ensure smooth passage of interrelated transactions over the electric medium but will also facilitate complex financial product innovation and product development. The application of IT and e-banking is becoming the order of the day with the banking system heading towards virtual banking. Banks, who strongly rely on the merits of ‘relationship was banking’ as a time tested way of targeting & servicing clients, have readily embraced CRM, with sharp focus on customer centricity, facilitated by the availability of superior technology. CRM, therefore, has become a new mantra in service management, both relationship & information wise.

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IV. CHALLENGES FACED BY BANKS

The major challenges faced by banks today are as to how to cope with competitive forces and strengthen their balance sheet. Today, banks are groaning with burden of NPA’s. It is rightly felt that these contaminated debts, if not recovered, will eat into the very vitals of the banks. Another major anxiety before the banking industry is the high transaction cost of carrying Non Performing Assets in their books. The resolution of the NPA problem requires greater accountability on the part of the corporate, greater disclosure in the case of defaults, an efficient credit information sharing system and an appropriate legal framework pertaining to the banking system so that court procedures can be streamlined and actual recoveries made within an acceptable time frame. The banking industry cannot afford to sustain itself with such high levels of NPA’s thus, “lend, but lent for a purpose and with a purpose ought to be the slogan for salvation.”

The Indian banks are subject to tremendous pressures to perform as otherwise their very survival would be at stake. Information technology (IT) plays an important role in the banking sector as it would not only ensure smooth passage of interrelated transactions over the electric medium but will also facilitate complex financial product innovation and product development. The application of IT and e-banking is becoming the order of the day with the banking system heading towards virtual banking. An extreme case of e-banking World Wide Banking (WWB) on the pattern of World Wide Web (WWW) can be visualized. That means all banks would be interlinked and individual bank identity, as far as the customer is concerned, does not exist. There is no need to have large number of physical bank branches, extension counters. There is no need of person-to-person physical interaction or dealings. Customers would be able to do all their banking operations sitting in their offices

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or homes and operating through internet. This would be the case of banking reaching the customers.

Banking landscape is changing very fast. Many new players with different muscle powers will enter the market. The Reserve Bank in its bid to move towards the best international banking practices will further sharpen the prudential norms and strengthen its supervisor mechanism. There will be more transparency and disclosures. In the days to come, banks are expected to play a very useful role in the economic development and the emerging market will provide ample business opportunities to harness. Human Resources Management is assuming to be of greater importance. As banking in India will become more and more knowledge supported, human capital will emerge as the finest assets of the banking system. Ultimately banking is people and

not just figures.

India's banking sector has made rapid strides in reforming and aligning itself to the new competitive business environment. Indian banking industry is the midst of an IT revolution. Technological infrastructure has become an indispensable part of the reforms process in the banking system, with the gradual development of sophisticated instruments and innovations in market practices

V. GOVERNMENT INITIATIVES

The RBI has given banks greater flexibility to refinance current long-gestation project loans worth Rs 1,000 crore (US$ 163.42 million) and more, and has allowed partial buyout of such loans by other financial institutions as standard practice. The earlier stipulation was that buyers should purchase at least 50 per cent of the loan from the existing banks. Now, they get as low as 25 per cent of the loan value and the loan will still be treated as ‘standard’.

The RBI has also relaxed norms for mortgage guarantee companies (MGC) enabling these firms to use contingency reserves to

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cover for the losses suffered by the mortgage guarantee holders, without the approval of the apex bank. However, such a measure can only be initiated if there is no single option left to recoup the losses.

SBI is planning to launch a contact-less or tap-and-go card facility to make payments in India. Contact-less payment is a technology that has been adopted in several countries, including Australia, Canada and the UK, where customers can simply tap or wave their card over a reader at a point-of-sale terminal, which reads the card and allows transactions.

SBI and its five associate banks also plan to empower account holders at the bottom of the social pyramid with a customer call facility. The proposed facility will help customers get an update on available balance, last five transactions and cheque book request on their mobile

phones.

Road Ahead

India's banking sector could become the fifth largest banking sector in the world by 2020 and the third largest by 2025. These days, Indian banks are turning their focus to servicing clients and enhancing their technology infrastructure, which can help improve customer experience as well as give banks a competitive edge.

Exchange Rate Used: INR 1 = US$ 0.0163 as on October 28, 2014

An IBA-FICCI-BCG report suggests that India’s gross domestic product (GDP) growth will make the Indian banking industry the third largest in the world by 2025. According to the report, the domestic banking industry is set for an exponential growth in coming years with its assets size poised to touch USD 28,500 billion by the turn of the 2025. With the deposits growing at a CAGR of 21.2 per cent (in terms of INR) in the period FY 06–13, there has been evident growth in the overall industry.

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VI. FOREIGN DIRECT INVESTMENT (FDI) IN INDIA

Investment made to acquire lasting interest in enterprisesoperating outside of the economy of the investor. Maximum FDI permitted in Indian private sector banks – 74 percent, under the automatic route which includes Portfolio Investment i.e. FII’s and NRI’s, Initial Public Issue (IPO), Private Placements, ADR/GDRs; and Acquisition of shares from existing shareholders;

Maximum FDI permitted in Indian public / nationalized banks – 20 percent;

Automatic route is not applicable to transfer of existing shares in a banking company from residents to non-residents. This category of investors require approval of FIPB, followed by “in principle” approval by Exchange Control Department of the RBI.

The “fair price” for transfer of existing shares is determined by RBI, broadly on the basis of the Securities and Exchange Board of India

guidelines for listed shares and erstwhile CCI guidelines for unlisted shares. After receipt of “in principle” approval, the resident seller can receive funds and apply to RBI, for obtaining final permission for transfer of shares. A foreign bank or its wholly owned subsidiary regulated by a financial sector regulator in the host country can now invest up to 100% in an Indian private sector bank. This option of 100% FDI will be only available to a regulated wholly owned subsidiary of a foreign bank and not any investment companies.

VII. FUTURE OUTLOOK

Everyone today is convinced that the technology is going to hold the key to future of banking. The achievements in the banking today would not have make possible without IT revolution. Therefore, the key point is while changing to the current environment the banks has to

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understand properly the trigger for change and accordingly find out the suitable departure point for the change.

Although, the adoption of technology in banks continues at a rapid pace, the concentration is perceptibly more in the metros and urban areas. The benefit of Information Technology is yet to percolate sufficiently to the common man living in his rural hamlet. More and more programs and software in regional languages could be introduced to attract more and more people from the rural segments also.

Standards based messaging systems should be increasingly deployed in order to address cross platform transactions. The surplus manpower generated by the use of IT should be used for marketing new schemes and banks should form a ‘brains trust' comprising domain experts and technology specialists.

VIII. CONCLUSION

Today, India having a fairly well developed banking system with different classes of banks – public sector banks, foreign banks, private sector banks – both old and new generation, regional rural banks and

co-operative banks with the Reserve Bank of India as the fountain Head of the system. In the banking field, there has been an unprecedented growth and diversification of banking industry has been so stupendous that it has no parallel in the annals of banking anywhere in the world. Indian banking system will further grow in size and complexity while acting as an important agent of economic growth and intermingling different segments of the financial sector. The banking today is re-defined and re-engineered with the use of Information Technology and it is sure that the future of banking will offer more sophisticated services to the customers with the continuous product and process innovations. Adoption of stringent prudential norms and higher capital standards, better risk management systems, adoption of internationally accepted accounting practices and increased disclosures

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and transparency will ensure the Indian Banking industry keeps pace with other developed banking system

References

1. Dr. R. Karuppasamy, Mr. C. Arul Venkadesh,

http://www.mbainfoline.com/Articles%20on%20Management/Recent%20Trends%20in%20Banking.htm

2. http://reports.dionglobal.in/ChoiceAdmin/KnowledgeCenter/KC160220124.pdf

3. http://www.ibef.org/industry/banking-india.aspx

4. http://www.moneycontrol.com/news/press-release/reporttrendprogressbankingindia-2010-11_617218.html

5. http://www.mbaknol.com/business-finance/recent-trends-in-indian-banking-sector/

6. http://www.articlesbase.com/information-technology-articles/it-emergence-recent-trends-in-banking-industry-of-india-

1981838.html

7. http://www.vikalpa.com/pdf/articles/2003/2003_july_sep_83_99.pdf

8. Report on Trend and Progress of Banking in India for the yearended June 30, 2011 submitted to the Central Government interms of Section 36(2) of the Banking Regulation Act, 1949

9. Sanjay Kumar Dhanwani, Abhinav, National Monthly RefereedJournal of Reasearch In Commerce & Management, VolumeNo.2, ISSUE NO.3 ISSN 2277-1166, www.abhinavjournal.com.

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RECENT TRENDS IN INDIAN BANKING – SOME ISSUES OF CONCERN

Dr.D.Narayana Rao Lecturer in Economics Govt. Degree College

Sabbavaram, Visakhapatam Dist

At the time of independence the Indian banking system was not sound. There were hundreds of private banks under unscrupulous managements. Hence, in the year 1949 two major actions were taken which were very important from the point of view of structural reforms in the banking sector. First the banking regulation Act was passed. It gave extensive regulatory powers to the Reserve Bank of India (RBI) over the commercial banks. Another development of no less importance was nationalization of the RBI (V.K.Puri, 2013). After that the Indian banking sector extended its services to the every nook and corner of the country and rendered its services to the people to full fill their different kinds of needs. As a result of the extensive services of the banking sector, every person in this country almost become a customer of the

existing commercial banks. Enormous improvement in the number services provided by the banks and the number of customers forced the banking sector to depend on information technology to dispense its services. In the Indian Economy, the service sector developed like any thing during last two decades. Being the par and parcel of service sector, the IT and Banking also developed tremendously in this country. With help of IT, the banking sector of this country started providing IT enabled services like Internet Banking, Mobile Banking, e-cheques and so on.

OBJECTIVES

With this background, an attempt has been made in this paper

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1. to present the recent developments in Indian banking withrespect to IT enabled services,

2. to discuss the various problems that the present banking sectoris facing with these IT enabled services

3. and to suggest some measures to mitigate the loss occurs due tothese IT enabled services.

RECENT DEVELOPMENT IN INDIAN BANKING WITH RESPECT TO IT ENABLED SERVICES

Indian Banking Sector integrated its services with Information Techonology for fast and qualitative services to the customers. The following are some of the important IT enabled services of Indian Banking Industry. A much explanation was not given to these services in this paper, because these are the services, which are very familier to the maxmum people now a days.

1. Electronic Payment Services

2. Real Time Gross Settlement (RTGS)

3. Electronic Funds Transfer (EFT)

4. Electronic Clearing Service (ECS)

5. Automatic Teller Machine (ATM)

6. Point of Sale Terminal

7. Tele Banking

8. Electronic Data Interchange (EDI)

PROBLEMS THAT THE PRESENT BANKING SECTOR IS FACING WITH THESE IT ENABLED SERVICES

Though the banking sector as a service provider and the customer as service receivers benefitted a lot from the IT enabled services in terms of saving time and quick transactions and so on. This

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is all one side of the coin. But the other side, which shows the increased crime rate in general cybercrime rate in particular, is more dangerous.

Cybercrimes can involve criminal activities that are traditional in nature, such as theft, fraud, forgery, defamation and mischief, all of which are subject to the Indian Penal Code. The abuse of computers has also given birth to a gamut of new age crimes that are addressed by the Information Technology Act; 2000.that involves cybercrime, hacking, phishing, Email Spoofing. In the current scenario the modern person can steal more with a computer than with a gun. Tomorrow’s person may be able to do more damage with a computer than with a missile. Cyber space is broad spectrum including cybercrime, computer, net banking, web engineering, storage media, networking tools. In a

current scenario any computer expert able to destroy our cyber legal framework means if any people having a computer and internet connection means it is fully open system for hackers and that why computer experts and hackers hack the any system and perform illegal activities with the help of these weapons and that’s why we required legal framework means cyber laws for executing all transaction in smooth way (Kathiriya, 2013).

The National Crime Records Bureau (NCRB), Ministry of Home Affairs has released Cyber Crime Statistics for the year 2013, which again shows rapid increase in cyber crime by 50 per cent on year to year basis from 2012 to 2013. The statistics mainly show cases Registered Under Cyber Crimes By Motives and Suspects (States & UTs): The maximum offenders came from the 18-30 age group. Among states, the highest incidents of cyber crime took place in Maharashtra (907)

followed by Uttar Pradesh (682) and Andhra Pradesh (651) (Ministry of Home Affairs, 2013).

The maximum cyber crime arrests of four hundred twenty six (426) under the IT Act took place in Maharashtra and Andhra Pradesh

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was a distant second with 296 arrests, followed by Uttar Pradesh with 283 arrests.

In percentage terms, the state that saw the most dramatic increase in cases registered under the IT Act was Uttarakhand at 475 per cent (from 4 cases to 23); Assam a close second with 450% (from 28 cases to 154). Interestingly, the picture postcard union territory, Andaman and Nicobar islands, registered an eye-popping increase of 800 per cent (two cases in 2012 to 18 in 2013) in the same category.

The Delhi city has registered 131 cases of cyber crime cases which is an increase of 72.4 percent as compared to last year 2012. Whereas Lakshadweep, Dadar and Nagar Haveli reported no cyber crime cases for the year 2013. Also Cyber Crime activities seem to rare

in the northeastern states. In 2013, only one case each was registered in Nagaland and Mizoram.

According to a report by the Times of India, a leading English daily, India scores high on the cyber crime map with all possibilities of emerging as the ‘ransomware capital’ of the Asia Pacific region.

Presently, the country is among the world’s top five countries for the highest number of incidences of cyber crime including ransomware, identity theft and phishing incidents with the average cost per cyber victim going up from $192 last year to $207.

Ransomware refers to a class of malware that restricts access to computer system it infects and demands a ransom paid to the creator of the malware to remove it. Though initially popular in Russia, about 2.5 lakh unique ransomware samples had been collected during the first quarter of 2013 alone, showing their rising incidence.

“Today’s cyber criminals are using more sophisticated attacks such as ransomware and spear-phishing which yield them more

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money per attack than ever before,” said Ritesh Chopra, country manager, Norton by Symantec.

With 66 percent of Indian consumers using their personal mobile device for both work and play, this creates entirely new security risks for enterprises, he added.

Lending credence to those fears, this year’s report further reveals that a staggering 63 per cent of smartphone users in India experienced some form of mobile cyber crime in the past 12 months.

The report also found that many consumers were engaging in risky behavior that has them playing a game of chance with their private information. A large percentage of Indian Wi-Fi user’s access social networks (61 per cent); shop online (44 per cent); and access

their bank account (42 per cent) through a public or unsecure Wi-Fi.

SUGGESTIONS FOR MITIGATION OF CYBER CRIME RATE

The discussion made so far with respect to the trends in cyber crimes in india throghs light on the important aspects of banking with IT enabled services and warns that the banking sector will face more and more problems like loss of confidence on IT enabled services of banks among customers. To get rid of these losses of cyber crimes, steps are to be taken not only at the government level but also at banking and customer level. Only when these three groups of people are works together, this rate of cyber crimes may come down.

It can be suggested to the banks that the awareness among the customers has to created with respect to all its IT enabled services and the customers must be educated on the issues

Snjay Kumar Dhanwani suggested in his paper that An effort should also be made to cover e-business in the country's consumer laws. Some are investing in it to drive the business growth, while others are

having no option but to invest, to stay in business. The choice of right

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channel, justification of IT investment on ROI, e-governance, customer relationship management, security concerns, technological obsolescence, mergers and cquisitions, penetration of IT in rural areas, and outsourcing of IT operations are the major challenges and issues in the use of IT in banking operations (Dhanvani, 2013).

References

1. Dhanvani, S. K. (2013). Recent Trends in Indian BankingIndustry. Abhinav , 60-63.

2. James H. Burrows (1996). "Electronic Data Interchange(EDI)".National Institute of Standards

3. Kamlesh Bajaj & Dehjaji ; E-Commerce,Tata McGraw hillpublications Co. Ltd., New Delhi,2005

4. Kathiriya, R. S. (2013). Evolution of Cyber Crimes in India.International Journal of Emerging Trends and Technology inComputer Science , 2 (4), 240-243.

5. Ministry of Home Affairs, G. o. (2013). National Cyber CrimeReport. India: National Cyber Crime Records Bereau.

6. O’Brien, J (1999). Management Information Systems –

Managing Information Technology in the InternetworkedEnterprise. Boston: Irwin McGraw-Hill. ISBN 0071123733.

7. S.B. Verma ; E-Banking and Development of Banks, Deep &Deep Publications, New Delhi ,2008

8. V.K.Puri, S. a. (2013). Indian Ecconomy - Its DevelopmentExperience. New Delhi: Himalaya Publishing House.

9. Various issues of Business week , The Economist , BusinessToday , The Economic times and Financial Express .

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RECENT TRENDS IN INDIAN BANKING INDUSTRY

D. Siva Satyanarayana Lecturer in Commerce

Dr.V.S.Krishna Govt. Degree College, Visakhapatnam

V.S.J. Ramachandra Murthy Reader in Commerce

Dr.V.S.Krishna Govt. Degree College, Visakhapatnam

P. Satyanarayana Lecturer in Commerce

Govt. Degree College, V. Madugula Visakhapatnam

INTRODUCTION

The banking industry has been expanding and undergoing a radical

change . The banking industry is also facing a stiff competition now-a-days. The competition is between public sector , private sector , cooperative,regional rural banks and from other foreign banks. Because Direct foreign Investment is allowed and permitted to do its activities and operations in our country.

In India, we are having a well developed and systematic banking system. Even in Global Financial crisis the country could stand well by not effecting the Indian economy. The Reserve Bank of India is the Central Bank, monitoring and regulating the activities of all the nationalized, private and foreign banks.

There has been an unprecedented growth and diversification in all areas of banking . Now the banks are providing various innovative and improving services to its customers. These services are to cater to the needs and requirements of its customers and general public. More bank branches are being opened to spread and widen its services

especially in rural areas.

The Banks are involved in providing services like customer credit, issue of credit cards to the eligible customers, merchant banking ,

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mutual funds, cash credit , overdraft facility, vehicular loans, RTGS, electronic payments, electronic clearing service , ATMs, issue of debit cards etc.,

RECENT TRENDS IN INDIAN BANKING INDUSTRY:

Our Indian Banking system has been facing several challenges with the Global banks. In spite of the competition, it could provide several services to its customers and to the general public.

1. Real Time Gross Settlement (RTGS):

It is introduced in the year 2004. It is a system where one cantransfer his funds to another bank.

Ex: An account holder of State Bank of India can transfer his funds

to another bank like canara bank or Union Bank of India. It ismaintained and operated by the Reserve Bank of India. Thefinancial operations can be done very easily and quickly. It is reallya boon to the customer in getting the funds from other bank , wherehe does not maintain any account.

2. Electronic fund Transfer (EFT):

Reserve Bank of India is the service provider for this activity. Thecustomer who wants to make payment to another customer ofother similar bank, make cash payment or gives the instructions tohis banker to send the amount through the bank enabling thebanker to transfer the fund. The beneficiary ‘s account gets

credited with this amount online. It may be the Savings BankAccount or Current Account and only thing is, the customer has toprovide the beneficiary’s bank account number, IFSC Code of theBank concerned.

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3. E-Cheques:

These are Electronic cheques, which is a new development in thebanking industry. The United States of America is instrumental indeveloping this technology. The introduction of E-cheques willreplace the paper cheque. The Negotiable Instruments Act isamended to this effect and E-cheques are also accepted in India asan instrument. It facilitates the cash payment process very easyand quick.

4. Clearing of cheques:

The customers issue various cheques to make payments to theirclients. The recipient of the cheque deposits the same cheque inhis Savings Bank Account or current account in the bank where hemaintains an account. This cheque may belong to the same bank ormay belong to other bank. The cheques received from its customerswill be sent to a clearing house and soon the concerned accountswill get debited and credited respectively. It is a systematicmechanism in the field of banking to speed up clearing process.

5. Automatic Teller Machines:

Two decades back, withdrawal of money from the bank accountinvolved a delayed process and much time was wasted. He had to

visit his bank concerned, fill the withdrawal form or present acheque of his own and verification of signature etc., . It was acumbersome procedure and waste of valuable time of the customer.Now it is a very easy task to withdraw the money. The accountholder of the bank is issued a ‘Debit card’ which will be used to

withdraw the money from any ATM. It is really a revolutionary

change in the field of banking industry globally. At the same time ,he can transfer the funds to any account holder of the same bank toanywhere. He need not visit his home bank for this service.

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6. Net Banking Facility:

A customer is given now the facility of Net Banking. He can do allBanking activities on his own personal computer. He cantransfer funds from one bank to other. Without visiting thebank, he can perform all the activities, except for depositing of

money. Mobile banking is also a boon to the customer now a days.

7. Credit cards/Debit cards at the point of sale/purchase:

The account holder of a bank need not carry any cash physically. Atthe point of sale , he simply swipe the card concerned.Automatically, his account is debited to that effect and the shopowners’ account gets credited. No physical cash is exchanged. It isvery secure and systematic.The above banking activities are madepossible due to the influence of Information technology. The

Information technology provides a combination of various servicesto banking sector which are invaluable. IT is playing a major role

in doing the banking transactions very easily with greatauthenticity and reliability. The fruits of Information Technologyis percolating to rural areas/segments also. The rural customer of abank is also in comfortable position to understand the activities ofthe bank. Now-a-days, the banks are coming forward to open moreof its branches in rural areas, with a view to tap the rural market.

CONCLUSION:

The Indian Banking system is developing day by day and isproviding various services to its account holders and customers. Infuture also, the banks could provide sophisticated services byapplying the latest applications and developments of Informationtechnology. The banks are approaching the people with different

products which are beneficial to them in short term and in longterm. The friendly nature that is developed amongst the people by

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the influence of banks had a positive effect in the banking system. The Reserve Bank of India imposes various conditions to safeguard the interests of the depositors , account holders and public. Several Prudential norms and standards are adopted by the banks to

compete with other private and foreign banks resulting better services to the public. Our Indian Banking system is very efficient and could face several financial up and downs globally by not curbing our internal economy.

References:

1. Various issues of Business week, Economic times.

2. www.rbi.org.in

3. E-Banking and development of banks, deep and deeppublications, New Delhi.7

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RECENT TRENDS IN INDIAN BANKING SECTOR

G.Divya MBA Student

Andhra University Visakhapatnam

Dr.G.Chandra Mouli Reader in Commerce

Dr.V.S.K.Govt.Degree & P.G. College (A)

Visakhapatnam

Today, we are having a fairly well developed banking system with different classes of banks – public sector banks, foreign banks, private sector banks, regional rural banks and co-operative banks. The Reserve Bank of India (RBI) is at the paramount of all the banks. The RBI’s most important goal is to maintain monetary stability (moderate and stable inflation) in India. The RBI uses monetary policy to maintain price stability and an adequate flow of credit. The rates used by RBI to achieve this are the bank rate, repo rate, reverse repo rate

and the cash reserve ratio. Reducing inflation has been one of the most important goals for some time.

Growth and diversification in banking sector has transcended limits all over the world. In 1991, the Government opened the doors for foreign banks to start their operations in India and provide their wide range of facilities, thereby providing a strong competition to the domestic banks, and helping the customers in availing the best of the services. The Reserve Bank in its bid to move towards the best international banking practices will further sharpen the prudential norms and strengthen its supervisor mechanism.

There has been considerable innovation and diversification in the business of major commercial banks. Some of them have engaged in the areas of consumer credit, credit cards, merchant banking, internet and phone banking, leasing, mutual funds etc. A few banks have

already set up subsidiaries for merchant banking, leasing and mutual

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funds and many more are in the process of doing so. Some banks have commenced factoring business.

Role of Information Technology (IT) and Customer Relationship Management (CRM) in Banking IT plays an important role in the banking sector as it would not only ensure smooth passage of

interrelated transactions over the electric medium but will also facilitate complex financial product innovation and product development. The application of IT and e-banking is becoming the order of the day with the banking system heading towards virtual banking. Banks, who strongly rely on the merits of ‘relationship was banking’ as a time tested way of targeting & servicing clients, have readily embraced CRM, with sharp focus on customer centricity, facilitated by the availability of superior technology. CRM, therefore, has become a new mantra in service management, both relationship & information wise.

Foreign Direct Investment (FDI) in India Definition of FDI: Investment made to acquire lasting interest in enterprises operating outside of the economy of the investor.

Maximum FDI permitted in Indian private sector banks – 74

percent, under the automatic route which includes Portfolio Investment i.e. FII’s and NRI’s, Initial Public Issue (IPO), Private Placements, ADR/GDRs; and Acquisition of shares from existing shareholders;

Maximum FDI permitted in Indian public / nationalized banks – 20 percent;Automatic route is not applicable to transfer of existing shares in a banking company from residents to non-residents. This category of investors require approval of FIPB, followed by “in principle” approval by Exchange Control Department of the RBI. The “fair price” for transfer of existing shares is determined by RBI, broadly on the basis of the Securities and Exchange Board of India

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guidelines for listed shares and erstwhile CCI guidelines for unlisted shares. After receipt of “in principle” approval, the resident seller can receive funds and apply to RBI, for obtaining final permission for transfer of shares. A foreign bank or its wholly owned subsidiary regulated by a financial sector regulator in the host country can now

invest up to 100% in an Indian private sector bank. This option of 100% FDI will be only available to a regulated wholly owned subsidiary of a foreign bank and not any investment companies.

Benefits of FDI:

Transfer of technology from overseas countries to the domesticmarket

Ensure better and improved risk management in the banking

sector

Assures better capitalization

Offers financial stability in the banking sector in India.

Voting Rights of Foreign Investors

Private Sector Banks Not more than 10% of the total voting rights of all the shareholders Nationalized Banks Not more than 1% of the total voting rights of all the shareholders of the nationalized bank.

Major challenges faced by banks Increased competition from domestic and international markets;

Transaction costs of carrying non-performing assets and substandard assets in its books;

Frequent changes in key policy rates and reserve requirements by the RBI; Maintaining sufficient liquidity.

Conclusion:

In the days to come, banks are expected to play a very useful role in the economic development and the emerging market will provide

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ample business opportunities to harness. Human Resources Management is assuming to be of greater importance. As banking in India will become more and more knowledge supported, human capital will emerge as the finest assets of the banking system. Ultimately banking is people and not just figures.

To conclude it all, the banking sector in India is progressing with the increased growth in customer base, due to the newly improved and innovative facilities offered by banks. FDI has provided a great fillip to the whole of banking sector industry as banks are now competing at a global level.

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TRENDS IN INDIAN BANKING –OPPORTUNITIES & CHALLENGES

Dr.Valluri.Vijayalakshmi Assistant Professor

Department Commerce Gayatri Vidyaparishad College

for Degree and PG Courses Visakhapatnam

Introduction:-

Banks in India have a spectacular growth rate coupled with an increase in profitability and significant improvement.Badebts fell drastically. Considering the growth prospects of the Indian economy over the coming decade, the banking Industry looks forward to a decade full of opportunities. However there are some challenges and high

expectations from stakeholders

Changing Customer preferences and rapid technology evolution could pose challenges to banks in many ways. On top of it ,the public sector will face a severe problem in mobilizing itself unless it gives its HR on priority.

The major Trends:-

The following major trends will impact the banks in the form of opportunities or threats over the next decade.

1. Mortgages to cross Rs.40 trillion by 2020:

2. Wealth management will be big business

3. The Next Billion will be the largest segment

4. The number of branches to grow2x;ATMs to grow5x;

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5. Mobile banking to see huge growth and will redefine transactionbanking paradigm:

6. CRM and data warehousing will drive the next wave oftechnology in banks:

7. Banking margins will come under pressure:

8. New models to serve and Medium Enterprises(SME):

9. Invest banking will grow over ten-fold:

10. Infrastructure financing to hit over Rs20 trillion on commercialbanks books:

1. Mortgages to cross Rs.40 trillion by 2020:--

Mortgages typify the retail banking opportunity in an economy. The total mortgages in the books of the banks have grown from 1.5 percent to 10 percent of the total bank advances, in a period of ten years. The outstanding mortgages are expected to cross Rs.40 trillion which is higher than the entire loan of the banking Industry pegged at Rs.30 trillion.

2. Wealth management will be big business:-

Going forward, wealth is expected to get further concentrated in the hands of a few. Wealth management services will be an integral part of the product portfolio for both, private as well as public sector banks.

3. The Next Billion will be the largest segment:

The next decade would witness banks experimenting with different low cost business models, smaller cost effective branches and new use of technology to serve this segment profitably.

4. The number of branches to grow 2x; ATMs to grow 5x:

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India has a very low penetration of branches and ATMs as compared to some of the other developed and developing nations. It is evident that the bank branches and ATMs are by far the most popular channels, despite a decade of promotion of alternate channels. The experience in developed economies also corroborates that branches and

ATMs continue to the critical channels, although certain transitions have shifted to alternate channels. As such ,there is a requirement of at least 40,000 to 50,000 additional branches and 1,60,000 to 1,90,000 additional ATMs in the coming decade.

5. Mobile banking to see huge growth and will redefinetransaction banking paradigm:

The penetration of internet and broadband access in India has been low so far. However, with the advent of mobile banking, the access to banking facilitates could completely get revolutionanized over the next decade. Customer survey of over 3,000 customers in urban areas has indicated that call centers and internet are the most dissatisfying channels. We expect the Indian banking industry to invest significant attention in technology innovation to drive next generation frame work for transaction banking. Indian banking could set an example for the rest of the world.

6. CRM and data warehousing will drive the next wave oftechnology in banks:

The average number of products per customer in Indian is significantly lesser than the global benchmarks. There is a significant potential for cross selling amongst all categories of banks in India.

7. Banking margin will come under pressure:

The next decade will see a dramatic change in margins as the wholesale debt markets deepen and corporate customers access the whole sale markets directly. Further, should the savings bank rate be

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liberalized banks will move to a regime of low margins. The public sector banks expect to see their margins squeeze with a much higher likelihood as compared to the private sector/foreign banks.

8.New models to serve the Small Medium Enterprises(SME)

The results of a survey conducted by FICCI to gauge the level of satisfaction among large, medium and small business customers with regard to banking services. The large customers are more satisfied

across all dimensions as compared to the medium and small sized ones. The smallest business is most dissatisfied. Due to higher risk and lower ticket size, the SME typically get less attention. Banks are yet to create innovative models to serve SMEs sufficient and timely credit at the right price. The SME hope to get the basics –good relationship management, fast credit decisions and a complete product range all at one place.

9. Investment banking will grow over ten-fold:

Investment banking will be among the fastest growing segments in the banking industry rising from 4 percent to 7 percent of the entire corporate banking revenue pool. The larger corporate customers expect to demand higher support for international expansion and mergers and acquisitions over next decade. The revenue pool will shift from traditional corporate banking to investment banking and advisory. Banks with international presence stand to benefit.

10. Infrastructure financing to hit over Rs20 trillion oncommercial banks books:

As India continues to rely on private funding for Infrastructure development, infrastructure will occupy a larger share of the balance sheets. Half of the debt finance for infrastructure today comes from

banks. Even as the asset liability mismatch issues are resolved by IIFCL and the government, the real challenge for banks would be to

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develop skills to undertake the risks of long gestation infrastructure projects and manage concentration risk in infrastructure.

Two Challenges of the Decade

There are two areas in which the Indian banking industry will be severely challenged to find a solution over the next decade. First pertains to the rising expectation from banks to find an economically viable solution for financial exclusion. The second pertains to human

resources challenges in the public sector. While the first challenge demands unusual innovation and experimentation, the second threatens to cripple the ability of the largest segment of the banking industry from being able to innovate and stay competitive.

It is unclear that the solutions to these two challenges will be identified unless the banks were to accord highest priorities to these and work in concert.

The HR challenges of public sector banks have reached a tipping point. Due to a legacy of several decades, the public sector banks will witness unprecedented loss of skills and competencies in form of retiring senior and middle management executives over the next few years. That coupled with the need for large scale re-skilling, attracting and retaining fresh talent, controlling the growing employee costs, and introduction of performance discipline are significant challenges,

Finally, there is utmost unanimity amongst public sector banks that attracting and retaining talent will be the biggest challenge.

References:-

1.Annual Reports;BCG analysis

2.Indian Banking 2020 Repot

3.IBM Bulletin

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ROLE OF FDI IN BANKING, IN GENERATING WEALTH TO INDIAN ECONOMY

LT CDR. K.Ravi Kumar Research Scholar

Mehawar University Rajasthan & HOD Commerce and

Vice Principal Dr.VSK.Govt College

Visakhapatnam

Dr. G.Chandra Mouli Reader in Commerce

Department of Commerce Dr.V.S.K.Govt.Degree College (A)

Visakhapatnam

Introduction

The banking system in India is significantly different from that of other Asian nations because of the country’s unique geographic, social, and

economic characteristics. India has a large population and land size, a diverse culture, and extreme disparities in income, which are marked among its regions. There are high levels of illiteracy among a large percentage of its population but, at the ame time, the country has a large reservoir of managerial and technologically advanced talents. Between about 30 and35 percent of the population resides in metro and urban cities and the rest is spread in several semi-urban and rural centers. The country’s economic policy framework combines socialistic and capitalistic features with a heavy bias towards public sector investment. India has followed the path of growth-led exports rather than the “export-led growth” of other Asian economies, with emphasis on self- reliance through import substitution.

Objective of the study

• Study about the growth of banking sector.

• FDI in banking in India (Govt. decision)

• Guidelines for investment in banking sector.

• Problems faced by Indian banking sector.

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• Benefits on FDI in Banking sector in India.

• Investment percentage banking sector.

Hypothesis of the study

The main objective of this paper is to study the history of Indian banking sector and its favorable environment for FDI, which leads to the development of the Indian economy.

H1: FDI leads to increase in the wealth of the Nation.

H2: Is Indian banking regulations are in par with FDI

Review of History

1786-1969

In the year 1786, the general Banking of India was setup, followed by bank of Hindustan and Bengal Bank. The East India Co. formed Bank of Bengal (1809), Bank of Madras (1843) as independent banks and collected them as presidency Banks. These banks were unified in 1920 and imperial Bank of India was formed. 1865 – Allahabad Bank was formed 1894- Punjab National Bank was formed 1906- Bank of India was formed 1907 to 1913- Indian Bank, Bank of Mysore established The RBI was formed in 1935

• Due to the continues failures in Banking system Government of Indiapassed the Banking companies act 1949 and later on it is modified s

Banking Regulation act. • In 1965 RBI got authority to control the functioning of othernationalized banks • In 1955 the Imperial Bank of India was Nationalized• The SBI was established to act as the controlling authority to RBI• In 1960 7 banks were nationalized and assigned subsidiaries to SBI

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After Nationalization of Banks

• 1969 under the directions of P.M Indira Gandhi14 major banks was nationalized • 1980 7 more banks was nationalized, resulting in80% of banking sector coming under the control of the government.

Post liberalization

Reforms were introduced in the banking sector to strength Indian banks and make them internationally competitive and banks to play a vital role in the economic development of the country. The banking sector was opened up for private participation and the entry of new private banks increased competition. The efficiency of the banking sector improved as suggested by indicators such as gradual in cost of intermediation and decline in nonperforming loans. Efficiency in the banking sector was driven by improved technology and competition.

Reforms in Financial sector post liberalization • Financial sector has undergone rapid transformation during post liberalization

• Which got transparency and accountability in the financial markets• Which results in greater inflow of investments from FII’s into thecapital markets

Trends in Banking

The scheduled commercial banks are classified as following after liberalization • Public sector banks• Old private sector banks• New private sector banks• Foreign banks

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FDI in Banking in India – voice against Govt. decision

Due to adamant decision of P M and congress party about their advancing their programme of financial liberalization, allowing FDI in banking sector led to strike by the banking employees. The additional point which also supported for raising voice against FDI in banking sector is, beside permitting the entry and consolidation of new private banks, the govt. on 05-03-04 announced a set of decisions with reference to FDI in the banking sector, which relaxed the capital on foreign equity in Indian banks to 20% in the case of public sector banks and 74% in the case of private banks. This was an additional permission to foreign banks to operate in the country through wholly owned subsidies to increasingly relaxed rules.

After keeping the above problem in mind, the RBI decided to retain the stipulation under the banking regulation act, section 12(2) that in the case of private banks the maximum voting rights per shareholder will be 10% of the total voting rights (1% of the public banks). The 10% of ceiling on equity ownership by single foreign entry was partly geared to aligning ownership guidelines with the rule of voting rights. The response to this form liberalization advocated was that the whole exercise was pointless in a much as the ceiling on single investor ownership and voting rights would deter foreign investors. The evidence shows that this expectation has turned out to be completely false as chart 1 shows, the shares of foreign investors in private bank equity exceeds 50% in five banks and stands at between a third and a half in another eight.

The implication of this is clear. The problem with well- performing private banks is not that it is different to attract FDI. The problem is

that current rules do not allow entry of those whose intent is to exercise control over a local bank with an adequate share holding and equivalent voting rights. Hence, if the need is to allow foreign equity

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infusion to meet prudential requirements such as the Basel norms, that is still possible. What is not allowed is the entry of single foreign investor seeking to establish or acquire domestic private banks with a controlling stake and voting rights.

Guidelines for investment in banking sector

The limits of FDI in the banking sector has been increased to 74% of

the paid up capital of bank

FDI in the banking sector is allowed under the automatic route in

India

FDI and portfolio investment in the public or nationalized banks inIndia are subject to limit of

20% in totality.

This ceiling is also applicable to the investors in SBI and its

associated banks

FDI limits in banking sector of India were increased with the aim to

bring in more FDI inflows in the country along with theincorporation of advanced technology and management practices

The objective was to make the Indian banking sector morecompetitive.

The RBI of India governs the investment matters in the banking

sector.

According to the guidelines for FDI in the banking sector, Indian operations by foreign banks can be executed by any one of the following three channels:

Branches in India

Wholly owned subsidies

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Other subsidies

In case of wholly owned subsidies (WOS), the guidelines for FDI in the banking sector specified that the WOS must involve a capital of minimum 300 corers and should ensure proper corporate governance.

Problem faced by Indian banking sector

• Inefficiency in management• Instability in financial matters• Innovativeness in financial products or schemes• Technical developments happening across various foreign markets• Non-performing areas or properties• Poor marketing strategies• Changing financial market conditions

Benefits of FDI in Banking sector in India

• Transfer of technology from overseas countries to the domesticmarkets • Ensure better and improved risk management in the banking sector• Assure better capitalization• Offers financial stability in the banking sector in India

Investment percentage in banking sector

It is known that without the financial support, India’s growth story will never meet the reality. In year 2011 there has been more than 70%

increase in FDI in financial sector compared to 2010. But the big negative that is keeping FDI’s venture over whelming in this sector is convertibility actor. Due to delayed project, money is getting locked in projects without developing any revenue/returns. Too many outdated regulations and bureaucratic procedure are keeping projects to run at required pace. FDI can be attracted 49% in private sector banks as per terms of RBI, in case of NBFC’s 100 % FDI in merchant banking, investment/portfolio management, investment consultancy, sector

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broking, asset management, Housing finance, credit card business, credit for rural India etc..

Conclusion

Indian banking sector is proving itself since 1786 till date with the guidelines of RBI and Government of India. Indian banking system has also proved during global economic crisis with its strong policies and procedures without affecting Indian financial system. From the above research it can be concluded that since India is a developing country and the people who are working in non-government organizations have less social security after their retirement. To encourage the saving habits among them our banking sectors are introducing various schemes. Apart from all the above, since the capital

raising capacity in India is very less to take the Indian banking sector to worldwide we require investment from abroad. RBI should make such policies that FDI should not over ride the regulations of RBI and should result in the growth of Indian economy.

References:

1. FDI in banking, advantage Karnataka.

2. www.rbi.org

3. Business today

4. FDI in banking, article in The Economic Times.

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RECENT TRENDS IN INDIAN BANKING: -A SPECIAL REFERENCE TO STATE BANK OF HYDERABAD

Dr. C.Sarada Reader in Commerce

S.R.R & C.V.R Govt.Degree College Vijayawada

INTODUCTION

A banking revolution occurred in our country during the post- nationalization era. The Commercial banks, especially Public Sector banks have drastically changed from their traditionally money dealing business to INNOVATIVE BANKING and sub served their options to

the needs of nation building activities and socio-economic upliftment of the Indian masses.

Indian banking has changed from class-banking to mass-banking /social banking.

The following have been the major shifts in the banking policy of the country:

Urban to rural orientation

Profit motive to mass banking

Class banking to mass banking

Big customers to small customers

Traditional banking to innovative banking

Short-term finance to development finance

Security-based lending to purpose-oriented lending

Creditworthiness of the borrower to the purpose of borrowing

and

Self-interest to social perspectives

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Indian banking has become development oriented. There are both quantitative and dimensions to the progressive changes that have taken place in our banking industry, ushering in a new era in the country’s economic progress.

A major banking and financial sectors reforms were introduced

during 1991 to 1995. These reforms have paved a way to a series of drastic changes in Indian banking.

Recent changes in Indian banking: E-Banking:

E-Banking is a major step towards building global village. Internet and world wide web (www) offers unlimited opportunities to transform the conduct of banking business. E-banking implies co-ordination of banking business with E-Commerce.

Online banking:

Internet banking is emerging as a most cost effective and convenient delivery channel due to its inherent advantages. Internet has enabled banking at the click of mouse.

Now customers can conduct any banking transactions, through the touch screens, which will enable customer to login and do banking transactions on the net.

Almost all large branches of banks have been computerized and banks have moved into the direction of inter branch and inter- bank connectivity. The setting-up of INFINET (Indian Financial Net work) a wide area satellite based net work based on VAST technology

facilitates an efficient and integrated inter- bank payment system in the country.

OFFSHORE BANKING:

Banks are able to offer international banking services through branches which are connected to the SWIFT (Society for World-wide

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Inter-bank Financial Telecommunication Network)networks. It is used for the transmission and receipt of all international financial messages by member banks and financial institutions.

The major changes that were taken place in the areas such as ;

1. Communication infrastructure and usage of INFINET2. Standardization and security3. Computerization of Govt. Transactions4. Data warehousing, Data Mining and Management

CREDIT CARDS

Credit cards are innovative ones in the line of financial services offered by Commercial banks. The present trend indicates that coming years will witness a cashless society.

Type of Credit cards:

1) Credit card 2) Charge card 3) store-card 4) Corporate Credit

card 5) Business Cards 6) Smart Cards 7) Debit Cards 8)A.T.M Card etc,.

Recent Trends in Indian Banking; A special reference of State Bank of Hyderabad:

S.B.H, established in 1941 under the Hyderabad State Bank Act, 1941, turned a subsidiary of the State Bank of India in 1959, and now have 1600 plus branches in India.

All the branches of the bank are totally networked under CORE BANKING SOLUTIONS, offering a wide range of products to its

customers. Of course, all the customers of the bank have access to the latest technologies like Internet Banking, A.T.Ms etc,. The bank has

PAN INDIA PRESENCE and operates through more than 1600 bank

branches.

Know Your Customer (KYC) is the platform on which banking

systems operates to avoid the pitfalls of operational, legal and

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reputational risks and consequential losses by scrupulously adhering to the various procedures laid down for opening and conduct of account.

S.B.H. Online Services

The following are the major services offered for individuals as well as corporate customers;

Account enquiry, tax credit enquiry etc., Statement of accounts Fund transfer to self or linked accounts Fund transfer to third party account within the bank Fund transfer to other bank accounts (RTGS/NEFT) Opening of Fixed deposits and recurring deposits Utility bills payment Intending for cheque books Maintaining standing instructions to transfer of funds Subscribing to IPO and other equity offers Gift Cards Standing instructions TDS Enquiry SMS Alerts Demat & ASBA Services Opening of PPF Account Payment of SBI Life Premium Form 15G/15H Enquiry

MOBILE BANKING:

With the rapid growth in the number of mobile phone subscribers in

India, banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. All the messages originating from mobile banking application are encrypted and to end using 128 bit AES encryption, thus ensuring security in processing the transactions.

LOAN PRODUCTS:

Demand loan/OD on term deposits, NSC

Gold loan on Gold ornaments

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Housing loan/Education loan/Mortgage loan against property

Business loan/Contractor loan/Doctor loan/Rice mill loan

Project finance

Transporters loan/Govt. sponsored scheme loans

Pension loan/Personal loan/Car loan

Reverse mortgage loan whose age is above 60 years

Bank Guarantee

CONCLUSION

Now bank has entered in to insurance sector as value added service, Forex business including NRI loans.

Thus, banking in India has made a remarkable progress in its growth, expansion and business with social perspective in the fulfillment of national objectives. Of course, its perfection is yet to be seen.

Banks require constant vigilance against corruption and misuse

of funds. Unhealthy credit policies, loan waving etc., by the Governments should be opposed collectively by the banks.

Banks prosper on public confidence and trust only. This in turn requires greater transparency, accountability and above all a safety to the public money.

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LEEWAY OF THE ‘E-WAY’ IN INDIAN BANKING

G.V.V.S.V.Prasad Babu Lecturer

Department of Commerce Govt. Degree College, Narsipatnam

INTORDUCTION

Technique is to make difficult things simpler. In the evolution process, man found many techniques which are helpful in many fields. Banking sector is no exception to that. Financial innovation has become an essence to provide new products and strategies to better suit different circumstances of time and market and to meet different requirements of participants in financial system. With the popularity of the Internet increasing steadily, most of the industries are finding new and interesting ways to make use of this new and quality interesting medium so as to keep up with the constantly changing preferences of clients. Rangarajan Committee stressed computerization of banking sector in his recommendations in the year 1984. The major objectives of computerization are improved customer services, better housekeeping, quicker decision making and increased profile and productivity. The customers also expect faster remittance facilities,

telephone banking, home-banking. Banks are working hard to improve the ability to design new products, develop better processed, and implement more effective solution for increasingly complex financial problems. Thanks to Government regulations, Tax policies, globalization, liberalization, privatization, these financial innovation are immensely increasing. Designing new type of instruments is a great task to the banking organization as it needs to study various elements starting from technical matters to requirements of the market. Banks are looking for new ways to attract new customers as well as to retain existing ones. Banks are trying to stay dominant in the competitive

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world by gaining technical advancement as an advantage. Needs and expectations of customers are predominantly changing. So, financial innovation is helpful in ensuring smooth functioning and improves the overall efficiency of the system by minimizing cost and reducing risk. Information technology has given rise to new innovations in the

product designing and their delivery in the banking and finance industries. Customer services and customer satisfaction are their prime objective. These strategies help the banking organizations in achieving higher efficiency, reduction of cost by replacing paper-based and labour intensive methods with automated processes. Around 30% of the internet users prefer Internet Banking channel in india. Banking sector is witnessing various innovations like ECS, RTGS, EFT, NEFT, ATM, RETAIL BANKING, CORE BANKING, ELECTRONIC PURSE, DEBIT & CREDIT CARDS, PAYMENTS BANK, FUND TRANSFERS, MOBILE BANKING, E-CORNER. These developments are welcoming. Credit & Debit Cards, Payments and Reciepts are to be in electronic form.

INNOVATIVE INSTRUMENTS OR PROCESSES IN BANKING

E-CORNER

E-corner is a facility provided by the banks where in customers can use ATMs, cash deposit machines, cheque deposit machines and self-service kiosk for passbook printing among others. With this, customers do not have to wait in a queue at the branch.

PAYMENTS BANK

The idea of “narrow banks”- that is, those who can only take

deposits for the purposes of withdrawal and remittances but not for lending- and it is the birth of a new concept called payments bank. The RBI’s final guidelines for payments banks will confer restricted or differentiated licences to these new entities to accept deposits up to Rs. 1 lakh per account. Such niche banks can provide payment and

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remittance services through various channels such as internet, mobile banking and business correspondents, but it cannot lend money or issue credit cards. These banks are required to invest 75 per cent of their deposits in government securities and the balance 25 per cent which can be parked with commercial banks. These banks are

permitted to earn fee income by distributing simple financial products such as mutual funds and insurance. Payments bank offers huge potential to mobile operators for expansion, given the strong synergies with services they already provide. A mobile service provider, a supermarket chain or a non-banking finance company could-as a payment bank- drive government’s financial inclusion agenda. They could provide payments services to migrant workers, low-income households and businesses among others. There were suggestions from intellectuals that the minimum capital norms should be reduced from Rs.100cr to Rs. 5crore.

RTGS, NEFT, ECS, CORE BANKING

RTGS stands for Real Time Gross Settlement system. It is a fund transfer mechanism where transfer of money takes place from one bank to another on a real time and on gross basis. This is the fastest possible money transfer system through the banking channel. The transmission, processing and settlement of instructions is done on a

continuous basis. It has been implemented in India from March 26, 2004 for high value clearing involving inter-bank fund transfers. RTGS business hours also extended (from 8 a.m to 8 p.m,) recently. New launch of RTGS was in October 2013. NEFT stands for National Electronic Funds Transfer. We can use any bank account that offers NEFT facility to pay our bill online. Banks charge a commission for effecting NEFT/RTGS whereas cheques do not bring any transaction costs. RBI has been taking steps to smoothen the clearance of cheques by introducing speed clearing and the Cheque Truncation system to avoid physical transfer of cheques between banks. There should have

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been substantial incentives to use the electronic mode of transfer, or punitive disincentives for customers who continue to use cheques. Facilities such as NEFT/RTGS enabled customers to transfer funds from one account to another account online, which again stopped the flow of cheques for such transactions. Core banking solutions enable

online transfer without using paper instruments. With the introduction of the electronic clearing system (ECS), companies stopped issue of dividend and interest warrants and the ECS bebit system obviates the necessity to issue cheques for utility bills.

ATM

It stands for Automatic teller Machine. ATMs used as spring board for Electronic Fund Transfer. The introduction of ATMs in banks has transformed banking by providing banking services such as ANY TIME, ANYWHERE AND ANY BANK etc., to the customer. The customer is saved the risk or bother of carrying hard cash or travellers’ cheque while travelling. It has also given cost savings to banks. The profile of front offices of the bank branches has changed with the Entry of ATMs. Customers no longer need to visit branches for their day to day banking transactions like cash deposits, withdrawals, cheque collection, balance enquiry etc. RBI allowed the White Label ATM operators (non-bank ATM operators) to accept the cards issued under

card payment network schemes. According to latest data, under PMJDY, banks have opened 8.83 crore accounts and issued 5.85 crore RuPay cards. Logically, an increased number of cards should also result in an increased number of cards should also result in an increase ATMs. However, ATM deployment has been running out of steam. New machines are seeing daily transactions of less than 100- way below the 120 transactions that are required for break-even. As of June 2014, the total number of ATMs in the country stood at 1.67 lakh and Point-of-sale terminals at 1.08 crore. CATMi (confederation of ATM industry)

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has warned that accounts opened under the PMJDY would end up being dormant if there are not enough ATMs to service them.

DEBIT CARD

It is a plastic payment card that provides the cardholder electronic access to his or her bank account at a financial institution. In many countries, the use of debit cards has become so widespread that their volume has overtaken or entirely replaced cheques and, in some

instances, cash transactions. Unlike credit cards, payments using a debit cards are immediately transferred from the card-holder’s designated bank account, instead of them paying the money back at a later date. There are currently three ways that debit card transactions are processed: Online debit Offline debit and Electronic Purse systems. One physical card can include the functions of all three types, so that it can be used in a number of different circumstances. Online debit cards require electronic authorization of every transaction and the debits are reflected in the user’s account immediately. Offline debit cards have the Logos of major credit cards and are used at the point of sale like a credit card (with payer’s signature). New and attractive growth prospects are being witnessed due to migration of cards (Euro,MasterCard,&VISA), long term evolution deployment across the globe, and government support.

ELECTRONIC PURSE CARD SYSTEM

Smart-card-based electronic purse systems (in which value is

stored on the card chip, not in an externally recorded account, so that machines accepting the card need no network connectivity) are in use throughout Europe since the mid-1990’s. In Austria and Germany, all current bank cards now include electronic purses. In India this system is limited to some areas.

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INTERNET BANKING and MOBILE BANKING

It is a key step that can truly transform the country, leveling the playing field for all and lifting India into the ranks of more prosperous, developed nations. And the backbone of this development will be the internet. Increasing internet connectivity has a direct positive effect on GDP growth, creating jobs and new businesses. Studies show that 10 per cent increase in connectivity stimulates GDP and new business

creation by 1 per cent or more. Once the internet accessible to the masses, there should be need to give reasons to use. Though not strictly speaking a daily necessity, Facebook and chat apps such as WhatsApp have become more widely known and highly popular among all levels of customers. Banks have to make plans to reach those areas and serve the customers in a relevant manner. The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into three types based on the levels.

a) Information Only system: General purpose information likeinterest rates, branch location, bank products and theirfeatures, loan and deposit calculations are provided in thebanks website. There exist facilities for downloading varioustypes of application forms. The communication is normally

done through e-mail.

There is no interaction between the customer and bank’sapplication system. No identification of the customer is done.In this system, there is no possibility of any unauthorizedperson getting into production systems of the bank throughinternet.

b) Electronic Information Transfer System: The systemprovides customer specific information in the form ofaccount balances, transaction details, and statement of

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accounts. The information is still largely of the ‘read only’ format. Identification and authentication of the customer is through password. The information is fetched from the bank’s applicatio9n system either in batch mode or off-line. The application systems cannot directly access through the

internet.

c) Fully Electronic Transactional System: This system allowsbi-directional capabilities. Transactions can be submitted bythe customer for online update. This system requires highdegree of security and control. In this environment, webserver and application systems are linked over secureinfrastructure. It comprises technology coveringcomputerization, networking and security, inter-bankpayment gateway and legal infrastructure.

Multiple services can be offered through online banking such as bill payment services. Internet banking is changing the banking industry and is having the major effects of banking relationships. The Net Banking thus, “now is more of a norm rather than an exception in many developed countries” due to the fact that it is the economical way

of providing banking services. Banking is now no longer confined to the traditional brick and mortar branches, where one has to be at the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. There is need to scan and analyse the market and respond to the needs of customers and to generate awareness regarding advantages of internet banking.

Mobile banking and SMS-based banking are now getting momentum in the banking arena. But lack of awareness as well as standardization of procedures at banks also adds to the problems which have led to a situation of slow pick-up of mobile banking services despite the high mobile density in the country. There is a need for greater degree of

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standardization in procedures relation to on-boarding of customers for mobile banking. For existing customers, banks will have to educate the customers of such services through SMS and emails. Apart from bringing a large majority of excluded banking population into the ambit of banking, mobile banking also offers a cheap alternative to branch

operations. While a transaction at a branch costs about Rs.55, at the ATM channel it comes down to Rs. 15. Through the internet it drops further to Rs. 3-5 per transaction. Mobile banking can also be pushed on basic devices.

VCC (VIRTUAL CREDIT CARDS)

A virtual credit card is a disposable payment card that can be used to make purchases or payments over the Internet. These cards provide inherent protection to cardholders, since the user is provided a new credit card number every time the person makes a purchase on the Internet. This is why this card is sometimes also called the “single-use card numbers.” After HDFC Bank and Kotak Mahindra Bank, ICICI Bank have launched Virtual Credit Card(VCC) which is an add-on Visa credit card issued on the primary credit card. The Virtual Credit Cards does not have any plastic existence but can only be viewed online and can only be used for online transactions. The credit limit is the same as that of the primary credit card, however one can specify his own limit

on the VCC and the details of purchase made is displayed on the primary statement itself. The key details of your VCC like the card number, expiry date, etc. are visible online.

CARD-ON-DELIVERY

Cash-on-Delivery is giving way to card-on-delivery where buyers just swipe their card on mobile Point-of-Sale devices. E-commerce industry will boost its growth with this tech-savvy system. E-commerce players can just hand over the mobile point of sale (MPOS) devices to the logistics partners who deliver goods purchased on their website to

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customers at their home or office. Moreover, the entry of innovative smart card devices in the market will further strengthen the overall industry in the long run. According to “Smart Card Market Forecast to 2014” report, the global shipment of smart cards are growing at the rate of around 15%. Furthermore, the huge demand for smart cards

will be seen in emerging markets as some of the key manufacturers in these regions are expanding their market reach. Increasing penetration of 3G, and renowned focus on payment transaction will give a further boost to the momentum. Backed by such positive factors, the global smart card shipments are expected to post a double digit growth (CAGR of around 12%) during 2011-2014.

AADHAAR PAYMENT BRIDGE

The National Payments Corporation of india (NPCI) has crossed the milestone of getting 10 crore bank accounts seeded with Asdhaar numbers. National Financial Mapper, managed by NPCI, rides on the Aadhar Payment Bridge system through which NPCI links the Government departments and other State agencies like oil-marketing companies and their sponsor banks on the one side and beneficiary banks & the end beneficiary on the other side. This is to reach out to the financially excluded segment of the country within its overall ambit of creating simplicity and innovation of all retail payment systems in

the country.

LONG WAY TO GO

Percetptual and Gesture-friendly technology are yet to be implemented. Banking transactions need to be done in a Non-physical format. Banking industry needs to witness contactless payment systems. Banking and financial services are not available in most of over 6 lakh villages. India is lagging in financial products adoption. There is a need to bridge the gap between having the electronic instruments and using them. Some banks in India are still relying on

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old methods, the ques at the counters are long, particularly pensioners. ATMs are unable to deliver money when customer is in a need. The Indian consumer is conservative when it comes to dealing with transaction, and cash payments have been the default payment option for them. Almost 75% transactions go through in cash. Despite

400million debit and credit cards, cash emerges as a preferred means of payment. The use of paper-based instruments (such as cheques, drafts, and the like) accounts for nearly 60 per cent of the volume of non-cash transactions in the country. In value terms, the share is presently around 11%. Illiteracy in India is also one of the factors lagging the banking industry from the use of technology. Internet frauds are increasing and cyber security has to be strengthened. Out of 90 crore mobile users in the country, only 4 crore users are using the mobile banking service.

Providing a savings bank alone will not change his life. Other services to meet his needs have to be provided like remittance, direct benefit transfer, etc. According to Census 2011, 40 per cent of India’s households are un-banked. Banking industry and its Information Technology is needed for poor people, but it is needed more for

underprivileged people because IT applications bring transparency and accountability.

References:

1. Banking Theory and Practices—Sundharam & Varsheney.

2. WWW. ELECTRONICBANKING.ORG.

3. National Monthly Referred Journal of Research in Commerce &Management…www.abhinavjournal.com.

4. Business Standard daily

5. Business Line daily

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TRENDS AND DEVELOPMENTS IN BANKING SECTOR OF INDIAN

Ch. Vishnu Murthy and Dr. P. Venkateswarlu

India’s banking sector is constantly growing. Since the turn of the century, there has been a noticeable upsurge in transactions through ATMs, and also internet and mobile banking. Today, we are having a fairly well developed banking system with different classes of banks – public sector banks, foreign banks, private sector banks, regional rural banks and co-operative banks. The Reserve Bank of India (RBI) is at the paramount of all the banks. The most important goal of RBI is to maintain monetary stability in India. The RBI uses monetary

policy to maintain price stability and an adequate flow of credit. The rates used by RBI to achieve this are the bank rate, repo rate, reverse repo rate and the cash reserve ratio. Reducing inflation has been one of the most important goals for some time.

Growth and diversification in banking sector has transcended limits all over the world. In 1991, the Government opened the doors for foreign banks to start their operations in India and provide their wide range of facilities, thereby providing a strong competition to the domestic banks, and helping the customers in availing the best of the services. The Reserve Bank in its bid to move towards the best international banking practices will further sharpen the prudential norms and strengthen its supervisor mechanism.

There has been considerable innovation and diversification in the business of major commercial banks. Some of them have engaged in

the areas of consumer credit, credit cards, merchant banking, internet and phone banking, leasing, mutual funds etc. A few banks have already set up subsidiaries for merchant banking, leasing and mutual

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funds and many more are in the process of doing so. Some banks have commenced factoring business.

Role of Information Technology (IT) and Customer Relationship Management (CRM) in Banking

IT plays an important role in the banking sector as it would not only ensure smooth passage of interrelated transactions over the electric medium but will also facilitate complex financial product innovation and product development. The application of IT and e-banking is becoming the order of the day with the banking system heading towards virtual banking.

Banks, who strongly rely on the merits of ‘relationship was banking’ as a time tested way of targeting & servicing clients, have

readily embraced CRM, with sharp focus on customer centricity, facilitated by the availability of superior technology. CRM, therefore, has become a new mantra in service management, both relationship & information wise.

Foreign Direct Investment (FDI) in India

Definition of FDI: Investment made to acquire lasting interestin enterprises operating outside of the economy of the investor.

Maximum FDI permitted in Indian private sector banks – 74percent, under the automatic route which includes PortfolioInvestment i.e. FII’s and NRI’s, Initial Public Issue (IPO),Private Placements, ADR/GDRs; and Acquisition of shares fromexisting shareholders;

Maximum FDI permitted in Indian public / nationalized banks –20 percent;

Automatic route is not applicable to transfer of existing shares

in a banking company from residents to non-residents. This

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category of investors require approval of FIPB, followed by “in principle” approval by Exchange Control Department of the RBI.

The “fair price” for transfer of existing shares is determined by

RBI, broadly on the basis of the Securities and Exchange Boardof India guidelines for listed shares and erstwhile CCI guidelinesfor unlisted shares. After receipt of “in principle” approval, theresident seller can receive funds and apply to RBI, for obtainingfinal permission for transfer of shares.

A foreign bank or its wholly owned subsidiary regulated by a

financial sector regulator in the host country can now invest upto 100% in an Indian private sector bank. This option of 100%FDI will be only available to a regulated wholly ownedsubsidiary of a foreign bank and not any investment companies.

Benefits of Foreign Direct Investment:

There are many benefits with foreign direct investments. It is easy to transfer of technology from overseas countries to the domestic market to increase development of domestic technology. The foreign direct investments ensure better and improved risk management in the banking sector. It is also possibility of better assurance of capitalization

in monetary market which offers financial stability in the banking sector in India.

Major challenges faced by banks

With the recent developments of banking sector there is increased competition from domestic and international markets. The transaction costs of carrying non-performing assets and substandard assets in its books, frequent changes in key policy rates and reserve requirements by the RBI and finally the banks are maintaining sufficient liquidity.

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Conclusion:

In the days to come, banks are expected to play a very useful role in the economic development and the emerging market will provide ample business opportunities to harness. Human Resources Management is assuming to be of greater importance. As banking in India will become more and more knowledge supported, human capital will emerge as the finest assets of the banking system. Ultimately banking is people and not just figures. Therefore, it can be concluded that the banking sector in India is progressing with the increased growth in customer base, due to the newly improved and innovative

facilities offered by banks. FDI has provided a great fillip to the whole of banking sector industry as banks are now competing at a global level.

References

1. Banking Structure in India-The Way Forward, DiscussionPaper, Reserve Bank of India, August 2013.

2. Financial Stability Report, Reserve Bank of India, June 2013.

3. Tamal Bandyopadhyay, Banking India will change – body andsoul, Live Mint, Web Page, JAN 02 2014

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RECENT TRENDS IN INDIAN BANKING

Sri V.Chittabbai Lecturer in Commerce

Dr.V.S.Krishna. Govt. Degree & P.G. College (A) Visakhapatnam

Sri G.Raj Kumar Lecturer in Commerce Govt. Degree College

Chodavaram, Visakhapatnam

B.Ramachandra Rao Lecturer in Commerce

Dr.V.S.Krishna. Govt. Degree & P.G. College (A) Visakhapatnam

Today, we are having a fairly well developed banking system with different classes of banks viz., public sector banks, foreign banks, private sector banks, regional rural banks and co-operative banks. The banking industry has experienced a series of significant transformations in the last few decades. The RBI’s most important goal is to maintain monetary stability in India. The rates used by RBI to

achieve this are the bank rate, repo rate, reverse repo rate and the cash reserve ratio. Reducing inflation has been one of the most important goals of RBI for some time.

There has been considerable innovation and diversification in the business of major commercial banks. Some of them have engaged in the areas of consumer credit, credit cards, merchant banking, internet and phone banking or mobile banking, leasing, mutual funds etc. Since the eighties, banks have increased the scope and scale of their activities and several banks have become very large institutions with a presence in multiple regions of the country. The present paper entitled “Recent Trends in Indian Banking” made an attempt to examine the new trends in commercial banking with respect to the development of Information Technology.

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Recent Development in Indian Banking with Respect to it Enabled Services

Indian Banking Sector integrated its services with Information Techonology for fast and qualitative services to the customers. The following are some of the important IT enabled services of Indian

Banking Industry. A much explanation was not given to these services in this paper, because these are the services, which are very familier to the maxmum people now a days.

1. Electronic Payment Services

2. Real Time Gross Settlement (RTGS)

3. Electronic Funds Transfer (EFT)

4. Electronic Clearing Service (ECS)

5. Automatic Teller Machine (ATM)

6. Point of Sale Terminal

7. Tele Banking

8. Electronic Data Interchange (EDI)

Electronic Payment Services - E Cheques

Nowadays we are hearing about e-governance, e-mail, e-commerce, e-tail etc. In the same manner, a new technology is being developed in US for introduction of e-cheque, which will eventually replace the conventional paper cheque. India, as harbinger to the introduction of e-cheque, the Negotiable Instruments Act has already been amended to

include; Truncated cheque and E-cheque instruments.

Real Time Gross Settlement (RTGS)

Real Time Gross Settlement system, introduced in India since March 2004, is a system through which electronics instructions can be given by banks to transfer funds from their account to the account of another

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bank. The RTGS system is maintained and operated by the RBI and

provides a means of efficient and faster funds transfer among banks facilitating their financial operations. As the name suggests, funds transfer between banks takes place on a 'Real Time' basis. Therefore, money can reach the beneficiary instantaneously and the beneficiary's bank has the responsibility to credit the beneficiary's account within two hours.

Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make payment to another person/company etc. can approach his bank and make cash payment or give instructions/authorization to transfer funds directly from his own account to the bank account of the receiver/beneficiary. Complete details such as the receiver's name, bank account number, account type (savings or current account), bank name, city, branch name etc. should be furnished to the bank at the time of requesting for such transfers so that the amount reaches the beneficiaries' account correctly and faster. RBI is the service provider of EFT.

Electronic Clearing Service (ECS)

Electronic Clearing Service is a retail payment system that can be used

to make bulk payments/receipts of a similar nature especially where each individual payment is of a repetitive nature and of relatively smaller amount. This facility is meant for companies and government departments to make/receive large volumes of payments rather than for funds transfers by individuals.

Automatic Teller Machine (ATM)

Automatic Teller Machine is the most popular devise in India, which enables the customers to withdraw their money 24 hours a day 7 days a week. It is a devise that allows customer who has an ATM card to

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perform routine banking transactions without interacting with a

human teller. In addition to cash withdrawal, ATMs can be used for payment of utility bills, funds transfer between accounts, deposit of cheques and cash into accounts, balance enquiry etc.

Point of Sale Terminal

Point of Sale Terminal is a computer terminal that is linked online to the computerized customer information files in a bank and magnetically encoded plastic transaction card that identifies the customer to the computer. During a transaction, the customer's account is debited and the retailer's account is credited by the computer for the amount of purchase.

Tele Banking

Tele Banking facilitates the customer to do entire non-cash related banking on telephone. Under this devise Automatic Voice Recorder is used for simpler queries and transactions. For complicated queries and transactions, manned phone terminals are used.

Electronic Data Interchange (EDI)

Electronic Data Interchange is the electronic exchange of business documents like purchase order, invoices, shipping notices, receiving advices etc. in a standard, computer processed, universally accepted format between trading partners. EDI can also be used to transmit financial information and payments in electronic form.

CONCLUSION

The discussion made so far with respect to the recent trends in

Indian banking with respect of the Information Technology enabled services through light on the important aspects of banking with IT enabled services and warns that the banking sector will face more and more problems like cyber crimes which in turn leads to the loss of

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confidence on IT enabled services of banks among customers and so on.

To get rid of these losses of cyber crimes, steps are to be taken not only at the government level but also at banking and customer level. Only when these three groups of people are works together, this rate of cyber crimes may come down and these IT enabled services become fruitful.

References

1. Dhanvani, S. K. (2013). Recent Trends in Indian BankingIndustry. Abhinav , 60-63.

2. James H. Burrows (1996). "Electronic Data Interchange(EDI)".National Institute of Standards

3. Kamlesh Bajaj & Dehjaji ; E-Commerce,Tata McGraw hillpublications Co. Ltd., New Delhi,2005

4. Kathiriya, R. S. (2013). Evolution of Cyber Crimes in India.International Journal of Emerging Trends and Technology in

Computer Science , 2 (4), 240-243.

5. Ministry of Home Affairs, G. o. (2013). National Cyber CrimeReport. India: National Cyber Crime Records Bereau.

6. O’Brien, J (1999). Management Information Systems –Managing Information Technology in the InternetworkedEnterprise. Boston: Irwin McGraw-Hill. ISBN 0071123733.

7. S.B. Verma ; E-Banking and Development of Banks, Deep &Deep Publications, New Delhi ,2008

8. V.K.Puri, S. a. (2013). Indian Ecconomy - Its DevelopmentExperience. New Delhi: Himalaya Publishing House.

9. Various issues of Business week , The Economist , BusinessToday , The Economic times and Financial Express .

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ADOPTION OF INFORMATION AND COMMUNICATION TECHNOLOGY IN THE BANKING SECTOR: SERVICES

AUGMENTATION OF THE ATM MARKETPLACE AS A CUSTOMER CHANNEL IN KERALA

K.Chaitanya Krishna Sai BE(ECE)

Alumini PSG College of technology Coimbatore

Introduction

Modern banks use Information Communication Technologies (ICT) to store customer information and to integrate multi channel transaction of customers. With the onset of globalisation within this highly competitive banking environment, the role of information technology has metamorphosed into more of a driver of business than a mere facilitator. It has propelled in multi fold the capabilities of banks to acquire potential customers, retain and develop existing customers and increasing efficiency of banking processes. Information technology is seen adopted in banks in the form of electronic payments services, real time gross settlements, electronic fund transfers, electronic clearance services, automated teller machine, tele banking and point of sale terminals. The implications of these services include anytime, anywhere banking at the convenience of the customer with less effort and low risk.

Indian retail banks faced with cut throat competition and in a new phase of growth are daunted with an array of market, customer, regulatory, cost and operational challenges. To overcome these barriers and meet the new growth targets, they have to draw inspiration from some notably innovative retailing models. One of these models also called as the “Next Generation Banking” Models is the “Financial/Non Financial Digital Ecosystem” Bank. In this model Bank as a trust centre has an extended proposition (financial and non financial) and it is implemented leveraging the power of mobile using M payment services. Likewise, banks can identify new ways of doing business like branch redesign, delivering out- of- hours banking for business customers to make end of day deposits, revolutionizing the use of banking channels like ATM. An additional point of interaction can be created that is relevant to the customer at potential touch points like ATM counters. The upside of this intervention is no additional investment but extended breadth of customer relationship.

According to the Reserve Bank of India, an ATM is defined as “a computerised machine computerized machine that provides the customers of banks the facility of accessing their account for dispensing cash and to carry out other

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financial & non-financial transactions without the need to actually visit their bank branch”.

Modern banking through ATMs has seen itself metamorphose from the very first Bankograph installed in the lobbies of New York’s First National City Bank (now Citibank) in 1960, the first ATM installed by Barclays Bank in 1967 and the first magstripe card for New York’s Chemical Bank in 1969 set up by Docutel, to the first on-line ATMs in 1974 and the voice-guided ATMs of today (Businessworld, 2013). India’s tryst with ATMs began in 1988 with HSBC in Mumbai. In June 2012, the Reserve Bank of India gave clearance to non-banking entities to set up ATMs. The WLATMs or White-Label ATMs are all set to expand the reach and subsequent opportunities of banking services especially in tier-III and tier-IV centres. Besides, they can replace the banks physical space and condense teller functions to the screen space of a few inches thereby reducing costs also. The growth of ATMs will predominately come from regulatory changes pertaining to financial inclusion, increased penetration and white-label ATMs (Celent, 2012).

According to the ATM statistics for January 2013, released by the Reserve Bank of India, there are a total of 107813 ATMs operating in the country. The number of transactions through ATMs using credit cards was 211453 and using debit cards was 476637271. The transactions using credit cards and debit cards through ATMs amounted to Rs. 1218.37 million and Rs. 1491838.3 million respectively (RBI, 2013). Nearly 65 per cent of the new ATMs will be deployed in tier II and tier III cities while tier I cities will show a growth rate of 20 per cent (Celent, 2012).

A recent report, ‘Global ATM Market and Forecasts to 2017’ by the strategic research and consulting firm RBR forecasts that India will have 400,000 ATMs by the year 2017. There are an estimated 74 ATMs per million in India as opposed to China's with a density of 300 ATMs per million. This figure is estimated to grow to 120 ATMs per million in India over the next 3 years compared with 400 ATMs per million in China (Business Standard, 2013). However, the Indian population is unique in the sense that they would still like to see their transactions take place compared to customers of other countries which have embraced online payments.

Review of Literature and Conceptual Background

Most of the conceptual skills of marketing adopted by banks have their origin in the consumer goods manufacturing industry but Indian banking is a very difficult industry (Shanker R., 2004). Traditionally banking involved channels that were independently functioning in silos and customers had exclusive experiences which were not synergised through integrations. Modern banks are drawing meaningful insights from the otherwise siloed customer

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interactions and experiences and gain a competitive edge over their competitors (Nagarajan N., 2013).

Banks confronted with a wide ambit of opportunities like automation of processes, digitalisation etc., has enabled customers to access banking services at their convenience, over various channels like phone, internet and ATM (Kohli J. and Premrajan A., 2013). Banks benefit from providing value-added services through alternate and innovative delivery channels like ATMs by making the services simple, fast, secure, hence effectively acquiring new customers, retaining their existing customers, keeping customers highly satisfied with the services provided, lowering operational cost, lowering transaction processing cost, widening customer base irrespective of geographical barrier and increasing profits on bottom-line (Vijesh R et. al., 2011).

In this modern world where money plays an important role in survival, ATMs help people to obtain money whenever needed by them and also during emergency conditions (Pandian & Sharma, 2012). A previous research of Ulengin B. (1998) in Turkey and Almossawi (2001) in Bahrain concluded that ATM network in convenient locations was a dominant factor in bank selection decision making of consumers in those countries. Tuli, Khatri and Yadav (2012), in their study established that the key factor which influences the customer to use the ATM services is it’s convenience in use and availability of machines.

Comparing the service quality dimensions of private and public sector banks, it is worth highlighting that cost effectiveness of ATM service, perception is approximately same for both kinds of banks (Kumbhar V. M., 2011). Interestingly, an earlier study on Customer Satisfaction in the Indian Banking Sector, reports on the different satisfaction levels of the customers that while private banks have been able to attract the younger customers with higher educational levels, who are comfortable with multi channel banking, the customers of the national bank are older and more satisfied with the traditional facilities, (Jham et. al. 2008). It is again, observed that the customers prefer ATM use over other e-banking services. Nearly 95% of respondents use ATM services, followed by internet banking, and phone banking (Shariq & Tondon 2012). Setting aside an 80s-era mentality of building big, banks today are moving to a smarter, smaller, economically sustainable approach and advanced ATM technologies can condense teller functions that used to fill hundreds of square feet into a device with approximately the dimensions of a card table (NCR, 2013).

For the ATM industry, India is a huge market with vast potential. It's a country of 1.2 billion people, 40 percent of them unbanked, according to the Reserve Bank of India (RBI). And Visa estimates that 91 percent of consumer

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purchases, by banked and unbanked Indians alike, are made with cash. And to provide the day-to-day, 24/7 services needed for true financial inclusion, RBI is pushing other programs to bring banking to the masses. And one major program is its initiative to increase the number of ATMs available to villagers in rural areas (Cluckey S., 2012). Hence the banks are inching closer to the period when across channels banks have to exploit and take advantage of opportunities to interact with potential customers. If banks can understand and approach their customers in the most preferred channel, it will prove to be a catalyst in generating greater ROIs (Nagarajan N., 2013).

The Flower of Service model captures eight clusters (represented by eight petals of a flower) of tangible and intangible supplementary services that embellish the core service. These eight petals include the areas of information, consultation, order taking, hospitality, safe keeping, exceptions, billing and payment.

Supplementary services may actually drive customer decisions because when two or more companies are competing in the same market for similar basic services, the only thing that distinguishes them is the supplementary services they offer. Customers look for organizations that offer the most supplementary services with the same price or a reasonable price, or they are willing to pay a premium to get additional supplementary services (Lovelock, 2001). In this study, only six supplementary services are used in the proposed model; Information, Consultation, Order Taking, Exceptions, Billing and Payment. We have excluded hospitality and safe keeping because the ATM channel cannot be used to provide these supplementary services. An elaboration on the six supplementary services used in this study is provided below.

Information: about how or where to buy or use a product, or reminders, documents and manuals.

Consultation: adding advice and customization around customer needs can add value.

Order-taking: recording orders and giving information on availability and delivery.

Exception: allowing for flexibility, when things go wrong or in exception circumstances adds value.

Billing: customers want bills that are accurate and easy to understand and contact details if they have queries.

Payment: offering payment options, such as annual, monthly or weekly payments and cash, credit card or direct bank payments may reduce the ‘pain’ of paying for something.

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A timeline of the various services that have been provided by ATMs have been displayed in Table 1. (Kumar et al., 2011) showcases how ATM services have shifted from simple deposit and withdrawal transactions to include non banking transactions as well.

Sufficient Number of ATMs, Secure locations, User-friendly System, Convenient Locations and ATM Functions are some of the variables considered important in the context of ATMs in various studies (Joseph and Stone,2003; Buttle and Alldigan, 2002; Bahia and Nantel, 2000 and Jabnoun and Al-Tamimi, 2003).

Table 1. Timeline of ATM Services provided by Banks

Period Features/Functionalities

1988-1994 (the Initial Period) Deposit of Cash

Withdrawal of Cash

1995-1999 (Early Developments) Mini Statement

Balance Inquiry

2000-2001 (First Extension) Coupon Dispensing

2002-2004 (Extended

Functionalities)

Fulfilling Requests from Customers (e.g. Check Book)

Account Transfers

Touch Screen Menus/Facilities

2004-2006 (non-banking

services)

Ticket Booking-Railway and Airlines

Bill Payments

Mobile Recharges

Future (2007 onwards) Check Deposit with Scanning

Customized ATMs

Ubiquitous Multifunction ATMs

Biometric ATMs

A summary of ATM based services offered by the private and public sector banks that were sampled is presented in table2. It is evident that the services provided are very limited with a vast majority being banking related services and only a handful of value-added services. There is little difference in the type of services being offered by private and public sector banks. In this regard

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neither private sector nor public sector banks have differentiated their ATM related services beyond extra features such as personalized cash withdrawals.

Table 2. ATM Services offered by Private sector and Public sector banks

Private sector banks Public sector banks

Personalised cash withdrawals

View account balances and mini-statements

Change ATM PIN

Order a cheque book or account statement

Credit Card Payment

Deposit cash or cheques

Transfer funds between accounts

Refill your Prepaid mobile

Pay your utility bills

Cheque Status Enquiry

NetBanking password request:

Registration for Mobile Banking

Pay your Taxes

Withdraw cash

Make payments for purchases

Recharge pre-paid mobile phones

Pay utility bills

Payment of Credit Card bills

Payment of insurance premium

Pay fees of select colleges

Registration of Mobile Banking and SMS Alerts

Donate to Temple Trusts

Donate to Relief Funds

Research Methodology

This study was based on primary data collected through a structured questionnaire from the customers of private and public sector banks in two stages. Stratified random sampling was employed to identify the banks in the first stage. In the second stage, bank customers using ATMs in and around Kochi City were sampled on the basis of convenience. The sampling frame for the study was the list of all private bank and public sector banks compiled by a leading business and finance vortal, moneycontrol.com. Three private and public sector were chosen at random and the ATM usage patterns and perceptions of these bank customers were studied. The sample included ICICI Bank, HDFC Bank, Axis Bank, State Bank of India, Punjab National Bank and Union Bank of India. The sampling unit for the study are ATM users in Kochi. The inclusion criterion was those bank customers from in and around Kochi

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who used ATMs. The exclusion criterion was customers of banks who did not use ATMs.

Data Analysis and Findings

Nearly all the respondents were used ATMs twice or more in a week. Figure 1 shows that ATMs are a relatively popular channel for banking services. This is a promising sign for banks which are considering adding to the bouquet of services that they already offer.

Figure 1. Frequency of Use of ATMs

Figure 2 displays the variety of services and the regularity with which customers use ATM services. Cash Withdrawal, Balance Enquiry, Mini Statement and Utility Bill Payment are the most frequently used ATM services. There is a visible inertia exhibited by the customers when it comes to the use of various services at ATMs.

Figure 2. Frequency of Use of ATM Services

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The diverse issues that bank customers perceive while using ATMs is shown in figure 3. The statistics show that ATMs are not perceived to be secure with a majority of respondents mentioning that there is a chance for fraudulent transactions. Most of the customers had to wait in long queues, faced technical issues and experienced long waiting times to finalise the transactions while interacting with ATMs.

Figure 3. Perception of Customers towards ATMs

The study tried to identify whether the customers would be receptive to a variety of supplementary non-banking services. Figure 4 shows that the respondents are willing to use a whole range of supplementary services through the ATM network. The most preferred supplementary services were Reminders, Service Usage Instructions, Receipts and Tickets, Notification of Changes in Services Offered and Loyalty-related Offers. The figures show that there is a lot of interest among customers to see new services being offered in the ATM channel.

Figure 4. Customer Preference for Additional Services through ATMs

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Discussion of Results

The majority of respondents are regular users of ATMs but they have confined themselves to using only the basic banking services being offered through the ATMs. As with every banking channel, there are some hindrances to the effective working of this mode of banking. Respondents have specified technical issues and long waiting times both outside and during ATM operations as roadblocks in their experience with ATMs. The customers were however amenable to experiencing new non-banking services such as Reminders, Service Usage Instructions, Receipts and Tickets, Notification of Changes in Services Offered and Loyalty-related Offers.

We have developed an Augmented ATM Services Model (AATMS Model) shown in figure 5, which is based on the Flower of Services Model (Lovelock, 2001). There have been limited studies which focus on the efficient use of ATMs to deliver value-added services to customers especially in the Indian context. This model attempts to provide a solution to banks to make the ATM channel more feature rich and cost effective.

Marketers agree that if a marketing message is delivered to a customer while they are in the process of thinking about the subject, the marketing effort is more likely to meet with success. If banks can take a lead from this principle and leverage their ATM networks to deliver targeted messages, it could enhance the revenue generation capabilities of an otherwise under-utilised banking channel. Further, banks could expand their ATM network and subsequently the points of interaction with customers to offer a larger assortment of services.

The Augmented ATM Services Model in figure 5 shows the various services that can be provided to bank customers through the existing ATM channel. The customer arrives at the ATM either during peak or non-peak hours. This waiting period is experienced by customers especially in cases where the number of ATMs rendering services is low. The waiting time in queues has been cited by a large proportion of respondents as a major problem they face at ATMs. The AATMS Model aims to rectify this problem through Pre-service engagement of customer during this particular waiting period.

The customer can access both core and supplementary services through the proposed system. Customers require a sufficient number of ATMs and these ATMs need to have a variety functions (Joseph and Stone, 2003; Buttle and Alldigan, 2002; Bahia and Nantel, 2000 and Jabnoun and Al-Tamimi, 2003). The AATMS Model has six services; Information, Consultation, Order Taking, Exceptions, Billing and Payment which are based on the Flower of Services Model and the study has shown that bank customers are very receptive to these services being provided through ATMs. The information on services

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which the customer uses can be used as inputs by the bank to provide customized services throughout the ATM network.

Figure 5. AUGMENTED ATM SERVICES MODEL

Conclusion

A pertinent revelation of the study is that even though there are a lot of banking services being offered through the ATM channel, the customers do not use most of these very regularly. However, the number of supplementary services being offered is very limited but the statistics indicate that there is a lot of interest in these new non-banking services with the most preferred supplementary services being Reminders, Service Usage Instructions, Receipts and Tickets, Notification of Changes in Services Offered and Loyalty-related Offers.

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The literature indicates that there is going to be a massive expansion in the number of ATMs being deployed by both private sector and public sector banks in India. This optimistic increase is going to be bolstered by the fact that the Reserve Bank of India has given the go ahead for white-label ATMs in India.

It is imperative that banks differentiate themselves through ATMs, one of the most prominent channels of banking in addition to the other channels. Although the ATM channel has been in existence for a very long time in the country, it is one of the most under-utilized channels of banking. Banks should streamline their investment measures and respond positively to the long term value that technological applications and innovative service delivery processes provide to the businesses. Banking is ardently competitive these days and it is competitive because traditional advantages like scale, location, access to needs, distribution have disappeared and have been replaced with digital, dynamic, competitive and yet a highly personalised milieu. This calls for a different kind of banking, one that takes full advantage of self service concept like ATMs. The objective should be to harness the power of customer relationships ensuring the maximisation of sales potential of each transaction, providing personalised marketing messages and offer value added services to the discriminating customer.

There is limited knowledge on ATMs and supplementary services being offered through this channel in the Indian context. Banks in a large number of countries have used their ATM networks to offer a plethora of non-banking services and have met with success. A future research task would be to study the further applications of this model in other contexts. Consequently a more comprehensive range of strategies will emerge that can be employed by the banking industry.

References:

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2. Bahia, K. & Nantel, J. (2000). A reliable and valid measurement scale for theperceived service quality of banks. The International Journal of BankMarketing, 18 (2), 84-91.

3. Business Standard. (2013). Retrieved June 10, 2013, fromhttp://www.business-standard.com/article/economy-policy/as-300-mn-ready-to-enter-banking-net-atm-makers-prepare-for-the-party-113032700014_1.html

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6. Cluckey, S. (2012) “Are gift cards the Next Big Thing for ATMs?”ATMmarketplace

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7. Hota, J. (2013). Growth of ATM Industry in India. CSI Communications, p.23, February 2013. Available at SSRN: http://ssrn.com/abstract=2214980

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