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Submitted to

KURUKSHETRA UNIVERSITY, KURUKSHETRA In partial fulfillment of the requirement for the degree of MASTERS OF BUSINESS ADMINISTRATION (MBA)
(Session 2006-2008) UNDER THE GUIDANCE OF: Prof. GIRIDHAR GOPAL Faculty, MMIM Submitted by: NEHA JAIN Roll no: 1562 MBA 4TH SEM


(A) (B) (C) Declaration Preface Acknowledgement Privatization of Banking Sector Research Methodology

Chapter 1 - Introduction to Banking industry Chapter 2 Chapter 3 i) ii) iii) iv) v) vi)

Literature review Introduction Objective Of Study Plan Of Study Type & Techniques Of Research Sources Of Data Sample Plan vii) Analysis & Interpretation viii) Limitations Of Study Chapter 4 Chapter 5 Profile of top 5 Nationalized and 5 Private Banks Chapter 6 - & Data Analysis interpretation Chapter 5 Findings conclusion Bibliography Suggestion

Practical training is an important part of the theoretical studies. It is of an immense importance in the field of management. It offers the student to explore the valuable treasure of experience and an exposure to real work culture followed by the industries and there by helping the students to bridge gap between the theories explained in the books and their practical implementations. Research Project plays an important role in future building of an individual so that he/she can better understand the real world in which he has to work in future. The theory greatly enhances our knowledge and provides opportunities to blend theoretical with the practical knowledge. I have completed the Research Project on COMPARISON OF PERFORMANCE OF NATIONALIZED BANKS & PRIVATE BANKS I have tried to cover each and every aspect related to the topic with best of my capability.

I hope research would help many.

Today after completing my project report, I feel a great relief & satisfaction. Now when I look back, I still remember the day when I was assigned this project COMPARISON OF PERFORMANCE OF NATIONALIZED BANKS AND PRIVATE BANKS. I was somewhat puzzled & a bit nervous & curious about the project. This project work would have been simply incomplete without the acknowledgement of those people who have hand behind in its success. Perseverance, inspiration and motivation have always played a great role in the success of any venture. At this level of understanding it is often difficult to understand the wide spectrum of knowledge without proper guidance and advice. First of all, I would like to thank the supreme power, the almighty GOD, who is really responsible for the satisfactory completion of my project work. Secondly, MY PARENTS, whom I am greatly indebted having brought me up with love & encouragement throughout my student life. I love to thank Mr. Giridhar Gopal, lecturer of MMIM for his inimitable support and constructive criticism in completing this project. Last but not the least I would like to express my gratitude to Dr. Sanjiv Marwah (Director) who have provided me with the opportunity to work on this project report.

Introduction To Bank

A banker or bank is a financial institution that acts as a payment agent for customers, and borrows and lends money The first modern bank was founded in Italy at Genoa in 1406, its name was "Banco di San Giorgio" (Bank of St. George). Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM. Banks borrow money by accepting funds deposited on current account, accepting term deposits and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current account, by making installment loans, and by investing in marketable debt securities and other forms of lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. Banks borrow most funds borrowed from households and non-financial businesses, and lend most funds lent to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.
Banks are critical to our economy. The primary function of banks is to put their account holders' money to use by lending it out to others who can then use it to buy homes, businesses, send kids to college... When you deposit your money in the bank, your money goes into a big pool of money along with everyone else's, and your account is credited with the amount of your deposit. When you write checks or make withdrawals, that amount is deducted from your account balance. Interest you earn on your balance is also added to your account.

DEFINITION OF BANK: According to, a bank is: an institution that deals in money and its substitutes and provides other financial services. Banks accept deposits and make loans and derive a profit from the difference in the interest rates paid and charged, respectively.

Definition: An establishment for the custody, loan, exchange, or issue, of money, and for facilitating the transmission of funds by drafts or bills of exchange; an institution incorporated for performing one or more of such functions, or the stockholders (or their representatives, the directors), acting in their corporate capacity.

Definitions of banking:
engaging in the business of keeping money for savings and checking accounts or for exchange or for issuing loans and credit etc. transacting business with a bank; depositing or withdrawing funds or requesting a loan etc. A bank is a business which provides financial services for profit. Traditional banking services include receiving deposits of money, lending money and processing transactions. Some banks (called Banks of issue) issue bank notes as legal tender.

Economic functions
The economic functions of banks include: 1. issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par and effectively transferable by mere delivery in the case of banknotes, or by drawing a cheque, delivering it to the payee to bank or cash. 2. netting and settlement of payments -- banks act both as collection agent and paying agents for customers, and participate in inter-bank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economise on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables payment flows between geographical areas to offset, reducing the cost of settling payments between geographical areas. 3. credit intermediation -- banks borrow and lend back-to-back on their own account as middle men 4. credit quality improvement -- banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and the bank's own capital which provides a buffer to absorb losses without defaulting on its own obligations. However, since banknotes and deposits are generally

unsecured, if the bank gets into difficulty and pledges assets as security to try to get the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. 5. maturity transformation -- banks borrow more on demand debt and short term debt, but provide more long term loans. Bank can do this because they can aggregate issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintain reserves of cash, invest in marketable securities that can be readily converted to cash if needed, and raise replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets) because they have a high and more well known credit quality than most other borrowers.

Types of Banks 1. central bank

The central bank, reserve bank, or monetary authority, is the entity responsible for the monetary policy of a country or of a group of member states. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a "bailout" lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.

The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the begining. The Government held shares of nominal value of Rs. 2,20,000. Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor

and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following: To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage.

Functions of Central Bank The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the Reserve Bank of India. Bank of Issue Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The assets and liabilities of the Issue Department are kept separate from those of the Banking Department. Banker to Government The second important function of the Reserve Bank of India is to act as Government banker, agent and adviser. The Reserve Bank is agent of Central Government and of all State Governments in India excepting that of Jammu and Kashmir. The Reserve Bank has the obligation to transact Government business, via. to keep the cash balances as deposits free of interest, to receive and to make payments on behalf of the Government and to carry out their exchange remittances and other banking operations. The Reserve Bank of India helps the Government - both the Union and the States to float new loans and to manage public debt. The Bank makes ways and means advances to the Governments for 90 days. It makes loans and advances to the States and local authorities. It acts as adviser to the Government on all monetary and banking matters. Bankers' Bank and Lender of the Last Resort The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a cash balance equivalent to 5% of its demand liabilites and 2 per cent of its time liabilities in India. By an amendment of 1962, the distinction between demand and time liabilities was abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit liabilities. The minimum cash requirements can be changed by

the Reserve Bank of India. The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial accommodation in times of need or stringency by rediscounting bills of exchange. Since commercial banks can always expect the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort. Controller of Credit The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India. It can do so through changing the Bank rate or through open market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular groups or persons on the basis of certain types of securities. Since 1956, selective controls of credit are increasingly being used by the Reserve Bank. As supereme banking authority in the country, the Reserve Bank of India, therefore, has the following powers: (a) It holds the cash reserves of all the scheduled banks. (b) It controls the credit operations of banks through quantitative and qualitative controls. (c) It controls the banking system through the system of licensing, inspection and calling for information. (d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks. Custodian of Foreign Reserves The Reserve Bank of India has the responsibility to maintain the official rate of exchange. Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of India's reserve of international currencies. The vast sterling balances were acquired and managed by the Bank. Further, the RBI has the responsibility of administering the exchange controls of the country. Supervisory functions In addition to its traditional central banking functions, the Reserve bank has certain nonmonetary functions of the nature of supervision of banks and promotion of sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks, relating to licensing and establishments, branch expansion, liquidity of their assets, management and methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorised to carry out periodical inspections of the banks and to call for returns and necessary information from them. The supervisory functions of the RBI have helped a great deal in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation. Promotional functions With economic growth assuming a new urgency since Independence, the range of the Reserve Bank's functions has steadily widened. The Bank now performs a varietyof developmental and promotional functions, which, at one time, were regarded as outside the normal scope of central banking. The Reserve Bank was asked to promote banking habit, extend banking facilities to rural and semi-urban areas, and establish and promote new specialised financing agencies. Classification of RBIs functions

The monetary functions also known as the central banking functions of the RBI are related to control and regulation of money and credit, i.e., issue of currency, control of bank credit, control of foreign exchange operations, banker to the Government and to the money market. Monetary functions of the RBI are significant as they control and regulate the volume of money and credit in the country.

2. Commercial banks
It raises funds by collecting deposits from businesses and consumers via checkable deposits, savings deposits, and time (or term) deposits. It grants different loans to businesses and consumers like secured loans, unsecured loans, mortgage loans. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds.

The role of commercial banks

Commercial banks engaged in the following activities: processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means

issuing bank drafts and bank cheques accepting money on term deposit lending money by way of overdraft, installment loan or otherwise

providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures

safekeeping of documents and other items in safe deposit boxes currency exchange

sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a financial supermarket

3. co-operative banks

the co-operative banks are institutions established with principle of co-operation. The objective of such organizations is to facilitate rural credit & to promote thrift and selfhelp among the economically weaker sections of the society. Like commercial banks, the co-operative banks also received deposits and lend money. But they lend money to their members and make incidental profits, although their sole objective is not profit earning. In other words, The potential advantages of a co-operative bank were seen broadly. It would, for instance, be able to bring together cooperative retail societies which had surplus funds, and co-operative production which lacked the capital required for further development. The bank would provide money for expansion in a boom and help societies out during a downturn in the trade cycle, and hence insulate the movement from the vagaries of capitalism; it also provided an opportunity to be more independent of outside financial control. This was also part of the principle of mutual self-help.

4. Industrial Bank
An industrial loan company (ILC) or industrial bank is a financial institution in the United States that lends money, and may be owned by non-financial institutions. The industrial banks provide long term loans and supply fixed capital to industrial concerns by subscribing to the shares and debentures floated by the companies. As they have financed the share capital, the industrial banks play an important role in the management and administration of the companies. The industrial banks have acted as underwriters in the floatation of new industrial concerns. In addition to this, trhey also arrange for medium- term loans. But in india, we have a numberof financial corporations, development corporations and investment corporations acting as industrial development banks. 5. development banks

in india, development banks were set up to cater to needs of agriculture & industries. Development banks provide long term and medium term loans. They also play an important role in promoting investment projects, underytaking project reports and providing technical advice and managerial services. In short, the development banks play the role of finance corporations and development corporation. A number of financial corporations and banks have been set up at the central and state level to promote agricultural and industrial development in our country.

6. Exchange Banks: These are also commercial banks engaged in the foreign exchange transactions. They also received deposits and lend money. They build up balances abroad by purchasingclaims to foreign currencies. They also sell these proceeds to the importers. They act as businessmen in buying & selling foreign currencies or claims to foreign exchange. This bank also grant loans to the exporters and importers. 7. indigenous banks: the indian central banking enquiry committee has defined an indigenous banker as an individual or private firm receiving deposits and dealing in hundis or lending money. The indigenous bankers have their own code of conduct. They dont have to follow the RBIs directuives and procedures. This bank deals with agriculturilists and small businssmen.

8. Regional Rural Banks:

The objective of establishing the Regional Rural Banks was to develop the rural economy by developing agriculture, trade, commerce and industry and other productive activities in the rural areas. In shoet, the Regional Rural Banks are to act as an alternative agencyto provide institutrional credit in the rural areas and to replace the money lenders in course of time. At the same time, the RRBs should supplement the activities of cooperative banks.

Banking services in India

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. 1. Bank Account 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: Bank Savings Account - Bank Savings Account can be opened for eligible person / persons and certain organisations / agencies (as advised by Reserve Bank of India (RBI) from time to time) Bank Current Account - Bank Current Account can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs / Specified Associates / Societies / Trusts, etc. Bank Term Deposits Account - Bank Term Deposits Account can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs/ Specified Associates / Societies / Trusts, etc. Bank Account Online - With the advancement of technology, the major banks in the public and private sector has faciliated their customer to open bank account online. Bank account online is registered through a PC with an internet connection. The advent of bank account online has saved both the cost of operation for banks as well as the time taken in 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.

2. Plastic Money
Credit Card 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 Standard Chartered credit card HSBC credit card Citibank Credit Card


Debit cards are also known as check cards. Debit cards look like credit cards or ATM (automated teller machine) cards, but operate like cash or a personal check. Debit cards are different from credit cards. While a credit card is a way to "pay later," a debit card is a way to "pay now." When you use a debit card, your money is quickly deducted from your checking or savings account.

Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants. You can use your card anywhere merchants display your card's brand name or logo. They offer an alternative to carrying a checkbook or cash. TWO TYPES OF DEBIT CARDS "On-line" debit cards: These cards usually are enhanced ATM (automated teller machine) cards which work the same as they would in an ATM transaction. It is an immediate electronic transfer of money from your bank account to the merchant's bank account. To access your account at a store terminal, you must punch in your personal identification number (PIN), as you would at an ATM. The system checks your account to see if it has enough money available to cover the transaction. "Off-line" debit cards: These cards usually look like a credit card and resemble a credit card transaction. The merchant's terminal reads your card, identifies it as a debit rather than a credit card, and creates a debit against your bank account. However, instead of debiting your account immediately, it stores the debit for processing later -usually within 2-3 days. Most, but not all, transactions are verified to see if there are adequate funds. Instead, of using a PIN number, the customer must sign a receipt, as he or she would with a credit card.

The "on-line" and "off-line" distinction may not matter to you unless:

your financial institution charges transaction or monthly fees. you prefer the security of a PIN-required transaction. you prefer that both options not be on one card.

What is the difference between a debit card and a credit card?

It's the difference between "debit" and "credit." Debit means "subtract." When you use a debit card, you are subtracting your money from your own bank account. Debit cards allow you to spend only what is in your bank account. It is a quick transaction between the merchant and your personal bank account.

Credit is money made available to you by a bank or other financial institution, like a loan. The amount the issuer allows you to use is determined by your credit history, income, debts, and ability to pay. You may use the credit with the understanding that you will repay the amount, plus interest if you do not pay in full each month. You will receive a monthly statement detailing your charges and payment requirements.

3. Loans
Banks in India with the way of development have become easy to apply in loan market. The following loans are given by almost all the banks in the country: Personal Loan Car Loan or Auto Loan Loan against Shares Home Loan Education Loan or Student Loan

In Personal Loan, one can get a sanctioned loan amount between Rs 25,000 to 10,00,000 depending upon the profile of person applying for the loan. SBI, ICICI, HDFC, HSBC are some of the leading banks which deals in Personal Loan. Almost all the banks have jumped into the market of car loan which is also sometimes termed as auto loan. It is one of the fast moving financial product of banks. Car loan / auto loan are sanctioned to the extent of 85% upon the ex-showroom price of the car with some simple paper works and a small amount of processing fee. Loan against shares is very easy to get because liquid guarantee is involved in it. Home loan is the latest craze in the banking sector with the development of the infrastructure. Now people are moving to township outside the city. More number of townships are coming up to meet the demand of 'house for all'. The RBI has also liberalised the interest rates of home loan inorder to match the repayment capability of even middle class people. Almost all banks are dealing in home loan. Again SBI, ICICI, HDFC, HSBC are leading. The educational loan, rather to be termed as student loan, is a good banking product for the mass. Students with certain academic brilliance, studying at recognised colleges/universities

in India and abroad are generally given education loan / student loan so as to meet the expenses on tuition fee/ maintenance cost/books and other equipment. 4. Money Transfer 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 businessess 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 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 inorder 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. Remittees 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. By 2007, we will see a good percent of all foreign-born households doing some level of online banking. First-mover banks will start having a window of opportunity to include online transfer functionality within the next couple of years, which currently frequents traditional money transmitters such as Western Union. There is a terrific opportunity for banks and non-banks to offer more robust global inter-institutional funds transfer services online. More than half of Western Union's customers today are already banked, and most do not have an alternative product marketed by their bank that is painless, quick, and cost-effective. That will change as banks offer transfer services through their online channel.

5. Visa Money Transfer

Visa has recently introduced the 'Visa Money Transfer' option for its savings and current account holder of any bank with a visa debit card. This facility helps its customer to transfer funds from his bank account to any visa card, either debit or credit within India. A Visa Money Transfer is of similar kind, in many respects, to the third-party fund transfer option given by some banks to its account holders through e-cheque, but this is restricted to only visa cardholders. How to transfer money? Log on to your bank account through your respective bank websites. Fill the beneficiary details like visa card numbers, name, address and then specify the amount that needs to be transferred. For bank account specify the visa card number and credit card number for paying credit card bill.

Click on to VISA Transfer Payments button. Transfer immediately or on schedule date. Your account will be debited according to the date mentioned.

History Of Banking In India

Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Early phase from 1786 to 1969 of Indian Banks Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III. Phase I The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in india as the Central Banking Authority.

During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Phase II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised. Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: 1949 : Enactment of Banking Regulation Act. 1955 : Nationalisation of State Bank of India. 1959 : Nationalisation of SBI subsidiaries. 1961 : Insurance cover extended to deposits. 1969 : Nationalisation of 14 major banks. 1971 : Creation of credit guarantee corporation. 1975 : Creation of regional rural banks. 1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

Banking Sector Reforms 1999-2000

In line with the recommendations of the second Narasimham Committee, the Mid-Term Review of the Monetary and Credit Policy of October 1999 announced a gamut of measures to strengthen the banking system. Important measures on strengthening the health of banks included: (i) assigning of risk weight of 2.5 per cent to cover market risk in respect of investments in securities outside the SLR by March 31, 2001 (over and above the existing 100 per cent risk weight) in addition to a similar prescription for Government and other approved securities by March 31, 2000, and (ii) lowering of the exposure ceiling in respect of an individual borrower from 25 per cent of the bank's capital fund to 20 per cent, effective April 1, 2000. Capital Adequacy and Recapitalisation of Banks Out of the 27 public sector banks (PSBs), 26 PSBs achieved the minimum capital to risk assets ratio (CRAR) of 9 per cent by March 2000. Of this, 22 PSBs had CRAR exceeding 10 per cent. To enable the PSBs to operate in a more competitive manner, the Government adopted a policy of providing autonomous status to these banks, subject to certain benchmarks. As at end-March 1999, 17 PSBs became eligible for autonomous status. Prudential Accounting Norms for Banks The Reserve Bank persevered with the on-going process of strengthening prudential accounting norms with the objective of improving the financial soundness of banks and to bring them at par with international standards. The Reserve Bank advised PSBs to set up Settlement Advisory Committees (SACs) for timely and speedier settlement of NPAs in the small scale sector, viz., small scale industries, small business including trading and personal segment and the agricultural sector. The guidelines on SACs were aimed at reducing the stock of NPAs by encouraging the banks to go in for compromise settlements in a transparent manner. Since the progress in the recovery of NPAs has not been encouraging, a review of the scheme was undertaken and revised guidelines were issued to PSBs in July 2000 to provide a simplified, non-discriminatory and nondiscretionary mechanism for the recovery of the stock of NPAs in all sectors. The guidelines will remain operative till March 2001. Recognising that the high level of NPAs in the PSBs can endanger financial system stability, the Union Budget 2000-01 announced the setting up of seven more Debt Recovery Tribunals (DRTs) for speedy recovery of bad loans. An amendment in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, was effected to expedite the recovery process. Asset Liability Management (ALM) System The Reserve Bank advised banks in February 1999 to put in place an ALM system, effective April 1, 1999 and set up internal asset liability management committees (ALCOs) at the top management level to oversee its implementation. Banks were expected to cover at least 60 per cent of their liabilities and assets in the interim and 100 per cent of their business by April 1, 2000. The Reserve Bank also released ALM system guidelines in January 2000 for all-India termlending and refinancing institutions, effective April 1, 2000. As per the guidelines, banks and such institutions were required to prepare

statements on liquidity gaps and interest rate sensitivity at specified periodic intervals. Risk Management Guidelines The Reserve Bank issued detailed guidelines for risk management systems in banks in October 1999, encompassing credit, market and operational risks. Banks would put in place loan policies, approved by their boards of directors, covering the methodologies for measurement, monitoring and control of credit risk. The guidelines also require banks to evaluate their portfolios on an on-going basis, rather than at a time close to the balance sheet date. As regards off-balance sheet exposures, the current and potential credit exposures may be measured on a daily basis. Banks were also asked to fix a definite time-frame for moving over to the Value-at-Risk (VaR) and duration approaches for the measurement of interest rate risk. The banks were also advised to evolve detailed policy and operative framework for operational risk management. These guidelines together with ALM guidelines would serve as a benchmark for banks which are yet to establish an integrated risk management system. Disclosure Norms As a move towards greater transparency, banks were directed to disclose the following additional information in the 'Notes to Accounts' in the balance sheets from the accounting year ended March 31, 2000: (i) maturity pattern of loans and advances, investment securities, deposits and borrowings, (ii) foreign currency assets and liabilities, (iii) movements in NPAs and (iv) lending to sensitive sectors as defined by the Reserve Bank from time to time. Technological Developments in Banking In India, banks as well as other financial entities have entered the domain of information technology and computer networking. A satellite-based Wide Area Network (WAN) would provide a reliable communication framework for the financial sector. The Indian Financial Network (INFINET) was inaugurated in June 1999. It is based on satellite communication using VSAT technology and would enable faster connectivity within the financial sector. The INFINET would serve as the communication backbone of the proposed Integrated Payment and Settlement System (IPSS). The Reserve Bank constituted a National Payments Council (Chairman: Shri S. P. Talwar) in 1999-2000 to focus on the policy parameters for developing an IPSS with a real time gross settlement (RTGS) system as the core. Revival of Weak Banks The Reserve Bank had set up a Working Group (Chairman: Shri M. S. Verma) to suggest measures for the revival of weak PSBs in February 1999. The Working Group, in its report submitted in October 1999, suggested that an analysis of the performance based on a combination of seven parameters covering three major areas of i) solvency (capital adequacy ratio and coverage ratio), ii) earnings capacity (return on assets and net interest margin) and iii) profitability (operating profit to average working funds, cost to income and staff cost to net interest income plus all other income) could serve as the framework for identifying the weakness of banks. PSBs were, accordingly, classified into three categories depending on whether none, all or some of the seven parameters were met. The Group primarily focussed on restructuring of three banks, viz., Indian

Bank, UCO Bank and United Bank of India, identified as weak as they did not satisfy any (or most) of the seven parameters. The Group also suggested a two-stage restructuring process, whereby focus would be on restoring competitive efficiency in stage one, with the options of privatisation and/or merger assuming relevance only in stage two. Deposit Insurance Reforms

Growth of banks sector in India

Banks will have to change dramatically from today's traditional institutions if they want to survive in the networked world. They are currently introducing internet banking to try to keep customers, but the move to digital electronic cash, held perhaps by the customer or an independent third party, will mean that the cash can be quite separate from the transaction agent. Cash does not need to be stored in a bank if records in secured databases anywhere can be digitally signed and authenticated. The customer may hold it on his own computer, or in a cyberspace vault elsewhere. With digital signatures and high network security, advanced software will put the customer firmly in control with access to any facility or service anywhere. In fact, no-one need hold cash at all, or even move it around. Cash is just bits today, already electronic records. In the future, it will be an increasingly blurred entity, mixing credit, reputation, information, and simply promises into exchangeable tokens. My salary may be just a digitally signed certificate from BT yielding control of a certain amount of credit, just another signature on a long list as the credit migrates round the economy
The Indian banking system has a large geographic and functional coverage. Presently the total asset size of the Indian banking sector is US$ 270 billion while the total deposits amount to US$ 220 billion with a branch network exceeding 66,000 branches across the country. Revenues of the banking sector have grown at 6 per cent CAGR over the past few years to reach a size of US$ 15 billion. While commercial banks cater to short and medium term financing requirements, national level and state level financial institutions meet longer-term requirements. This distinction is getting blurred with commercial banks extending project finance. The total disbursements of the financial institutions in 2001 were US$ 14 billion. Banking today has transformed into a technology intensive and customer friendly model with a focus on convenience. The sector is set to witness the emergence of financial supermarkets in the form of universal banks providing a suite of services from retail to corporate banking and industrial lending to investment banking. While corporate banking is clearly the largest segment, personal financial services is the highest growth segment.

The recent favourable government policies for enhancing limits of foreign investments to 49 per cent among other key initiatives have encouraged such

activity. Larger banks will be able to mobilise sufficient capital to finance asset expansion and fund investments in technology.

Literature Review
The role of public sector banks and other financial institutions in economic development has been examined in many studies. There are two broad views about government involvement in financial systems around the world, i.e., the development view and the political view. The development view as advocated by Gerschenkron (1962) states that governments can intervene through their financial institutions to direct savings of the people towards developmental sectors in countries where financial institutions are not adequately developed to channel resources into productive sectors. Gerschenkrons view was part of a broader consensus in development economics that favored government ownership of enterprises in strategic economic sectors. Realizing this importance of financial sector in economic development, governments in developing countries sought to increase their ownership of banks and other financial institutions in the 1960s and 1970s, in order to direct credit towards priority sectors. Contrary to this view, in recent years a new political view of government ownership has evolved which asserts that state control of finance through banks and other institutions politicizes resource allocation for the sake of getting votes or bribes for office holders and thereby results in lower economic efficiency. Barth etal. (2001) using cross country data on commercial bank regulation and ownership from over 60 countries find that state ownership of banks is negatively associated with bank performance and overall financial sector development and does not reduce the likelihood of financial crises. Another study [La Porta et al. (2002)], Opinions 406 based on data of government owned banks from 92 countries around the world, finds that government ownership of banks is high in countries which are characterized by low levels of per capita income, underdeveloped financial systems, interventionist and inefficient governments and poor protection of property rights. The study further finds evidence that government ownership of banks is associated with slower subsequent financial development, lower economic growth and especially lower growth of productivity. Now we come to the question: how privatization can improve the performance of a state owned enterprise? Generally, the case for privatization of state owned enterprises can be grouped around three main themes, i.e., competition, political intervention and corporate governance. The competition argument states that privatization will improve the operation of the firm and the allocation of resources in the economy, if it results in greater competition. Privatization can improve efficiency even without changing market structure if it hinders interventions by politicians and bureaucrats who would like to use the SOEs to further their political or personal gains. It is also argued that corporate governance is weaker in state owned enterprises than in private firms because of agency problems. SOEs have multiple objectives and many principals who have no clear responsibility of monitoring [Clark et al. (2003)]. Another reason for SOEs to have poorer corporate governance is the weak incentive structure for managers to perform efficiently. They do not face a market for their skills or the threat of losing their jobs for non-performance. Thus, less competition, greater political intervention and weaker corporate governance are strong theoretical arguments against state ownership [Clark et al. (2003)].

Clarke et al. (2003) using a combination of country case studies and cross country analyses conclude that privatization of banks improves performance as compared to continued state ownership. However, continued state ownership even in minority shares of privatized banks is found to have negative effects on their performance. Privatization of state owned banks through public share offerings produces lower gains than direct sales to strategic investors in countries where the institutional environment is weak. Lastly, they find that the benefits accruing are reduced if foreign banks are not allowed to participate in the privatization process. Otchere (2003) presents a comprehensive analysis of the pre and post privatization performance of privatized banks and their rival banks in low and middle-income countries. The author does not find any significant evidence of improvements in the privatized banks post privatization performance. In fact, the privatized banks have a higher proportion of bad loans and appear to be overstaffed relative to their rivals, in the post privatization period. The continued government ownership of Opinions 407 privatized banks is found to be responsible for their underperformance, as it hinders managers ability to restructure them effectively. Using a comprehensive dataset of bank privatizations in 101 countries during the period 1982-2000, Boehmer et al. (2003) examine the economic and political factors that are likely to effect governments decision to privatize a state owned bank, in both developing and developed countries. Their findings indicate that in developing countries, a bank privatization is more likely the lower the quality of the countrys banking sector, the more right wing the countrys government is, and the more accountable the government is to its people.



Research is a careful investigation or inquiry especially through search for new facts in branch of knowledge. Here we design the method for collecting information, managing & implementing the data collection process, analyzing the results & communicating the findings & their implications. Research problem is the one which requires a researcher to find out the best solution for the given problem that is to find out the course of action, the action the objectives can be obtained optimally in the context of a given environment. Research Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. OBJECTIVES: There are some objectives of conducting my study, which are as follows:

To make a comparative performance appraisal of top 5 Nationalised & Private Banks in India in year 2007

To know the top nationalized bank among different Nationalized Banks in India. To know the top Private Bank among different Private banks in India. To know overall, whether Nationalized Bank is better or Private Bank is better among all different banks.

To suggest some measures to improve the performance of both banks.

Plan of study

Plan of study Define the information needed Review the literature Design Research

Collect Data (Execution)

Data Analysis

Interpret & Report

The problem definition can be said to be the quite essential part of the research process; as it determine precisely, what the managerial problem is & the type of information that the research can generate to help the problem before conducting the fieldwork. It is better to decide upon the method/technique of data collection. Generally, there are 2 techniques of data collection are: 1. Census Technique 2. Sampling Technique A census is a complete enumeration of each & every unit of population where as in a Sample, only a part of the universe is studied & conclusion about the

entire universe is drawn about that basis. The census method is costlier & more time consuming as compared to sampling method but the result are near representatives than sample method. The availability of resources, time factor degree of accuracy desire & scope of the problem enable us to apply sample technique. Sampling technique is used in my research.

The research is mainly based on secondary data that has mainly been collected from published document and website of Reserve Bank of India. Other sources of data are: Newspapers, magazines, websites, journals. Most of the data presented in the publication are from annual accounts of banks Data on number of offices are from Master Office Files, DESACS, RBI Data on number of employees are from Indian Banks Association (IBA). Capital, reserves & surplus, deposits, investments, advances, interest income, interest expended and operating expenses are as in annual accounts of banks.

Sample Size
Top 5 nationalised banks: State Bank of India(SBI) Canara Bank Punjab National Bank(PNB) Bank Of Baroda(BOB) Bank Of India(BOI) Top 5 Private Banks: ICICI Bank HDFC Bank Axis Bank Jammu & Kashmir Bank Federal Bank These criteria of selecting Nationalized Banks as well as Private Banks is on the basis of Deposits.


After the data collection, it was compiled, classified & tabulated manually & with help of computer. Then the task of drawing inferences was accomplished with the help of percentage & graphic method. And lastly, various suggestions has given to improve the performance of both banks i.e. Nationalized Banks and Private Banks.


1. Assumption for the purpose of analysis: Some assumption was made while doing analysis & interpretation; there could be few limitations in regard to these. 2. As the sample size considered for the research is very small, it was not possible to draw accurate conclusions. 3. Sampling errors is another limitation. 4. Lack of availability of data due to paucity of time


Banking in India
Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. [edit]

Early history

At the end of late-18th century, there were hardly any banks in India in the modern sense of the term. At the time of the American Civil War, a void was created as the supply of cotton to Lancashire stopped from the Americas. Some banks were opened at that time which functioned as entities to finance industry, including speculative trades in cotton. With large exposure to speculative ventures, most of the banks opened in India during that period could not survive and failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century.
The Bank of Bengal, which later became the State Bank of India.

At the beginning of the 20th century, Indian economy was passing through a relative period of stability. Around five decades have elapsed since the India's First war of Independence, and the social, industrial and other infrastructure have developed. At that time there were very small banks operated by Indians, and most of them were owned and operated by particular communities. The banking in India was controlled and dominated by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras - which later on merged to form the Imperial Bank of India, and Imperial Bank of India, upon India's independence, was renamed the State Bank of India. There were also

some exchange banks, as also a number of Indian joint stock banks. All these banks operated in different segments of the economy. The presidency banks were like the central banks and discharged most of the functions of central banks. They were established under charters from the British East India Company. The exchange banks, mostly owned by the Europeans, concentrated on financing of foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency banks, and the exchange banks. There was potential for many new banks as the economy was growing. Lord Curzon had observed then in the context of Indian banking: "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." Under these circumstances, many Indians came forward to set up banks, and many banks were set up at that time, a number of which have survived to the present such as Bank of India and Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank. [edit]

During the Wars

The period during the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for the Indian banking. The years of the First World War were turbulent, and it took toll of many banks which simply collapsed despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed during the years 1913 to 1918 as indicated in the following table:

The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal, and banking activities had remained paralyzed for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included: In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India.

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or branch of an existing bank may be opened without a licence from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalization of major banks in India on 19th July, 1969. [edit]


By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill, and it received the presidential approval on 9th August, 1969. A second dose of nationalization 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 GOI controlled around 91% of the banking business of India. After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. [edit]


In the early 1990s the then Narsimha Rao government embarked on a policy of liberalisation and gave licences to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as Global Trust Bank (the first of such new generation banks to be set up)which later amalgamated with Oriental Bank of Commerce,UTI Bank(now re-named as Axis Bank), ICICI Bank and

HDFC Bank. This move, along with the rapid growth in the economy of India, kickstarted the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 49% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more.

Privatization is transfer of ownership or control over assets or activities from the public to the private sector. In broad terms, privatization involves greater market force, ensures higher competition, reduces the role of the state in the economic sphere and thus brings in greater private involvement into government activities. It liberalizes different regulations to unleash forces of competition and to induce market forces into the economy. It is also referred to as structural adjustment programmes for the economy as a whole and as an element of broader economic policy. However, in its strict sense, privatization refers to divestiture to private entity1. Privatization, one of the policy reforms, is meant to improve the efficiency of state owned enterprises2. The Committee on the Reforms of the Financial System (1991), under the chairmanship of Mr. M. Narasimham had recommended for reforms in the financial sector. Banking and insurance are the two key factors of the financial sector3. The Government has welcomed the establishment of private banks and is encouraging privatization of public sector banks and extension of private banks. Banking Industry in India has always revolved around the traditional function of deposits and credit. Their role has been defined to assist the overall economic growth with majority of shares being controlled by the Government of India in most of the banks. But with the process of Liberalization, the banking industry has also undergone tremendous change in the last 5 years. The rules of the game have been changing with RBI introducing new norms to make banks more accountable and to adopt the practices followed worldwide.


Current situation

Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks

in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

List of Nationalized Banks In India These are:

Allahabad Bank Andhra Bank Bank Of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab National Bank State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of India State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Saurashtra State Bank of Travancore Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank

In my research project, I consider these top 5 Nationalized Banks on the basis of Deposits:
State Bank of India Canara Bank Punjab National Bank Bank Of Baroda Bank of India



State Bank of India (SBI) (LSE:SBID) is a Public Sector Banking Organisation (PSB), in which the Government of India is the biggest shareholder, and is the largest bank in India. If one measures by the number of branch offices, SBI is the second largest bank in the world. It traces its ancestry back to the Bank of Calcutta, which was established in 1806; this makes SBI the oldest commercial bank in the Indian subcontinent. SBI provides various domestic, international and NRI products and services, through its vast network in India and overseas. With an asset base of $126 billion and its reach, it is a regional banking behemoth.
The State Bank of India, the countrys oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a run for their money. The bank is entering into many new businesses with strategic tie ups Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc each one of these initiatives having a huge potential for growth. The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years. It is also focusing at the top end of the market, on whole sale banking capabilities to provide Indias growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc. With four national level Apex Training Colleges and 54 learning Centres spread all over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programes are attended by bankers from banks in other countries. The bank is also looking at opportunities to grow in size in India as well as Internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable

group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings.

The CNN IBN, Network 18 recognized this momentous transformation journey, the State Bank of India is undertaking, and has awarded the prestigious Indian of the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008.

Vision To emerge as a Best Practices Bank by pursuing global benchmarks in profitability, operational efficiency, asset quality, risk management and expanding the global reach. Mission To provide quality banking services with enhanced customer orientation, higher value creation for stakeholders and to continue as a responsive corporate social citizen by effectively blending commercial pursuits with social banking. A Brief Profile of the Bank Canara Bank (BSE: 532483), established in 1906 with the name of Canara Bank Hindu Permanent Fund in Mangalore, India, by Ammembal Subba Rao Pai, is one of the oldest and major commercial banks of India. Its name was changed to Canara Bank Limited in 1910. The bank, along with 13 other major commercial banks of India, was nationalised on 19th July, 1969, by the Government of India. In 1985, Canara Bank acquired Lakshmi Commercial Bank in a rescue. Canara Bank has made a distinctive mark in various corporate social responsibilities, namely, serving national priorities, promoting rural development, enhancing rural self-employment through several training institutes, spearheading financial inclusion objective etc. Promoting an inclusive growth strategy, which forms the basic plank of national policy agenda today, is in fact deeply rooted in the Bank's founding principles. "A good bank is not only the financial heart of the community, but also one with an obligation of helping in every possible manner to improve the economic conditions of the common people". These insightful words of our founder continue to resonate even today in serving the society with a purpose.

As of 2007, the bank has a network of 2542 branches, spread over 25 States/4 Union Territories of India. Its head office is located in Bangalore, India. The bank also has international presence in several centers, including London, Hong Kong, Moscow,

Shanghai, Doha, and Dubai. In terms of business it is one of the largest nationalized commercial banks in India, with a total business of about Rs.2 trillion.

Development projects
Canara bank made a partnership with UNEP to initiate a successful solar loan programme. It was a four-year $7.6 million effort, launched in April 2003 to help accelerate the market for financing solar home systems in southern India


Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital.The bank was nationalised in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present. VISION: To evolve & position the bank as a world class progressive, cost effective & customer friendly institution providing comprehensive financial & related services. Integrating frontiers of technology & serving various segments of society especially the weaker sections, committed to excellence in serving the public & also excelling in corporate values. MISSION: To provide excellent professional services & improve its position as a leader in the field of financial & related services, build & maintain a team of motivated & commited workforce with high work ethos, use latest technology aimed at customer satisfaction act as an effective catalyst for socio-economic development.

With its presence virtually in all the important centres of the country, Punjab National Bank offers a wide variety of banking services which include corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. Among the clients of the Bank are Indian conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies. The large presence and vast resource base have helped the Bank to build strong links with trade and industry. Punjab National Bank is serving over 3.5 crore customers through 4540 Offices including 421 extension counters - largest amongst Nationalized Banks. Punjab National Bank with 112 year tradition of sound and prudent banking is one among 300 global companies and seven Indian companies which are expected to emerge as challengers to Worlds leading blue chip companies. While among top

1000 world banks, The Banker, the leading magazine in London, has placed PNB at the 248th position, the bank features at 1308th position among Forbes Global 2000 list of global giants and fast growing companies. Strong correspondent banking relationship which Punjab National Bank maintains with over 200 leading international banks all over the world enhances its capabilities to handle transactions world-wide. Besides, bank has Rupee Drawing Arrangements with 15 exchange companies in the Gulf and one in Singapore. Bank is a member of the SWIFT and over 150 branches of the bank are connected through its computer-based terminal at Mumbai. With its state-of-art dealing rooms and well-trained dealers, the bank offers efficient forex dealing operations in India. Keeping in tune with changing times and to provide its customers more efficient and speedy service, the Bank has taken major initiative in the field of computerization. All the Branches of the Bank have been computerized. The Bank has also launched aggressively the concept of "Any Time, Any Where Banking" through the introduction of Centralized Banking Solution (CBS) and over 2409 offices have already been brought under its ambit. PNB also offers Internet Banking services in the country for Corporates as well as individuals. Internet Banking services are available through all Branches of the Bank networked under CBS. Providing 24 hours, 365 days banking right from the PC of the user, Internet Banking offers world class banking facilities like anytime, anywhere access to account, complete details of transactions, and statement of account, online information of deposits, loans overdraft account etc. PNB has recently introduced Online Payment Facility for railway reservation through IRCTC Payment Gateway Project and Online Utility Bill Payment Services which allows Internet Banking account holders to pay their telephone, mobile, electricity, insurance and other bills anytime from anywhere from their desktop. Another step taken by PNB in meeting the changing aspirations of its clientele is the launch of its Debit card, which is also an ATM card. It enables the card holder to buy goods and services at over 99270 merchant establishments across the country. Besides, the card can be used to withdraw cash at more than 25000 ATMs, where the 'Maestro' logo is displayed, apart from the PNB's over 1094 ATMs and tie up arrangements with other Banks.

4. bank of baroda
It has been a long and eventful journey of almost a century across 25 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise, financial prudence and corporate governance. It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital, princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that needs to be shared with all those millions of people - customers, stakeholders, employees & the public at large - who in ample measure, have contributed to the making of an institution.

To be a top ranking National Bank of International Standards committed to augmenting stake holders' value through concern, care and competence.

It all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On 20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy financial body, THE BANK OF BARODA. It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping others grow, and growing itself in turn.

Marketing Initiatives The mid-eighties marked the beginning of the shift to a buyers` market. The Bank orchestrated its business strategies around the centrality of the customer. It diversified into areas of merchant banking, housing finance, credit cards and mutual funds. A string of segment specific branches entrenched operations in the profitable markets. Overseas operations were revamped and structural changes intensified in the territories to cater to second generation NRIs. Slowly but surely, the move to become a one stop financial supermarket had been set in motion. Service delivery standards were stipulated. Technology was adopted to add punch. Employees across the board were inculcated with the marketing concept. Aggressive marketing became the new business philosophy. People Initiatives Bank of Baroda has always had an immense faith in the infinite potential of its people. This has been historically demonstrated in its recruitment practices, developmental initiatives, placement processes and promotion policies. Strategic HR interventions like, according cross border and cross cultural work exposure to its managers, hiring diverse functional specialists to support line functionaries and complementing the technical competencies of its people by imparting conceptual, managerial and leadership skills, gave the Bank competitive advantage. The elaborate man management policies also made the Bank a breeding ground for business leaders. The Bank provided around a dozen CEOs to the industry- men who went on to build other great institutions. People initiatives were blended with IR initiatives to create an effectively harmonious workplace, where everyone prospered. Financial Initiatives New norms for capital adequacy required new capital management strategies. In 1995 the Bank raised Rs 300 crores through a Bond issue. In 1996 the Bank tapped the capital market with an IPO of Rs 850 crores, Despite adverse market conditions prevailing then, the issue was over subscribed, reflecting the positive public perception of the Bank's fundamental financial strength. Digital Initiatives Bank of Baroda pioneered the shift from manual operating systems to a computerized work environment. Starting with ledgers, to ledger posting machines, through ALPMs, the Bank graduated to the use of Unix based systems to Mainframes, to client server based Total Branch Mechanization Systems. Today, the Bank has 1918 computerized branches, covering 70% of its network and 91.64% of its business. Alive to the growing complexities of an intensely competitive marketplace and the mounting expectations of customers fuelled by this competition, the Bank reworked its distribution strategy. It ventured beyond the brick and mortar delivery channel into ATMs and the OmniBOB range of anytime, anywhere electronic channels of PC banking, telephone banking. The e-banking products used state of the art technologies like digital certificates, smart card authentication and secure networking.

The new IT strategy, in the process of implementation will see the deployment of Core Banking Systems, Multi Service Transaction Switch, Payment Gateways - all geared to deliver convenience banking. Quality Initiatives In its relentless striving for quality perfection, the Bank secured the ISO 9001:2000 certification for 15 branches. By end of the current financial, the Bank is targeting 54 more branches for this quality certification. The Future Revolutionary and discontinuous changes in the operating environment are a stark reminder that business success is 'impermanent'. The emergence of IT as a major driver for change, has accentuated the need to initiate a major transformation program. The conversion to an IT savvy, market driven bank will be a prerequisite to survival and growth. A major and strategic step in hi-tech, was the establishment of the Integrated Treasury branch, as a forerunner to full-fledged global treasury operations. Towards creating a future Bank of Baroda, the Bank has adopted a revolutionary new business strategy that will be enabled by a revolutionary new IT strategy. Actioning this strategy will position Bank of Baroda as India's uncontested premier bank. At Bank of Baroda, change is a journey. It has a beginning. There will be no end. It will be a long and difficult march. And the Bank will emerge stronger, more resilient and positioned to become India's first bank of truly global standards. The relocation to the imposing Baroda Corporate Centre, is a true reflection of the Bank's resolve to move ahead of the times. It will not be out of place now, as it stands on the threshold of a digital era, to echo the same sentiments that guided the Bank in its platinum jubilee year - 'a promising future is the sequel to a glorious past'.



Vision "to become the bank of choice for corporates, medium businesses and upmarket retail customers and to provide cost effective developmental banking for small business, mass market and rural markets" Mission "to provide superior, proactive banking services to niche markets globally, while providing cost-effective, responsive services to others in our role as a development bank, and in so doing, meet the requirements of our stakeholders".

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalised along with 13 other banks. Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the Bank occupies a premier position among the nationalised banks. The Bank has 2644 branches in India spread over all states/ union territories including 93 specialised branches. These branches are controlled through 48 Zonal Offices . There are 24 branches/ offices (including three representative offices) abroad.

The Bank came out with its maiden public issue in 1997. Total number of shareholders as on 30/09/2006 is 2,25,704. While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of introducing various innovative services and systems. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalised banks to establish a fully computerised branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio. The Bank's association with the capital market goes back to 1921 when it entered into an agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to extend depository services to the stock broking community. Bank of India was the first Indian Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 23 branches (including three representative office ) at key banking and financial centres viz. London, Newyork,Paris,Tokyo,Hong-Kong,and Singapore. The international business accounts for around 20.10% of Bank's total business.



AXIS Bank Bharat Overseas Bank Bank of Punjab Centurion Bank City Union Bank Development Credit Bank Federal Bank ICICI Bank IDBI Bank IndusInd Bank ING Vysya Bank Kotak Mahindra Bank SBI Commercial and Intl. Bank Tamilnad Mercantile Bank The Bank of Rajasthan The Dhanalakshmi Bank The Federal Bank The HDFC Bank The Jammu & Kashmir Bank The Karnataka Bank The Karur Vysya Bank The Lakshmi Vilas Bank The South Indian Bank The United Western Bank YES Bank

In my research project, I consider these top 5 Private Banks on

the basis of Deposits:
ICICI Bank The HDFC Bank AXIS Bank The Jammu & Kashmir Bank Federal Bank

ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment Corporation of India) is India's largest private sector bank in market capitalization and second largest overall in terms of assets. ICICI Bank has total assets of about USD 79 Billion (end-Mar 2007), a network of over 950 branches and offices, about 3600 ATMs, and 24 million customers (as of end July 2007). ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank's equity shares are listed in India on stock exchanges at Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its ADRs are listed on the New York Stock Exchange (NYSE).

PROFILE The Government of India established ICICI in 1955 as a Financial Institution (FI, other such institutions were IDBI and SIDBI) with the objective to finance large industrial projects. ICICI was not a bank - it could not take retail deposits - and nor was it required to comply with Indian banking requirements for liquid reserves. ICICI borrowed funds from many multilateral agencies (such as the World Bank), often at concessional rates. It used these to make large corporate loans.
All this changed in 1990s. ICICI founded a separate legal entity, ICICI Bank, to undertake normal banking operations - taking deposits, credit cards, car loans etc. The experiment was so successful that ICICI merged into ICICI Bank in a "reverse merger" in 2002. At the time of the reverse merger, there were rumours that ICICI had a large proportions of Non Performing Loans ("NPA", as they are known in India) on its books - in particular to the steel industry. Since 2002, there has been a general revival in Indian industry (and metal based industry in particular). It is widely believed that the proportion of NPAs has come down to prudent levels (even if it were high earlier).

ICICI Bank now is the largest among all banks in retail or consumer financing. ICICI Bank is the largest issuer of credit cards in India. It was the first bank to offer a wide network of ATM's and has a large network of ATM's. ICICI Bank also has the largest market value of all banks in India, and is widely seen as a sophisticated bank able to take on many global banks in the Indian market. The Bank is expanding in overseas markets and has the largest international balance sheet among Indian banks. The international banking business was set up in 2002 to implement a focussed strategy for the overseas market. The Bank now has whollyowned subsidiaries, branches and representatives offices in 18 countries, including an offshore unit in Mumbai. This includes wholly owned subsidiaries in UK, Canada and Russia, offshore banking units in Singapore and Bahrain; advisory branch in Dubai, branches in Sri Lanka, Hong Kong and Belgium; and rep offices in the US, China, United Arab Emirates, Bangladesh, South Africa, Indonesia, Thailand and Malaysia. The bank is targeting the NRI (Non Resident Indian) population for expanding its business. ICICI Bank has been endorsed by Amitabh Bachchan and Shahrukh Khan. The Cheques presented to winners in the first 2 versions of the famous game show - Kaun Banega crorepati were ICICI Bank cheques. ICICI Bank reported marked-to-market loss of $264 million as of January 31, 2008 following USA subprime mortgage crisis.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. PROMOTER HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.


HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People. CAPITAL STRUCTURE: The authorised capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up capital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the bank's equity and about 19.4% of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). Roughly 31.3% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 190,000 shareholders. The shares are listed on the The Stock Exchange, Mumbai and the National Stock Exchange. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol "HDB". DISTRIBUTION NETWORK: HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 744 branches spread over 339 cities across India. All branches are linked on an online real-time basis. Customers in over 120 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base. The Bank also has a network of about over 1658 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.


Customer Service and Product Innovation tuned to diverse needs of individual and corporate clientele. Continuous technology upgradation while maintaining human values. Progressive globalization and achieving international standards. Efficiency and effectiveness built on ethical practices.

Core Values Customer Satisfaction through

o o o

Providing quality service effectively and efficiently "Smile, it enhances your face value" is a service quality stressed on Periodic Customer Service Audits

Maximisation of Stakeholder value Success through Teamwork, Integrity and People

Axis Bank was the first of the new private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India

Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank today is capitalized to the extent of Rs. 357.71 crore with the public holding (other than promoters) at 57.49%. The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. Presently, the Bank has a very wide network of more than 671 branch offices and Extension Counters. The Bank has a network of over 2764 ATMs providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence.



Jammu and Kashmir Bank Limited was incorporated on 1st October, 1938 and commenced its business from 4th July, 1939 at in Kashimir (India). The Bank was the first in the country as a State owned bank. According to the extended Central laws of the state, Jammu & Kashmir Bank was defined as a govt. Company as per the provision of Indian companies act 1956. In the year 1971, the Bank received the status of scheduled bank. It was declared as "A" Class Bank by RBI in 19760. Today the bank has more than 500 branches across the country and has recently become a billion Dollar Company.

The Jammu & Kashmir Bank is today one of the fastest growing banks in India with a network of more than 500 branches/offices spread across the country offering world class banking products/services to its customers. Today, the Bank has a status of value driven organization and is always working towards building trust with shareholders, customers, borrowers, regulators, employees and other diverse stakeholders, for which it has adopted a strategy directed to developing a sound foundation of relationship and trust aimed at achieving excellence, which of course, comes from the womb of good corporate governance. Good governance is a source of competitive advantage and a critical input for achieving excellence in all pursuits. J&K Bank considers good corporate governance as the sine qua non of a good banking system and has adopted a policy based on all the four pillars of good governance transparency, disclosures, accountability and value.

PROFILE Incroporated in 1938 as a limited company. Governed by the Companies Act and Banking Regulation Act of India. Regulated by the Reserve Bank of India and SEBI.

Listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) 53 per cent owned by the Government of J&K. Rated "P1+" by Standard and Poor- CRISIL connoting highest degree of safety. Four decades of uninterrupted profitibility and devidends.


Private sector Bank despite government holding 53 per cent of equity. Sole banker and lender of last resort to the Government of J & K. Plan and non -plan funds, taxes and non-tax revenues routed through the bank. Salaries of Government offcials disbursed by the Bank. Only private sector bank designated as agent of RBI for banking.


Federal Bank is an Indian bank in the private sector, headquartered at Aluva, Kerala. The bank was established by Kulangara Paulo Hormis.As of 2006 it had 525 branches and 368 ATMs around the country. To keep an organisation live and vibrant, growth is an essential phenomenon. And for growth to happen, organisations have to plant its root firmly on the ground of strong business philosophies. It is the propose that drive organisations forward, and a strong philosophy is what fuels this advance. Federal Bank is the leading player in the category - traditional banks, the term tradition denoting that a set of values are followed for quite a few years. The bank envisions all-round prosperity to all its stakeholders; customers, employees, shareholders and associates. Excellence is practised and propagated, in all spheres of activities. Strategic alliances and diversification measures are adopted, making sure that the ultimate aim is achieved, to be a bank of true world class standards. To become a bank respected by customers and competitors alike, there is an asset you can never dare to overlook the employees. Well-trained, well-informed and happy work force with strong work ethics is sure to result in success with no precedents. An HRD policy aimed at developing a WE attitude among the employees is reaping its results, the people the Bank evolving into an energetic lot who can make all the difference.
AnyTime-AnyWhere-AnyWay Banking The Bank has the full range of delivery channels including, Internet Banking, Mobile Banking and Alerts, Any Where (Branch) Banking, Interconnected Visa enabled ATM network, E-mail Alerts, Telephone Banking and a Centralised customer Call Centre with toll free number.

Customers thus have the ability to avail 24 hour banking service from the channel of his choice, according to his convenience. Federal Bank already has the largest number of ATMs in Kerala, taking round-the-clock banking convenience to even many rural areas. The Bank's ATM card also doubles as a International Visa Debit Card enabling the Bank's customers to use the card at any of the over 8,40,000 networked ATMs round the world and pay for shopping at over 12 million retail establishments across the state. The Bank has launched its anywhere banking service, enabling customers to bank at any branch of his / her choice regardless of the place where the account is maintained. Financial Super Market

The Bank has now emerged into a financial supermarket giving the customers a range of products and services. Apart from the entire slew of Banking products and delivery channels we also provide the following facilities: Depository Services Credit Cards Life Insurance Products in association with ICICI Prudential General Insurance Products in association with United India Insurance Export Credit Insurance Products in association with ECGC Express Remittance Facility from Abroad - FEDFAST Cash -On- Line Express Cash Remittance Lock Box Service for NRI's in the US Cash Management Services Merchant Banking Services E-shopping Payment gateway BSNL Bill Payment Online LIC Insurance Payment Easy Pay- On-line fee payment system Online Railway Reservation System Online Kiosks for customers

Unique Technology driven services The Bank's Mobile Banking Services enables customers to access their account details over the mobile phone. The Bank also has the Mobile Alert facility, which enables customers in any part of the world to receive instant alerts on transactions in their account in India on their mobile. A noteworthy feature of the facility is that it is highly flexible and can be personalised according to the needs of the customer at any time. Even while leveraging on technology to improve convenience, we have always strived to ensure that our product and services are simple, easy to use and most affordable.

450000 400000 350000 300000 250000 200000 150000 100000 50000 0


142381 139860
124916 119882 230510 68298 58786 25194 21584


SBI Canara PNB Bank



ICICI HDFC Axis Bank Bank Bank

J&K Federal Bank Bank


INTERPRETATION: - The above bar graph diagram depicts that State Bank of India has highest deposits i.e., Rs. 4,35,521 among Nationalized Banks & ICICI Bank has highest deposits i.e., 2,30,510 among Private Banks. And from all different banks, SBI has highest deposits.


2689 4156 2801 2717 713 638 501 460 548

NUMBER OF OFFICES 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0

No. of Offices

SBI Canara PNB Bank



ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The above bar diagram shows that SBI has wide branch network i.e., 9556 offices among Nationalized Banks as well as among all different banks. And among Private Banks, ICICI has wide branch network i.e., 713 offices.


46359 57316 38086 41511 33321 21477 9980 6829 6029

200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0


SBI Canara PNB Bank



ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - From the above data, it clearly shows that SBI has large number of employees i.e. 1,85,388 employees among Nationalized banks as well as among all different banks. And from Private Banks, ICICI Bank has large number of employees i.e. 33,321 employees.


548.76 407.41 555 498 1027 607 1024 585 544


1200 1000 800 600 400 200 0
SBI Canara PNB Bank BOB BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank

Business per Employees


INTERPRETATION: - The above bar diagram depicts that Bank of Baroda has highest Business Per Employees i.e. Rs. 555 lakhs among Nationalized Banks and among Private Banks, ICICI Bank has first highest Business Per Employees & Axis Bank has second highest Business Per Employees. Overall, among all different banks, ICICI Bank has highest Business Per Employees i.e. Rs. 1,027 lakhs.


3.24 2.68 2.73 2.71 9 6.13 7.59 4 4.43


9 8 7 6 5 4 3 2 1 0

Profit Per Employees

SBI Canara PNB BOB Bank


ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The above data shows that Canara Bank has highest Profit Per Employee i.e. Rs. 3.24 lakhs among Nationalized Banks and among Private Banks, ICICI Bank has highest Profit Per Employees i.e. Rs. 9 lakhs. And Overall, among all different banks, ICICI Bank has highest Business Per Employees.


10354 10435 8650 5895 24663 6433 3402 2009 1502


35000 30000 AMOUNT 25000 20000 15000 10000 5000 0
SBI Canara PNB Bank BOB BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The above bar diagram shows that SBI has largest Capital and Reserves & Surplus i.e. Rs. 31,299 among Nationalized Banks as well as among all different banks. On the other hand, ICICI Bank has largest Capital and Reserves & Surplus i.e. Rs. 24,663 among Private Banks.

160000 140000 120000 100000 80000 60000 40000 20000 0


45226 45190 34994 35493 91258 30565 26897 7392 7033


SBI Canara PNB BOB Bank


ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - From the given data, it depicts that SBI has highest investments i.e. Rs. 1,49,149 among Nationalized Banks as well as among all different banks. On the other hand, ICICI Bank has highest investments i.e. Rs. 91,258 among Private Banks.

350000 300000 AMOUNT 250000 200000 150000 100000 50000 0
SBI Canara PNB Bank BOB BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


98506 96597 83621 84936 195866 46945 36876 17080 14899


INTERPRETATION: - The above diagram depicts that among Nationalized Banks as well as among all different banks, SBI has large number of advances i.e. Rs. 3,37,336. And ICICI Bank has large number of advances i.e. Rs. 1,95,866 among Private Banks.

40000 35000 30000 25000 20000 15000 10000 5000 0


11365 11537 9213 9180 22994 6889 4560 1899 1817


SBI Canara PNB BOB Bank


ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - - From the given data, it depicts that SBI has highest interest income i.e. Rs. 39,491 among Nationalized Banks as well as among all different banks. On the other hand, ICICI Bank has highest interest income i.e. Rs. 22,994 among Private Banks.


1451 1042 1173 1563 5929 1516 1010 160 287

OTHER INCOME 6000 5000 AMOUNT 4000 3000 2000 1000 0

SBI Canara PNB BOB Bank BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The above data shows that SBI has highest Other Income i.e. Rs. 5769 among Nationalized Banks. On the other hand, among Private Banks and all different banks, ICICI Bank has highest Other Income i.e. Rs. 5929.


7338 6023 5427 5740 16358 3179 2993 1131 1085

25000 INTEREST EXPENDED 20000 15000 10000 5000 0
SBI Canara PNB BOB Bank BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - - From the given data, it depicts that SBI has highest interest expended i.e. Rs. 23,437 among Nationalized Banks as well as among all different banks. On the other hand, ICICI Bank has highest interest expended i.e. Rs. 16,358 among Private Banks.


2565 3326 2544 2608 6691 2421 1215 372 406

12000 10000 AMOUNT 8000 6000 4000 2000 0
SBI Canara PNB BOB Bank BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The above bar diagram shows that SBI has large number of Operating Expenses i.e. Rs. 11,824 among Nationalized Banks as well as among all different banks. On the other hand, ICICI Bank has large number of operating expenses i.e. Rs. 6,691 among Private Banks.

6 COST OF FUNDS 5 4 3 2 1 0
SBI Canara PNB BOB BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank Bank

4.79 5.35 4.24 4.58 4.55 5.34 4.58 4.96 4.56 5.11


INTERPRETATION: - The above data shows that Canara Bank has highest Cost Of Funds i.e. 5.35 lakhs among Nationalized Banks. On the other hand, among Private Banks, ICICI Bank has highest Cost Of funds i.e. 5.34. And Overall, among all different banks, Canara Bank has highest Cost of Funds.

3.5 3.08 4.69 3.69 3.97 4.08 5.99 4.17 4.01 4.51


6 Return on advances adjusted to COF 5 4 3 2 1 0
SBI Canara PNB BOB Bank BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The above diagram depicts that PNB has highest Return on Advances Adjusted to COF i.e. 4.69 among Nationalized Banks. Whereas HDFC Bank has highest Return on Advances Adjusted to COF i.e. 5.99 among Private Banks as well as among all different banks.

22.5 16.25 25.16 20.63 19.33 7.01 13.87 9.06 14.63 17.47


30 PERCENTAGE 25 20 15 10 5 0
SBI Canara PNB BOB BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank Bank


INTERPRETATION: - The given data shows that PNB has highest wages as % to total expenses i.e. 25.16 among Nationalized Banks as well as among all different banks. On the other hand, Federal Bank has highest wages as % to total expenses i.e. 17.47 among Private Banks.

0.84 0.98 1.03 0.72 0.88 1.09 1.33 1.1 0.96 1.38

1.4 RETURN ON ASSETS 1.2 1 0.8 0.6 0.4 0.2 0
SBI Canara PNB BOB BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank Bank


INTERPRETATION: - The above bar diagram depicts that PNB has largest Return on Assets i.e. 1.03 among Nationalized Banks. And on the other hand, Federal Bank has largest Return on Assets i.e. 1.38among Private Banks as well as among all different banks.

12.34 13.5 12.29 11.8 11.58 11.69 13.08 11.57 13.24 13.43



13 12.5 12 11.5 11 10.5

SBI Canara PNB BOB Bank BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The given data shows that Canara Bank has highest Capital Adequacy Ratio ie 13.5 among Nationalized Banks as well as among all aifferent banks. Whereas Federal Bank has highest Capital Adequacy Ratio ie 13.43 among Private Banks.

1.56 0.94 0.76 0.6 0.74 1.02 0.43 0.72 1.13 0.44


1.6 1.4 1.2 RATIO 1 0.8 0.6 0.4 0.2 0
SBI Canara PNB BOB Bank BOI ICICI HDFC Axis J&K Federal Bank Bank Bank Bank Bank


INTERPRETATION: - The above bar diagram depicts that SBI has highest Net NPA Ratio ie 1.56 among Nationalized Banks and among all different banks. On the other hand, J&K Bank has highest Net NPA Ratio ie 1.13 among Private Banks.

EXPLANATORY NOTES: This Is An Attempt To Provide Quick And Handy Access To Data On Scheduled Commercial Banks From 2002-03 To 2006-07, Excluding Regional Rural Banks. This Is The Third Volume In The Series; First Volume Of The Series Was Published For The Year 2004-05

Data Sources
Most Of The Data Presented In The Publication Are From Annual Accounts Of Banks. Data For The Previous Years Are From The Annual Publication, Statistical Tables Relating To Banks In India; Some Data For The Previous Years Have Been Revised. Data For The Year 2006-07 Are From Published Annual Accounts Of Banks. Data On Number Of Offices Are From Master Office Files, Desacs, Rbi Data On Number Of Employees Are From Indian Banks Association (Iba).

Data Definitions
Capital, Reserves & Surplus, Deposits, Investments, Advances, Interest Income, Interest Expended And Operating Expenses Are As In Annual Accounts Of BanksBusiness (Defined As Deposits And Advances) Per Employee, Profit Per Employee, Return On

Assets, Capital Adequacy Ratio (Crar) And Net Non-Performing Assets As Percentage Of Net Advances (Net Npa Ratio) Are From Notes On Accounts Of Annual Accounts
Number Of Offices Is As Per Master Office File, Desacs, Rbi.

Cost Of Funds (Cof) Is Defined As The Ratio (In %) Of Interest Paid On Deposits And Borrowings To Average
Of Deposits And Borrowings For The Years 2005-06 And 2006-

2007. Cost Adjusted Return On Advances Is Cof Subtracted From Return On Advances, Where Return On Advances Is Defined As The Ratio (In %) Of Interest Earned On Advances To Average Of Advances For The Years 2005-06 Wages As Percentage To Total Expenses Is Computed As The Ratio Of Payment To And Provisions For Employees To Averages Of Total Expenses For The Years 2005-06 And 2006-07.

Bank Group Level Averages

Business Per Employee (Or Profit Per Employee) Is Computed By

Dividing The Total Business (Or Profit) For The Group (As Available In Annual Accounts) By The Number Of Employees In The Group (As Obtained From Iba) Cof Is Computed As The Ratio Of Interest Paid On Deposits And Borrowings To Average Of Deposits And Borrowings Of The Group For The Years 2005-06 And 2006-07. Return On Advances Adjusted To Cof Is Computed By Subtracting Cof For The Group From Return On Advances For The Group; The Latter Is Computed As The Ratio Of Interest Earned On

Advances By The Group To Average Of Total Advances Of The Group For The Years 2005-06 And 2006-07.
Return On Assets For A Group Is Obtained As Weighted Average

Of Return On Assets Of Individual Banks In The Group, Weights Being The Proportion Of Total Assets Of The Bank As Percentage To Total Assets Of The Group. Capital Adequacy Ratio And Net Npa Ratio For The Four Bank Groups And Also For All Banks Have Been Obtained From Osmos, Department Of Banking Supervision, Rbi For Rest Of The Items, Simple Averages Are Used At The Group Level. Similar Definitions Are Used At All Banks Level. All Banks Averages Are Computed Based On State Bank Group (8 Banks), Nationalised Banks (20), Foreign Banks (29) And Other Scheduled Commercial Banks (24 Banks, Excluding Erstwhile Lord Krishna Bank). Idbi Limited Is Considered As A Nationalised Bank

As On The Date Of Publication, Detailed Annual Account Of Erstwhile Lord Krishna Bank, Now Merged With Centurion Bank Of Punjab, Is Not Available. However, Limited Data For The Erstwhile Bank, As Made Available, Have Been Provided Here.