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EARLY PHASE (1786 TO 1935)

GENERAL BANK OF INDIA 1786(FIRST BANK).

The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. RESERVE BANK OF INDIA 1935. SLOW GROWTH AND PERIODIC FAILURES.

PEOPLE MOSTLY SAVE IN POSTAL DEPOSITS

PRE NATIONALIZATION PHASE (1935-1969)


o

Reserve Bank of India -was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. RBI got established in 1935. It was nationalized in 1949. BANKING REGULATION ACT 1949.

1955:-Nationalization of Imperial Bank of India and formation of State Bank of India.


1960:-Nationalization of SBI and subsidiaries 1962:-Deposit Insurance corporation was established with aim to provide insurance cover to depositors, thereby protecting deposits of common man.

1969:- Transitory period- social banking and nationalization(14 banks). The Government of India First 14 Nationalised banks: 1. Bank of India 2. Union Bank of India 3. Bank of Baroda 4. Bank of Maharashtra 5. Punjab National Bank 6. Indian Bank 7. Indian Overseas Bank 8. Central Bank of India 9. Canara Bank 10. Syndicate Bank 11. United Commercial Bank 12. Allahabad Bank 13. United Bank of India 14. Dena Bank

PHASE (1980-1990)

1980 :

Nationalisation of seven banks with deposits over 200 crores.


o

1990 :-

the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

MODERN PHASE FROM 1991 TILL DATE


1991 :-the Indian rupee was devalued. The currency lost 18% relative to the us dollar.
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Narsimahmam Committee advised restructuring the financial sector by a temporal reduced reserve ratio as well as the statutory liquidity ratio.(1991 & 1998). The Committee on Banking Sector Reforms Committees headed by Mr. M. Narasimhan, it is also known as Narasimhan Committee . The Committee, headed by former Reserve Bank of India governor M Narasimhan, was appointed by the United Front government to review the progress in banking sector reforms. The committee submitted its recommendations to union Finance Minister Yashwant Sinha in November of 1991.The Committee was required to review the progress in the reforms in the banking sector over the past six years with and to chart a programme on Financial Sector Reforms necessary to strengthen the India's financial system and make it internationally competitive taking into account the vast changes in the international and financial markets, technological advances.

IN A NUTSHELL !!

Phase I Slow growth rate Phase II nationalization of 14 Indian banks Phase III the trend continues---7 more banks nationalized no such significant changes with a constant growth rate Phase IV New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

CHALLENGES DURING THE PHASES


Focus only on corporate clients Lack of skill expertise in retail and structured finance Lack of distribution system Limited use of technology Inefficient capital allocation Competition in market

BANKING STRUCTURE IN INDIA

SCHEDULED AND NON-SCHEDULED BANKS

Scheduled Banks: Scheduled Banks in India constitute those banks, which have been included in the Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act. As on 30th June 1999, there were 300 scheduled banks in India having a total network of 64,918 branches. The scheduled commercial banks in India comprise of State bank of India and its associates(8), nationalized banks (19), foreign banks (45), private sector banks (32), co-operative banks and regional rural banks Non-Schedule Banks: Non-scheduled bank in India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank".

TYPES OF BANKS

COMMERCIAL BANKS:

Public

sector Banks Private sector Banks Development Bank/Financial institutions

CO-OPERATIVE BANKS
DEVELOPMENT BANKS

CENTRAL BANK: RESERVE BANK OF INDIA

COMMERCIAL BANKS

WORKING OF COMMERCIAL BANKS

CO-OPERATIVE BANKS

The Co operative banks in India started functioning almost 100years ago. The Cooperative bank is an important constituent of the Indian Financial System . They are setup to provide easy loans to farmers or other persons to set up his /her business. They are non profitable banks. Cooperative banks in India finance rural areas under :: Farming Cattle Milk Hatchery Personal finance

Some example of co-operative banks in India Saraswat co-op bank Bharat co-op bank Surat co-op bank New India co-op bank

DEVELOPMENT BANKS

These banks are mainly used for devoloping industries and countries. Some Examples:

IFCI IDBI NABARD SIDBI EXIM BANK DFHI NHB

CENTRAL BANK (RBI):

Established - April 1, 1935 Ownership- originally privately, Nationalized 1949 Central Office Governor sits and policies are formulated initially established in Calcutta; permanently moved to Mumbai in 1937

Preamble "... to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage

FUNCTIONS OF RBI

Traditional function: Monopoly of currency notes issue Banker to the Government (both the central and state) Fight against economic crisis and ensures stability of Indian economy Controller of Foreign Exchange and credit Controller Maintaining the external value of domestic currency

Promotional functions: Extension of the facilities for the small scale industries Innovating the new banking business transactions. Extension of the facilities for the provision of the agricultural credit through NABARD.

Supervisory functions: Granting licence to Banks. Periodical review of the work of the commercial banks. Control the non-banking finance.

TOOLS:oCASH RESERVE RATIO): 5.5% oREPO RATES(RR):7.5% oREVERSE REPO RATE(RRR): 6.0% oSTATUTORY LIQUIDTY RATIO (SLR):24% oBANK RATE: 6.0%

FACTS AND FIGURES

Indian banking sector has 6th rank in all over the world.(Above China , Japan and even Brazil) SBI has 6500+ ATMs all over the country. ICICI bank has 3500+ ATMs all over the country. RBI had printed 6,39,948 lakh crore notes till 6TH November 2008. IN Indore SBI has 45+ ATMs . SBI provides the facility and it is tie with 9200+ banks to use their ATMs. Acc. To business magazine survey the no. of ATMs grew28% yearly. India has 23+ ATMs per million people , China has 55+ ATMs and South Korea has 1600+ ATMs. Transaction done through ATMs is around 70,000 crore in a year . ICICI bank has largest no. branches in foreign also.

BANKING SECTOR REFORMS

Several committees constituted to resolve problems of Commercial Banking in India, two most important are-

a)

Narasimham Committee I (1991)- aimed at bringing operational flexibility and functional autonomy so as to enhance efficiency, productivity and profitability

b)

Narasimham Committee II (1998)- bringing structural changes so as to strengthen banking system to make it more stable

NARISHIMAM COMMITTEE REPORT I

Four-tier hierarchy for banking structure - three to four large banks with SBI at top Parity in treatment of Private sector banks with Public sector

banks

Follow BIS/Basel norms Lifting of ban - setting new banks in Private sector Liberal Governmental policies for expansion of foreign bank branches and rationalization of foreign operations of Indian banks Merger of strong PS banks and closure of some weaker banks Amicable golden handshake scheme for surplus banking sector staff Setting up ARC to tackle NPAs in banks Enhancement of capital adequacy norms Healthy competition between PS banks and private sector banks essential.

NARISHIMAM COMMITTEE REPORT 2

Four-tier hierarchy for banking structure - three to four large banks with SBI at top

Parity in treatment of Private sector banks with Public sector banks

Follow BIS/Basel norms Lifting of ban - setting new banks in Private sector Liberal Governmental policies for expansion of foreign bank branches and rationalization of foreign operations of Indian banks

CHALLENGES FACED BY THE INDIAN BANKS

Providing services to rural markets No provision or management of risks Ever rising customer expectations Maintaining growth rate Human resource management Customer retention Employee retention Maintaining a global mark Lack of technological advancement Lack of product expertise Traditionally focused on limited range of products Lack of distribution expertise

GROWTH OPPORTUNITY
Global market access Human resources available Strong regulatory measure Huge untapped market Benefit by core banking solutions Availability of latest technology due to globalization Competition good for customers Scope for new entrants

WAY AHEAD

PRE GLOBALISED SCENARIO (SERVICE CULTURE IN BANKS)


FORMALISED

CUSTOMER UNFRIENDLY

SERVICE CULTURE

NONCOMPETITIVE ATTITUDE

NO FOCUS ON CUSTOMER SERVICES

BANKING SECTOR TODAY


DEPTH 1)COUNTRYWIDE COVERAGE 2) LARGE NO. OF PLAYERS 3)SOPHISTICATED FINANCIAL MKTS.

DIVERSIFICATION 1)INTEGERATED PLAYERS 2)LEVARAGING SYNERGIES

TECHNOLOGY 1)USING ADVANCED TECHNOLOGY 2) DEEPEN THE USE OF TECHNOLOGY

REGULATION 1)EFFECTIVE MONETARY MGMT. 2)ROBUST REGULATORY SYSTEM

SECTOR SNAPSHOT
Total assets us 35 billion Total deposits us 279 billion

SIZE

NO. OF BANKS

Over 290 scheduled banks Over 66000 branches

BRANCH NETWORK

BANKING SERVICES
CONSULTANCY SERVICES FINANCIAL SERVICES

MOBILE, INTERNET BANKING

ATM SERVICES, GOOD WAITING LOBBIES

LOW INTEREST,PRO MOTIONAL DISCOUNTS

TECHNOLOGICAL INNOVATIONS IN BANKING SECTOR


CORE BANKING SOLUTIONS(CBS) Pooling data at central server CUSTOMER RELATIONSHIP MANAGEMENT(CRM) ELECTRONIC FUND TRANSFER(EFT) ELECTRONIC CLEARING SYSTEM(ECS) ANY BRANCH BANKING RISK MANAGEMENT ATMS CARD MANAGEMENT MOBILE BANKING

INNOVATIONS IN BANKING PRODUCTS


CORE PRODUCT: BASIC BANKING SERVICES AND HANDLING THEM EFFICIENTLY BASIC PRODUCT: SAFETY OF DEPOSITS,LONABLE FUNDS EXPECTED PRODUCT: TIMELY SERVICE ,LONG BANKING HOURS, LOW INTERST RATES AUGMENTED PRODUCT: GOOD WAITING ROOMS, E-BANKING POTENTIAL PRODUCT: OCCASIONAL GREETINGS, SURPRISE GIFTS

ADDITIONAL BANKING SERVICES

Merchant banking Factoring Loan syndication Mutual fund Venture capital Insuring Stock handling

MARKETING STRATEGIES FOR BANKS

Market Segmentation in India:

Agricultural Sector

1.
2. 3. 4.

Marginal 2 to 5 acres 5 to 10 acres 10 acres and above


Industrial Sector Tiny Co-operative Small-sized Large- sized

1.

2.
3. 4.

1. 2. 3. 4.

Services Sector Household Sector Marginal Low Income Middle Income High Income

Market Targeting in which each segments attractiveness is measured and a target segment is chosen based on its attractiveness. Positioning which is the act of establishing a viable competitive position of the firm and its offer in the target segment chosen.

Product: The products offered are the services which includes various types of bank accounts, different types of loans, investment services, Credit cards, Demat accounts, online banking, mobile banking and many more. Pricing: Typical for banking sector since RBI regulates rates of interest, Organizations are supposed to sub-serve weaker sections and the rural regions of the country.

Develop marketing strategy

Make marketing mix decisions

Estimate the demand curve.

Calculate cost

Place: It refers to the establishment and functioning of a network of branches and other offices through which banking services are delivered. Objective is to get the right product ,at right places at right time at the least cost . Extensive branch network- access to large section of people Proximity may play a determinant role in selecting the bank. Promotion: Advertising Publicity

Sales Promotion
Personal Selling

Push and Pull Strategies

Current Marketing Strategies:


Referral services

Direct mailing
Cold calling Offering items having your brand identity Using the media Getting celebrities to endorse the product or service. Sponsoring events Using permission-based Marketing

TECHNOLOGYLEADS THE WINNING COMBINATION

the winners will be those institutions that tie their technology to their strategies to meet their challenges.

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