OBJECTIVES

1) To study about functions of private bank.

2) To study the process of privatization in the banking industry.
3) To study about the law and practices of banking.
4) To collect classify and circulate statistical and other information of the
structure and working of the banking system.
5) To explore, plan, co-ordinate and organize detailed survey of banking,
resource, personnel and management development program of bank and of the
banking industry.

SCOPE
Scope of study in privatization in Indian banking sector
The scope of this study is that it will help the further researchers to gain an
insight into the customers minds that what are their perception about private
sector banks and how it affects the banking sector. The purpose of this study is
to identify those parameters and policy issues to be considered in connection
with proposals to transfer federal state or local government service, asset and
function to the private sector. It will review the stated goals and identify
strategies to ensure transparency, accountability and preservation of common
good.

LIMITATION
In spite of best of efforts to minimize all limitation that might creep in
course of the research, there were certain constraints within which the research
was completed.
1) The research was based on secondary as well as primary data. The primary
data require for research objective was collected from the sample based in
Guwahati city. Although Guwahati is one of the most important cities of the
country and a commercial hub of north east India, sample selected from the city
cannot be considered as a proper representation of the population of the country.
2) The objective of the survey was to check the perception of the bank managers
as well as customers of the bank.
3) For primary data, non response error cannot be ruled out.
4) This study is related to selected Public Sector Banks and Private Sector
Banks only.
5) The secondary data, which used for this study is based on annual reports of
the bank. The quality of this research depends on quality and reliability of data
published in annual reports of banks.
6) There are different methods to measure the profitability of the banks. View
of expert can be different in this matter from one another.
7) The present study is largely based on ratio analysis; such analysis has its
own limitations, which also applies to the study.

RESEARCH METHOIDOLOGY
Meaning word "research" is derived from the French word "Research" using to
some broadly Research refer to a search for knowledge research is an attempt to
find answer to problem both theoretical and practical through the application of
scientific methods.

Primary data:Constitute first hand information which is collected for the first time in
order to solve research problem. It is the data collected from primary sources
which are original sources. The method used for the collection of primary data
are:
Interview method
Questionnaire method

Secondary data

Secondary data are next to primary data. This data is already collected and
complied for sources other purpose by source other than the research himself.
Website, internet
Reference Book

INTRODUCTION OF INDIAN BANK

Bank of Hindustan was set up in 1870; it was the earliest Indian Bank. Later,
three presidency banks under Presidency Bank's act 1876 i.e. Bank of Calcutta,
Bank of Bombay and Bank of Madras were set up, which laid foundation for
modern banking in India. In 1921, all presidency banks were amalgamated to
form the Imperial Bank of India. Imperial bank carried out limited number of
central banking functions prior to establishment of RBI. It engaged in all types
of commercial banking business except dealing in foreign exchange. Reserve
Bank of India Act was passed in 1934 & Reserve Bank of India (RBI) was
constituted as an apex body without major government ownership. Banking
Regulations Act was passed in 1949. This regulation brought RBI under
government control. Under the act, RBI got wide ranging powers for
supervision & control of banks. The Act also vested licensing powers & the
authority to conduct inspections in RBI. In 1955, RBI acquired control of the
Imperial Bank of India, which was renamed as State Bank of India. In 1959,
SBI took over control of eight private banks floated in the erstwhile princely
states, making them as its 100% subsidiaries. It was 1960, when RBI was
empowered to force compulsory merger of weak banks with the strong ones. It
significantly reduced the total number of banks from 566 in 1951 to 85 in 1969.
In July 1969, government nationalized 14 banks having deposits of Rs. 50
crores & above. In 1980, government acquired 6 more banks with deposits of
more than Rs.200 crores. Nationalization of banks was to make them play the
role of catalytic agents for economic growth. The Narasimha Committee report
suggested wide ranging reforms for the banking sector in 1992 to introduce
internationally accepted banking practices. The amendment of Banking
Regulation Act in 1993 saw the entry of new private sector banks. Banking
industry is the back bone for growth of any economy. The journey of Indian
Banking Industry has faced many waves of economic crisis. Recently, we have
5

seen the economic crisis of US in 2008-09 and now the European crisis. The
general scenario of the world economy is very critical. It is the banking rules
and regulation framework of India which has prevented it from the world
economic crisis. In order to understand the challenges and opportunities of
Indian Banking Industry, first of all, we need to understand the general scenario
and structure of Indian Banking Industry.

Private sector bank in India

The private-sector banks in India represent part of the indian banking sector that
is made up of both private and public sector banks. The "private-sector banks"
are banks where greater parts of stake or equity are held by the private
shareholders and not by government.
Banking in India has been dominated by public sector banks since the 1969
when all major banks were nationalized by the Indian government. However,
since liberalization in government banking policy in the 1990s, old and new
private sector banks have re-emerged. They have grown faster & bigger over the
two decades since liberalization using the latest technology, providing
contemporary innovations and monetary tools and techniques.
The private sector banks are split into two groups by financial regulators in
India, old and new. The old private sector banks existed prior to the
nationalization in 1969 and kept their independence because they were either
too small or specialist to be included in nationalization. The new private sector
banks are those that have gained their banking license since the liberalization in
the 1990s.

Old private-sector Bank

6

The banks, which were not nationalized at the time of bank nationalization that
took place during 1969 and 1980 are known to be the old private-sector banks.
These were not nationalized, because of their small size and regional
focus. Most of the old private-sector banks are closely held by certain
communities their operations are mostly restricted to the areas in and around
their place of origin. Their Board of directors mainly consist of locally
prominent personalities from trade and business circles. One of the positive
points of these banks is that, they lean heavily on service and technology and as
such, they are likely to attract more business in days to come with the
restructuring of the industry round the corner.

New private sector Bank

The banks, which came in operation after 1991, with the introduction of
economic reforms and financial sector reforms are called "new private-sector
banks". Banking regulation act was then amended in 1993, which permitted the
entry of new private-sector banks in the Indian banking sector. However, there
were certain criteria set for the establishment of the new private-sector banks,
some of those criteria being:#The bank should have a minimum net worth of Rs.
200 crores.
1. The promoters holding should be a minimum of 25% of the paid-up
capital.
2. Reliance Capital, India Post, Larsen & Toubro, Shriram Transport
Finance are companies pending a banking license with the RBI under the
new policy, while IDFC & Bandhan were given a go ahead to start
banking services for 2015.
3. Within 3 years of the starting of the operations, the bank should offer
shares to public and their net worth must increased to 300 crores.
7

Private Banks are banks owned by either an individual or a general partner with
limited partner(s). Private banks are not incorporated. In any such case, the
creditors can look to both the "entirety of the bank's assets" as well as the
entirety of the sole-proprietor's/general-partners' assets.
These banks have a long tradition in Switzerland, dating back to at least
the Revocation of the Edict of Nantes (1685). Private banks also have a long
tradition in the UK where C. Hoare & Co. has been in business since 1672.
There were many private banks in Europe, but most have now become
incorporated companies, so the term is rarely true any more. Today, the term
"private bank" can also refer to the financial institution specializing in financial
advice and services for high-net-worth individuals (private banking).
"Private banks" can also refer to non-government owned banks in general, in
contrast to government-owned (or nationalized) banks, which were prevalent
in communist, socialist and some social democratic states in the 20th century.

SWOT Analysis of Indian Banking Industry

The accelerating shift in economic power from the developed to emerging
economies is dramatically changing the banking industry across the world. The
international banking scene has in recent years witnessed strong trends towards
globalization and consolidation of the financial system. Stability of the financial
system has become the central challenge to bank regulators and supervisors
throughout the world. The multi-lateral initiatives leading to evolution
of international standards and codes and evaluation of adherence thereto
represent resolute attempts to address this challenge. The Indian banking scene
has witnessed progressive deregulation, institution of prudential norm and an
8

emulation of international supervisory best practices. The supervisory processes

have also concomitantly evolved and have acquired a certain level of robustness
and sophistication in the banking industry.
Strengths of Indian Banks
In the short-term, most developed economies experienced a significant
economic slowdown or recession in 2008-9, reducing significantly the growth
of domestic banking assets. Emerging economies such as India by contrast
tended to maintain relatively high growth rates, although some temporary
economicslowdown was experienced in certain cases. In 2010, however, emergi
ngeconomies grew strongly in general, while the recovery in Europe in
particular remained relatively weak.

High standard regulatory environment. The policy makers, which

comprise the Reserve Bank of India (RBI), Ministry of Finance and
related overnment and financial sector regulatory entities, have made
several notable efforts to improve regulation in the sector.
Bank lending has been a significant driver of GDP growth and
employment
Presence of more number of Smaller banks that would likely to be
impacted adversely.
Approximately 53000 networks of branches spread all over the
country provides easy access to entire spectrum of customers.
Diversification in their operations Banks offer an entire gamut of
services including insurance, investment banking, asset management,
9

private equity, foreign exchange, payment of utility bills to customers,

mobile and internet banking.
Large manpower with relevant banking skills to manage the operations.
Technological up gradation changing the way the banking is done.
Anywhere banking and anytime banking has become a reality and thus
making service faster, error free and competitive.
Banks have gained financial strengths in terms of Productivity and
Profitability

10

CHAPTER 1
GLOBAL VIEW
Private banking is the way banking originated. The first banks in venice were
focused on managing personal finance for wealthy families. Private banks
became known as Private to stand out from the retail banking & savings banks
aimed at the new middle class. Traditionally, Private Banks were linked to
families for several generations. They often advised and performed all financial
& banking services for families. Historically, private banking has developed in
Europe (see the List of private banks). Some banks in Europe are known for
managing assets of some royal families. The assets of the Princely Family of
Liechtenstein are managed by LGT Group (founded in 1920 and originally
known as The Liechtenstein Global Trust). The assets of the Dutch royal
family are managed by Mees Pierson (founded in 1720). The assets of
the British Royal Family are managed by Coutts (founded in 1692).
Historically, private banking has been viewed as a very exclusive niche that
only caters to high-net-worth individuals (HNWIs) with liquidity over $2
million, though it is now possible to open private banking accounts with as little
as $250,000 for private investors. An institution's private banking division
provides services such as wealth management, savings, inheritance, and tax
planning for their clients. For private banking services clients pay either based
on the number of transactions, the annual portfolio performance or a "flat-fee",
usually calculated as a yearly percentage of the total investment amount.
"Private" also alludes to bank secrecy and minimizing taxes through careful
allocation of assets, or by hiding assets from the taxing authorities. Swiss and
certain offshore banks have been criticized for such cooperation with
11

individuals practicing tax evasion. Although tax fraud is a criminal offense in

Switzerland, tax evasion is only a civil offence, not requiring banks to notify
taxing authorities.
In Switzerland, there are many banks providing private banking services.
From Congress of Vienna in 1815 Switzerland has remained neutral including
the time of two World Wars. After World War I, the former nobles of AustroHungarian Empire moved their assets to Switzerland for fear of confiscation by
new governments. During World War II, many wealthy people, including Jewish
families and institutions, moved their assets into Switzerland to protect them
from Nazi Germany. However, this transfer of wealth into Switzerland had
mixed and controversial results, as beneficiaries had difficulties retrieving their
assets after the war. After World War II, in east Europe, assets were again
moved into Switzerland for fear of confiscation by communistic governments.
Today, Switzerland remains the largest offshore center, with about 27 percent
($2.0 trillion) of global offshore wealth in 2009, according to Boston Consulting
Group. (Offshore wealth is defined as assets booked in a country where the
investor has no legal residence or tax domicile)
In England, private banks were established in the 17th century, in parallel with
the development of agriculture, managing the assets of the royal family, nobility
and the landed gentry.
The United States has one of the largest private banking systems in the world, in
part due to the 3.1 million HNWIs accounting for 28.6% of the global HNWIs
population in 2010, according to the co-research of Capgemin and Merrill
Lynch. Some American banks that specialize in private banking date back to the
19th century, such as U.S. Trust (founded in 1812) and Northern Trust (founded
in 1889).

12

The U.S. capital markets have long been a favored destination for foreign
companies wishing to raise capital or establish a trading presence for their
securities. The following information provides a general overview of the
relevant laws and regulations governing the U.S. securities markets with which
foreign companies wishing to access the U.S. capital markets should be familiar.
Two of the most important laws applicable to companies wishing to access the
U.S. capital markets are the Securities Act of 1933 (the Securities Act) and
the Securities Exchange Act of 1934 (the Exchange Act). In very broad
overview, the Securities Act requires companies wishing to offer and sell
securities in the United States to register the transaction with the Commission or
to follow the requirements of an exemption from the registration requirements.
The Exchange Act requires companies to register classes of equity securities in
order to list these securities on a national securities exchange in the United
States, or if certain asset and shareholder thresholds are exceeded. The
Exchange Act also requires companies to make periodic filings with the
Commission to disclose information about their business operations, financial
condition, and management.

CHAPTER 2
13

INDIAN VIEW
The main objective of the Indian Banking Sector reforms of the 1990s was to
have a good and efficient financial system. As the new economy now continues
to grow much higher, new demands are placed on the Banking industry. Higher
growth is contributing to increase in higher income categories households and
this has led to higher consumption thus ultimately leading to more demand for
financial savings. On the production side, industrial production has accelerated,
trade has increased in terms of exports thus leading to a lot of investment
demand in this area. Thus higher consumer demand and production demand has
led banks to bring new and new products and innovate continuously and
produce more customized products thereby increasing competition in the sector.
If Indian banks have to sustain such high demand pressures it has to expand
both organically and inorganically. Looking at the global banking scenario only
22 banks figure in the top list of top 1000 banks and only 5 in the top list of 500
banks. Though banking in India has changed a lot, it has shown signs of
transformation whereby it can feature in the top rung of banks. The loan book of
the banks has increased tremendously and also the credit has exceeded the
deposit growth. Indian banks have also realized that with organic growth there
is a need to grow inorganically as well, to be competitive with other players in
the market. For e.g. State Bank if India, Indias largest bank has acquired 76%
stake in the Keynian Bank, Giro Commercial Bank. ICICI Bank, Bank of India,
Bank of Baroda also followed the same route. Even nationally banks like Bank
of Punjab has been merged with Centurion Bank to form Centurion Bank of
Punjab Ltd, Many such instances have started growing in the Indian banking
industry thereby giving signals that inorganic growth is important to compete
and sustain in the Indian banking industry. To meet 47 these challenges of
growing through inorganic growth and Indian banks going global, banks have
started following international norms. There has been increased transparency in
14

the system. The use of technology in the banking industry has changed things a
lot, thus creating faster processes, addressing customer problems in a more
efficient way etc. India has also compiled with all the Core Principles of
Effective Banking Supervision of the Basel Committee. Currently, India has 96
scheduled commercial banks (SCBs) - 27 public sector banks (that is with the
Government of India holding a stake), 31 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges)
and 38 foreign banks. They have a combined network of over 53,000 branches
and 49,000 ATMs. According to researches carried out by the Reserve Bank of
India (RBI), on an all India basis, 59 per cent of the adult population in the
country has bank accounts and 41 per cent dont. In rural areas, the coverage of
banks is 39 per cent, against 60 per cent in urban areas. There is only one bank
for a population of 13000. Banking sector in India has been transformed
completely. Presently the latest inclusions such as Internet banking and Core
banking have made banking operations more user friendly and easy. At present
there are 20 public sector banks, State Bank of India and its associate group.

15

CHAPTER 3
Definition 'Private Banking'
Personalized financial and banking services that are traditionally offered to a
bank's rich, high net worth individuals (HNWI). For wealth management
purposes, HNWIs have accrued far more wealth than the average person, and
therefore have the means to access a larger variety of conventional and
alternative investments. Private banks aim to match such individuals with the
most appropriate options.

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 nationalization 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
16

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
Nationalization 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.

FEATURE OF PRIVATE BANK

4/7 account access: Access your money, when and where you want it,
anywhere in the world.

Online tools: Check your account balances online, change your contact
details, pay your BPAY bills, transfer money overseas, replace and activate your
cards and much more.

Cost efficient: ANZ Internet Banking is one of the cheapest banking

options available.

ANZ guaranteed: We guarantee that you will be reimbursed for any

unauthorized transactions in the unlikely event that you are a victim of fraud.
Learn how we protect you.

ANZ Shield: The peace of mind of an extra layer of security for your
online payments and activities with ANZ Shield.

IMPORTANCE OF PRIVATE SECTOR BANK

17

The private sector banks play a vital role in the Indian economy. They indirectly
motivate the public sector banks by offering a healthy competition to them. The
following are their importance:

1) Offering high degree of Professional Management:

The private sector banks help in introducing a high degree of professional
management and marketing concept into banking. It helps the public sector
banks as well to develop similar skill and technology.

2) Creates healthy competition:

The private sector banks provide a healthy competition on general efficiency
levels in the banking system.

3) Encourages Foreign Investment:

The private sector banks especially the foreign banks have much influence on
the foreign investment in the country.

4) Helps to access foreign capital markets:

The foreign banks in the private sector help the Indian companies and the
government agencies to meet out their financial requirements from International
capital markets. This service becomes easier for them because of the presence of
their head offices/other branches in important foreign centers. In this way they
help a large extent in the promotion of trade and industry in the country.

5) Helps to develop innovation and achieve expertise:

18

The private sector banks are always trying to Innovate new products avenues
(new schemes, services, etc.) and make the industries to achieve expertise in
their respective fields by offering quality service and guidance.
They introduce new technology in the banking service. Thus, they lead the other
banks in various new fields. For example, introduction of computerized
operations, credit card business, ATM service, etc.

Privatization in bank
ICICI Bank

ICICI Bank was established by the Industrial Credit and Investment

Corporation of India (ICICI), an Indian financial institution, as a wholly
owned subsidiary in 1994. The parent company was formed in 1955 as a jointventure of the World Bank, India's public-sector banks and public-sector
insurance companies to provide project financing to Indian industry. The bank
was initially known as the Industrial Credit and Investment Corporation of India
Bank, before it changed its name to the abbreviated ICICI Bank. The parent
company was later merged with the bank.
ICICI Bank is an Indian multinational banking and financial services company
headquartered in Vadodara, Gujarat India. As of 2014, it is the second largest
bank in India in terms of assets and market capitalization. It offers a wide range
19

of banking products and financial services for corporate and retail customers
through a variety of delivery channels and specialized subsidiaries in the areas
of investment

banking, life, non-life

insurance, venture

capital and asset

management. The Bank has a network of 4,050 branches and 12,919 ATMs in
India, and has a presence in 17 countries including India.
ICICI Bank is one of the Big Four banks of India, along with State Bank of
India, Punjab National Bank and Bank of Baroda. The bank has subsidiaries in
the United Kingdom and Canada; branches in United States, Singapore,
Bahrain, Hong Kong, Sri Lanka, Qatar, Oman, Dubai International Finance
Centre and China; and representative offices in United Arab Emirates, South
Africa, Bangladesh, Malaysia and Indonesia. The company's UK subsidiary has
also established branches in Belgium and Germany.

Technology in ICICI Bank

ICICI Bank has been at the forefront when it comes to technology adoption in
banking sector in India. Business intelligence has been a long journey for the
company with 12 million terabyte of data currently. And the reason why ICICI
Bank is spending so much on technology is primarily because of two reasons customer expectations and behavior is changing rapidly in India and second, the
diversified customer base in India.
There are so many business units like banking, mutual funds and insurance
within the ICICI group and it is very important for the group to seamlessly
integrate these units. This is because there is an overlap of the customer base
among these business units.

20

Product of ICICI Bank

Funds & Investments
Mutual Funds
Investing in Mutual Funds is important for building a balanced portfolio. We
help you in identifying the appropriate Mutual Fund schemes based on your
needs, risk appetite and financial goals. To get the right mix of risk and return,
avail equity funds for growth and capital appreciation, and debt funds for capital
protection.
Mutual Funds are subject to market risks. Please read the offer documents
carefully before investing.
Try the all-new and upgraded Mutual Fund Transaction Platform.

Portfolio Management Services

We will assist you with a range of specialized investment strategies to capitalize
on opportunities in the market by referring you to our partnering Asset
Management companies. ICICI Bank provides referral services only.

Deposits
Get full safety for your investments along with steady growth for your portfolio
with competitively priced deposit products from ICICI Bank Wealth
Management. We have designed a gamut of deposits to cater to your unique
banking needs. Now, earn attractive interest for various tenures on your
deposits.
Banking product
21

Savings Account

No minimum Balance Requirement

Complete waiver of charges on Demand Drafts, Pay Orders and

Anywhere Banking facilities
Complimentary and personalized International Debit Card
Internet Banking Avoid the queue or delays and try our simple and
secure Internet Banking facility for an unmatched online banking
experience
Customer Care Our Customer Care service is always available to
address your queries
Mobile Banking A quick, simple and convenient way to take command
of your bank account securely, anytime, anywhere.
Nomination Facility You may nominate a person as beneficiary to your
account proceeds

My Savings Rewards Start earning PAYBACK points on a day-to-day

basis that can be redeemed against exciting rewards from our partners.

Home loans

Dedicated team of experts to guide you through the property purchase

process

Home Loan suited as per your needs.

22

Home Loan tenure up to 20 years

Simplified documentation

Doorstep delivery of Home Loan papers

Loan approval even before the property is selected

Insurance options to cover your home loan at a competitive premium

Earn PAYBACK points under My Savings Rewards on every successful

EMI payment through Auto-debit mode

Family Wealth Account

A wealth of privileges has been designed to take care of your family. We offer
you a comprehensive suite of products and services tailored for exclusive
customers like yourself. To get started, all you need to do is start a Family
Banking relationship with ICICI Bank.

At least one of the members in your family should hold a Wealth Management
account with ICICI Bank and this premium service will be extended to all the
members in the family*. Earn PAYBACK points under My Savings Rewards for
adding members to Family Wealth Account.
Car loans

23

The Car Loans from ICICI Bank are designed to finance your dream car that
suits your status and taste. Enjoy the following benefits when you choose a Car
Loan from us and be rest assured of a pleasant journey.

Get loans up to 90% of the ex-showroom price of the car

Our Car Loans offer attractive interest rates to ensure you have a smooth
drive

New car loans are offered with fixed interest rates during the tenure of the
loan

Repayment of Car Loans tenure up to 60 months

Earn PAYBACK points under My Savings Rewards on every successful

EMI payment through Auto-debit mode

Foreign exchange service

Embark on hassle-free vacations with our world class Forex solutions.
Experience utmost convenience and service excellence when you choose
Foreign Currency, Travellers Cheques and Travel Card for your foreign
exchange needs. Whether you travel for holiday or for business, we offer
efficient solutions with the assurance of prompt delivery of foreign exchange at
your doorstep. Available in select cities through authorized service providers.

Demat account

Enjoy 24x7 access to transfer securities through the Internet and Interactive
Voice Response (IVR). Now you can receive your account statement and bill by

24

e-mail, and track your dividend, interest and bonus through the account
statement.

You also can seamlessly access your Demat Account by sending an SMS to
enquire about your Holdings, Transactions, Bill and ISIN details. Also receive
SMS alerts for all debits/credits and benefit from our competitive service
charges that offer you value for money.

ICICI Group subsidiary

ICICI Prudential life Insurance company
ICICI Securities
ICICI Lombard general Insurance Company
ICICI Prudential AMC and Trust
ICICI Venture
ICICI Direct
ICICI Foundation

Axis bank

25

Axis Bank Limited (formerly UTI Bank) is the third largest private sector bank
in India. Although classified as a private sector bank, Axis Bank's promoters
( UTI, LIC and GIC, which collectively held approx. 34% of the shares as at 31
December 2013), are all entities owned and controlled by the Government of
India.
The bank offers financial services to customer segments covering Large and
Mid-Sized corporates, MSME, Agriculture and Retail Businesses. Axis Bank
has its registered office at Ahmedabad.

Indian Business: As on 31-Mar-2014, the Bank had a network of 2402

branches and extension counters and 12922 ATMs. Axis Bank has the largest
ATM network among private banks in India and it operates an ATM at one of
the worlds highest sites at Thegu, Sikkim at a height of 4,023 meters (13,200 ft)
above sea level.

International Business: The Bank has eight international offices with

branches at Singapore, Hong Kong, Dubai (at the DIFC),Shanghai, and
Colombo, and Colombo and representative offices at Dubai and Abu Dhabi,
which focus on corporate lending, trade finance, syndication, investment
banking and liability businesses. In addition to the above, the Bank has a
presence in UK with its wholly owned subsidiary Axis Bank UK Limited. The
total assets of the overseas branches were US$7.86bn (31 March 2015).

Home loan
26

Axis Bank has opened a new front in the fast-growing home loan market by
promising to waive the last 12 equated monthly installments, or EMIs, if
repayments are done on time, a move that could prevent customers from
shifting to rivals offering lower rates and help the bank grab market share from
them.
The bank, which aims to raise its retail loan portfolio to about 30 per cent of
total from less than a fifth now, said this offer is available for those who borrow
under floating rate of interest and where payments are on time. "The idea is also
to check the churn in the home loan portfolio," said Jairam Sridharan, head
consumer lending and payments at Axis Bank. "With no pre-payment penalty,
customers are shifting loans to take advantage of the interest rate arbitrage
between banks. This product will also help us retain customers."

HDFC Bank

Housing

Development

Finance

Corporation

Limited or HDFC is

an Indian financial conglomerate based in Mumbai, India. It is a major provider

of finance for housing in India. It also has a presence in banking, life and
general insurance, asset management, venture capital and education loans.
HDFC Bank Limited is an Indian banking and financial services company
headquartered in Mumbai, Maharashtra. Incorporated in 1994, it is the fifth
largest bank in India as measured by assets. It is the largest private sector bank
in India by market capitalization as of February 2014. The bank was promoted
27

by the Housing Development Finance Corporation, a premier housing finance

company (set up in 1977) of India. According to the Brand Trust Report 2014,
HDFC was ranked 32nd among India's most trusted brands. HDFC was ranked
45th on the list of top 50 Banks in the world in terms of their market
capitalization.
As of 31 March 2013, the bank had assets of INR 4.08 trillion. For the fiscal
year 2012-13, the bank has reported net profit of INR 69 billion, up 31% from
the previous fiscal year. Its customer base stood at 28.7 million customers on 31
March 2013.
HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (Visa Electron). The bank also issues the MasterCard
Maestro debit card. The Bank launched its credit card business in late 2001. By
the end of June 2013, it had a credit card base of 5.94 million. By March 2012,
the bank had a total card base (debit and credit cards) of over 19.7 million. The
Bank is also one of the leading players in the "merchant acquiring" business
with over 240,000 point-of-sale (POS) terminals for debit / credit cards
acceptance at merchant establishments. The Bank is positioned in various net
based B2C opportunities including a wide range of Internet banking services for
Fixed Deposits, Loans, Bill Payments, etc.

28

Yes bank

Yes Bank, is India's fifth largest private sector Bank, co-founded by Rana
Kapoor in 2004 Yes Bank is the only Greenfield Bank license awarded by the
RBI in the last two decades. Yes Bank is a Full Service Commercial Bank,
has steadily built a Corporate, Retail & SME Banking franchise, Financial
Markets, Investment Banking, Corporate Finance, Branch Banking, Business
and Transaction Banking, and Wealth Management business lines across the
country.

Technology in Yes Bank

To ensure a highly professional banking experience, YES BANK has made
significant investments in technology. YES BANK has always been at the
forefront when it comes to leveraging on the latest technology to provide
products and services to its customers.
This philosophy is also reflected in the five brand pillars of our Bank where
technology has been identified as a key pillar and is considered a true
differentiator. Many first-mover implementations have provided us with long
lasting advantages, while also winning many accolades and awards for the
Bank. With one of the finest direct banking platforms, we are the first Bank in
India to offer two-factor authentication, single PIN access across all electronic
channels and Wi-Fi enabled branches to make the Bank truly world-class.
29

All parts of the Bank use IT to deliver superior products and services to the
customer. Innovations like Money Monitor, Mobile payments, Dual factor
authentication, Mobile Banking, RFID in branches, one-view of customer
relationship, most advanced speech enabled IVR enable products and sales
teams to offer superior customer offerings. Additionally, YES BANK continues
to strengthen its strategic partnerships with some of the best known IT majors
globally to develop innovative system features in order to improve process
efficiencies and create sector-specific banking solutions. Further, the
development of a robust Business Continuity plan within the Bank addresses
risks and secures systems that are vital to business operations.
YES BANK entered into a strategic partnership with Cordys for implementation
of a Business Process Management Suite to further help automation of
processes, straight through processing, robust audit mechanisms and flexibility
to quickly launch new customer products.
YES BANK entered into a partnership with First Data Corporation for its ATM
outsourcing in line with the Banks strategy to partner with best in class service
providers. This move has given the Bank a substantial cost advantage viz. ATM
management on one side, and ability to scale up much faster at the other.

Product & services of Yes bank

Corporate and Institutional Banking-The Corporate & Institutional
Banking (C&IB) division at Yes Bank contribute a major part of the
bank with a turnover of over 1,000 crores.
Commercial Banking

30

 Investment Banking-Yes Bank's is a major player in Investment

Banking in India and is involved in the identification, structuring and
execution of transactions for its clients in diverse industries and
geographies. Some of the typical transactions include mergers &
acquisitions, divestitures, private equity syndication and IPO advisory.
Corporate Finance-YES BANK's Corporate Finance practice offers a
combination of advisory services and customized products to optimize
risk based on "Knowledge Arbitrage"
Financial Marketing-The Financial Markets (FM) business model
provides Risk Management solutions related to foreign currency and
interest rate exposures of clients.
Retail Banking-YES BANK has banking network of over 600
branches and 2,000 ATMs giving it a major presence in urban India.
Yes bank is one of the fastest growing private Bank in India.

Product and services of private Bank

Private Banking product
Private Bank providing products and services, tailored to meet investment goals
of a particular client. Because investment goals vary substantially among the
clients, the banks offer a broad range of private banking products to their
clients, for example:
Alternative Investments
Equities
Fixed-income securities
Mutual funds

31

 Structured products
Foreign exchange
Commodities including precious metals
Deposits
Cash management
Real estate investments
Banks can offer either proprietary products or third-party products. To
distinguish between the two options, two types of product platforms are used:
Open architecture product platform is where a private bank distributes
all the third party products and is not restricted to selling only its
proprietary products.
Closed architecture product platform is where the bank sells only its
proprietary products and does not entertain any third party product.
Because of the diversity of clients' investment goals and existing private
banking products, a bank cannot meet the needs of the clients by offering solely
proprietary products. That is why most of the banks now follow an open
architecture product platform.

32

Private Banking Services

Private banking services can be subdivided into 2 broad categories: asset
management and financial advising. Examples of services from each category
are shown below:
Asset Management

Financial Advising
investment
counseling

asset allocation

market analysis

risk management

tax counseling

fiduciary solutions
protecting

estate planning
and

assets in the present

growing
retirement planning
inheritance planning

GROWTH IN BANKING SECTOR

The banking sector comprises of 28 public sector banks with majority
government ownership, 23 private banks and 27 foreign banks. Private sector
banks were barred from involvement in the banking market after the
nationalization of banks in 1969. Most important changes were implemented
after 1990. First, the market was opened up to private sector banks and foreign
banks. Second, regulations governing the establishment of branches were
amended. Third, regulations relating to lending were eased. Fourth, public
33

sector banks were allowed to procure financial resources from the stock market
up to 49%of their paid-up capital. The state of affairs began to change after
2000.The government adopted a policy of converting development financial
institutions into banks, and ICICI became a bank in 2001, followed by IDBI in
2004. During this period, one public sector bank and four private sector banks
were established, and 16 foreign banks entered the market. In March 1991,
foreign banks had 151 branches. This had increased to 205 by March 2001, and
to 295 by March 2009.

Growth of Bank Deposits:

The resource mobilization is an integral part of banking activity. The basic
principle of branch expansion is to tap deposit and culminate saving habit
among the community. Tapping of potential savings and uses them for a
productive purpose in particular is the main objective.

Growth of Advances:
The credit from the bank is an important input in the production function of the
agriculture, industry, commerce and allied productive activities for socio
economic development of the country. The bank credits, its development,
composition and direction are equally important in realizing the countrys
various macroeconomic goals. The channelization of bank credit in proper
direction, otherwise, there will be the adverse effect on the economy of the
country.

Growth of bank Investment

34

The percentage share of state bank of India and its associate banks registered a
growth of 5.6 during 2010-2011. The nationalized banks of India registered an
increase of 26.4 per cent during 2010-11. During 2010-11 Indias public sector
banks, old private sector banks, new private sector banks, private sector banks
and foreign banks registered a growth 19.0, 15.3, 15.6, 15.5 and 22.1 per cent
during 2010-2011. The all scheduled commercial banks registered a growth 18.6
per cent during 2010-2011.

TECHNOLOGICAL DEVELOPMENT IN BANKING:Indian banking has changed terrifically in the past few years. The changes are
multiple and at a fast pace in the term of transformation of technology
advancement. It has become completely dependent on technology as the
service/ product channel. Up gradation of technology, innovation and
modernization are the key factors of having excellence in banking sector. It
becomes necessary for a bank to differentiate its products from others. The
differentiation can be in terms of specialization, new products, increasing added
value by technology convergence. Technology in banking sector is one of the
focus areas of banks. The banks in India are using Information Technology (IT)
not only to improve their own internal processes but also to increase facilities
and services to their customers. Technological innovation not only enables a
broader reach for consumer banking and financial services, but also enhances its
capacity for continued and inclusive growth. IT improves the front end
operations with back end and helps in bringing down the transaction costs for
the customers.

NEED OF PRIVATIZATION IN BANK

35

Privatization has become a popular measure for solving the Banking problems
of governments by reducing the role of the state and encouraging the growth of
the private sector Bank. However, privatization takes a number of forms and has
been approached in various ways during the move away from government
control to other forms of ownership in developing countries.
In the course of banking liberalization, Reserve Bank has so far granted licenses
to 9 private sector banks up to March 2003. This apart, many foreign banks are
allowed to set up branches / offices in India. Simultaneously banks were
encouraged to go for mergers as in the case with Times Bank Ltd with HDFC
bank and Bank of Madura Ltd with ICICI Bank Ltd.

The following may be the arguments for privatization of banks in

India:
1. Public sector ownership has an inherent handicap due to it being extremely
diffused. This makes it less amenable to effective control by shareholders,
compared to private ownership.
2. Bank nationalization had given monopoly to the government in the banking
industry. As in case of any monopoly situation, the quality of service went down
and the people suffered.
3. State ownership of banks reduces competition and breeds inefficiency.
4. There is no evidence to suggest that State ownership lowers the probability of
banking crises.
5. The sale of public equity of banks may be particularly lucrative now. Twelve
of the 27 PSBs and 19 private sector banks are listed on stock exchanges, and
the market has appreciated their recent performance.

36

6. A sixth rationale for privatization is that it enhances efficiency and

productivity through proper management and control.
7. The competition, not merely ownership, is the key. And foreign competitors
might bring additional benefits take fresh capital as shown in other emerging
markets. A foreign owned bank, with large capitalization, can withstand local
disturbances better.
8. The private sector and foreign banks can resist local government pressure to
lend to favored sectors.
9. Frequent recapitalization of State-owned banks is a huge burden on the
Government budget.
10. The relative insensitivity of the public sector banking system to its cost
structure, inability to respond quickly to the changing market trends and the
greater rigidities in the management decision-making processes because of what
may be described as 'non-com- metrical' considerations.

ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the growth and sustainability of the
state-owned enterprises. The advantages of privatization can be perceived
from both microeconomic and macroeconomic impacts that privatization
exerts.

A. Microeconomic advantages:

37

 State owned enterprises usually are outdone by the private enterprises

competitively. When compared the latter show better results in terms of
revenues and efficiency and productivity. Hence, privatization can provide
the necessary impetus to the underperforming PSUs.
Privatization brings about radical structural changes providing momentum
in the competitive.
Privatization leads to adoption of the global best practices along with
management and motivation of the best human talent to foster sustainable
competitive advantage and improvised management of resources.

B. Macroeconomic advantages:
Privatization has a positive impact on the financial health of the sector
which was previously state dominated by way of reducing the deficits and
debts.
The net transfer to the State owned Enterprises is lowered through
Privatization .
Helps in escalating the performance benchmarks of the industry in general.
Can initially have an undesirable impact on the employees but gradually in
the long term, shall prove beneficial for the growth and prosperity of the
employees
Privatized enterprises provide better and prompt services to the customers
and help in improving the overall infrastructure of the country. .

38

DISADVANTAGES OF PRIVATIZATION IN BANK

Private sector bank focuses more on profit maximization and less on social
objectives unlike public sector bank that initiates socially viable adjustments
in case of emergencies and criticalities.
There is lack of transparency in private sector and stakeholders do not get
the complete information about the functionality of the Bank
Privatization has provided the unnecessary support to the corruption and
illegitimate ways of accomplishments of licenses and business deals Anant
Kousadikar and Trivender Kumar Singh 21 amongst the government and
private bidders. Lobbying and bribery are the common issues tarnishing the
practical applicability of privatization.
Privatization loses the mission with which the enterprise was established
and profit maximization agenda encourages malpractices like production of
lower quality products, elevating the hidden indirect costs, price escalation
etc.
Privatization results in high employee turnover and a lot of investment is
required to train the lesser-qualified staff and even making the existing
manpower of PSU abreast with the latest business practices.
There can be a conflict of interest amongst stakeholders and the
management of the buyer private company and initial resistance to change
can hamper the performance of the enterprise .
Privatization escalates price inflation in general as privatized enterprises
do not enjoy government subsidies after the deal and the burden of this
inflation affects the common man.

PRIVATE SECTOR BANK-EVOLUTION

39

the private sector banks played a crucial role in the growth of joint stock
banking in India. The first half of the 20th century witnessed phenomenal
growth of private sector banks. As a result in 1951, there were 566 private banks
of which 474 were non-scheduled and 92 scheduled classified on the basis of
their capital size. The role of private sector banking started declining when the
Government of India entered banking business with the establishment of State
Bank of India in 1955 and subsequently two rounds of bank nationalization one
in July 1969 (14 major banks), another in April 1980 (takeover of 6 banks).
Consequently, the presence of public sector banks has increased. At present,
there are 32 private banks comprising of 24 old banks, which existed prior to
1993-94 and eight new private banks, which were established during 1993-94
and onwards after the RBI announced guidelines in January 1993 for
establishment of new banks in private sector following the recommendations of
Narasimham Committee-I (1991). Compared to New private sector banks, the
old banks are smaller in size. For example, at end March 2000, the average net
worth of the 24 Old Private Banks (OPBs) was Rs.179.67 Crore per OPB
compared to that of the New Private Bank (NPB) at Rs. 479.88 Crore per NPB.
The OPBs are essentially regional in character although some of them have
scattered presence in areas other than in and around the areas of their origin.
The number of branches of the NPBs was 999 at end March 2003, while those
of OPBs 3491. The NPBs are extremely cautious in expanding their branch
network and business because their managers.
The Narasimham Committee-I, that advocated competition in the banking
industry, made unequivocal recommendation to allow private and foreign banks
into the industry. Acting on the recommendations of the committee, the RBI laid
down guidelines for the establishment of the private 191 sector banks on
January 1993.

40

Nine banks were set-up in private sector including some by development

financial institutions. Prominent among them are ICICI Bank, GTB, HDFC and
IDBI bank. Another interesting development was merger of some banks. Bareily
Corporation Ltd merged with Bank of Baroda in 1999, Times Bank merged with
HDFC Bank in 1996, Bank of Madura Ltd merged with ICICI bank in 2001 and
Nedungadi Bank Ltd merged with Punjab National Bank in 2003. With regard
to branch expansion, banks attaining capital adequacy norms and prudential
accounting standards can set up new branches without the prior approval of
RBI.

CHALLENGES OF INDIAN BANKING SECTOR

The bank marketing is than an approach to market the services profitability. It is
a device to maintain commercial viability. The changing perception of bank
marketing has made it a social process. The significant properties of the holistic
concept of management and marketing has made bank marketing a device to
establish a balance between the commercial and social considerations, often
considered to the be opposite of each other. A collaboration of two words banks
and marketing thus focuses our attention on the following:
Bank marketing is a managerial approach to survive in highly competitive

market as well as reliable service delivery to target customers.

It is a social process to sub serve social interests.
It is a fair way of making profits
It is an art to make possible performance-orientation.
It is a professionally tested skill to excel competition.

Deceleration in economic growth impacting expansion of banking sector

41

 Maintaining asset quality in the face of growing non-performing assets and

restructuring of advances
Augmenting capital and maintaining prudential capital
Preserving and augment profitability in a stressed environment
Implementing financial inclusion & Direct Benefits Transfer
Increased competition from both within the banking sector with various
banks becoming aggressive
Adopting and adapting to technological changes/innovation to meet
regulatory norms and tap alternative channels
Improving quality of human resources for working efficiently under the
latest technological developments.

License to Private Banks

In India after the privatization of banking industries in 1993-1994, the license
had been given to the following banks
ICICI Bank, HDFC Bank, IDBI Bank, Axis Bank, Centurion Bank, Times
Bank, Industrial Bank, Global Trust Bank, Bank of Punjab.
Later Times Bank and Bank of Punjab were acquired by HDFC Bank.
Global Trust Bank was acquired by Oriental Bank of Commerce.
License in 2002
Yes Bank, Kotak Mahindra Bank

42

The Reserve Bank of India is slowly opening the doors for corporate to enter the
highly regulated industry i.e. the banking industry.
New Banking Law [The Banking Laws (Amendment) Bill 2012]
Some Features of the Bill are as Follows
The new regulation increases the shareholders voting rights from 10 per
cent to 26 per cent in private sector banks, making investment attractive
to foreign players. This will make the Indian banking sector attractive for
the overseas investors and is expected to lead to consolidation in the
industry.
It allows nationalized banks to issue bonus shares and rights to give them
flexibility to raise capital.
Now, Reserve Bank of India (RBI) could issue new bank licenses to
business houses.
It gives the RBI powers to inspect the books of any associate enterprise of
a bank
RBI will have powers to impose penalty if banks fail to maintain
adequate CRR
Bill also enables the government to raise voting rights in state banks such
as the State Bank of India to 10 per cent from the current one per cent.
Bill allows foreign banks to convert their Indian operations into local
subsidiaries or transfer shareholding to a holding company of the bank
without paying stamp duty

43

PRIVATE BANKS IN INDIA

Old private sector Banks
1. City Union Bank
2. Dhanlaxmi Bank
3. Federal Bank
4. ING Vysya Bank (merged with Kotak Mahindra Bank in April 2015)
5. Jammu and Kashmir Bank
6. Karnataka Bank
7. Karur Vysya Bank
8. Lakshmi Vilas Bank
9. Nainital Bank
10.Ratnakar Bank
11.South Indian Bank
12.Tamilnad Mercantile Bank
13.Catholic Syrian Bank
New private sector Banks

44

1. Axis Bank
2. Development Credit Bank
3. HDFC Bank
4. ICICI Bank
5. IndusInd Bank
6. Yes Bank
7. Bandhan Bank
8. IDFC
9. Kotak Mahindra Bank[

CURRENT STATUS AND DEVELOPMENT OF THE

INDIAN BANKING SECTOR
The Indian economys liberalization in the early 1990s has resulted in the
conception of various private sector banks. This has sparked a boom in the
countrys banking sector in the past two decade. The revenue of Indian banks
grew four-fold from US$ 11.8 billion to US$ 46.9 billion, whereas the profit
after tax rose nearly nine-fold from US$ 1.4 billion to US$ 12 billion over
2001-10 . This growth was driven primarily by two factors. First, the influx of
Foreign Direct Investment (FDI) of up to 74 per cent with certain restriction
.Second, The conservative policies of the Reserve Bank of India (RBI), which
have shielded Indian banks from recession and global economic turmoil. an
index tracking the performance of important banking sector stocks, and has
grown at a compounded annual growth rate (CAGR) of approximately 20 per
cent over 2003-12 .
45

CHAPTER 4
The Indian banking sector is a mixture of public, private and foreign
ownerships. The below table highlights top 10 banks which contributed 58%
share of the total credit as on March 31, 2011. The State bank of India has
recorded highest market share. The Net Interest Margin of HDFC Banks is 4.2%
which is highest among others.
Name
of bank

State
bank of
India
Punjab
national
Bank
Bank of
Baroda
ICICI
Bank
Canara
Bank
HDFC
Bank
IDBI
Bank

Credit
portfolio
(Rs.Bn)
-Mar
2011
7565

Market NIM
shares Mar(%)
2011

Tier
I RONW
capital( (%)
%)
Mar2011

18

2.9

7.8

13

Gross
NPA
(%)
Mar2011
3.3

2421

3.5

8.4

24

1.8

2287

2.8

10.0

24

1.4

2164

2.3

13.2

10

4.5

2125

2.6

10.9

26

1.5

1600

4.2

12.2

17

1.1

1571

1.8

8.1

16

1.8

46

Axis
1424
Bank
Central 1297
Bank of
India
Bank of 2131
India

3.1

9.4

19

1.1

2.7

6.4

18

2.2

2.5

8.3

17

2.2

Composition of deposit
120

100

80

Term deposit
CASA

60

40

20

0
PSBs

OPRBs

NPRBs

Deposits of Borrowings

47

FBs

120
100
80
borrowings
deposits

60
40
20
0
PSBs

OPRBs

NPRBs

FBs

Growth in deposit over past few year

Growth in deposit
1400
1200
1000
Growth in deposit

800
600
400
200
0
FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Government controlled Bank Dominate percentage share of

total Assets

48

Sales

Foreign Banks
Private sector bank
Government Controlled bank

Function of banking process

Core business Activities
card issue processing
payment processing
e- payment
e-banking
ATMs
loan operation

49

CHAPTER 5
SUGGESTIONS:
There are some suggestions derived from the doing the analytical study of the
financial performance of the selected banks. As such this chapter offer new
suggestions for the increasing profitability and proper capital structure decision
of banking industry in India.
The return on equity for private sector banks is less than that of public
sector banks. So, researcher may suggest to private sector banks to
improve their profitability. Thus private sector banks are required to
increase their profit after tax to satisfy the share holders with adequate
return.
In private sector banks return on long term fund found poor as compared
to public sector banks. It is necessary for the private sector banks to

50

utilize their long term fund very effectively to generate enough return. So,
as they can compete to public sector banks.
An appropriate mix of capital structure should be adopted in order to
increase the profitability of banks.
In the case of higher debt, profitability will tend to decline. The reason
behind this may be due to the high interest bearing securities engaged in
the total debt.
Banks should concern much on internal sources of financing in order to
increase their profitability.

Sometimes productivity can be affected due to higher amount of Labour

turnover towards other sector and these can reduce only through
satisfaction of employees of banks by financial and non-financial
motives.
If employees lack the requisite banking culture and fail to project the
image of the bank in a proper way, productivity is bound to suffer. So
banks should adopt means of increasing interest income by granting
qualitative advances and widening their credit portfolio and increased
other income.
Banks should develop the spirit of cost consciousness among its
employees. It will also help in increasing the earnings. Better
management information system, credit monitoring and cash management
can result increase in productivity.
A separate cell at each district head quarter may be set up exclusively for
recovery of bank dues. Government vehicles should also be provided for
the recovery and the recovery procedures should be simplified. The
defaulters misusing the loans should be severely dealt with. The
recommendation of the Narsimham Committee regarding setting up of an

51

Asset Reconstruction Fund to take over from banks the bad and doubtful
debts at a discount deserves to be implemented
The attitudes of bankers should be more customers oriented than
procedure oriented. More flexible business hours, evening counters,
bright and comfortable banking halls and well informed staff, information
brochures and regular contacts, all of which will have to be given due
attention to improve customer services.
Appropriate use of technology for improvement the quality of customer
service and ensuring efficiency in operations is crucial for the effective
functioning of banks in emerging competitive environment. There is a
need for improving and upgrading work technology to cope up with the
growing volume of business transactions. The present program of branch
computerization is largely confined to metropolitan and urban branches
only. The feasibility of extending this facility to other growing banking
centers has to be explored.
The process of any reforms in banking system cannot gather momentum
without evolving reforms in the area of Human Resource Development.
Overstaffing, over unionization and rigid frame work of promotions and
transfers, also lack of effective leadership are the principal contributory
factors to the disquieting trend in Personal Management. Thus, the policy
should be redefined to making the employees committed to the
organization and to the changes that are taking place and to face the
future challenges as a cohesive team.
Considering pros and cons of privatization, the case for privatizing
Indian Banking seems to be strong. While privatization is theoretically
the desired policy option. In reality, privatization of banks has proven to
be difficult, making the end point unclear. The problem of political
opposition of privatization has no short cut solution in a democracy and
can only be solved over time through consensus building.

52

 The developmental role of banking is constrained by the availability of

infrastructure and activities of state agencies in the area. Therefore,
merely pumping in of more credit by commercial banks will not
automatically lead to development. However, if the state and other
agencies evolve suitable schemes to enable people to involve them in
productive activities, then the banks can step in and provide the credit
that will be needed.

CONCLUSION
This study examines the impact of privatization on bank performance and
efficiency using data of banks in India for the five-year period 1998-2002.
Statistical analysis was performed using the difference of means test for three
groups of banks partially privatized, fully state14 owned, and those already in
the private sector. Partially privatized banks have performed better as compared
to the fully public sector banks in respect of certain financial performance and
efficiency parameters. Partially privatized banks also seem to be catching up
with the banks already in the private sector. No significant performance or
efficiency difference was seen in these two cohorts of banks. Overall, going by
the results of this study, partially privatized banks have continued to show
improved performance and efficiency in the years after privatization. In several
countries, post-privatization outcomes were far from satisfactory. However,
Indias partial privatization, as shown by this study, appears to have resulted in
positive outcomes. Prior studies suggested that partial privatization fails to
produce any improvement in performance and that mixed state private firms
often do worse than fully state-owned companies (Boardman and Vining, 1989).
The results of this study, like those of fundamental. (1997), contrast with these
findings and could be of interest to researchers. The Government of India is
53

already considering a measure to bring down its stake further to 33 per cent.
Given the positive outcome of partial privatization so far, further dilution of the
stakes may help. When compared with the privatization strategies worldwide, it
seems that the Indian strategy of gradual privatization has succeeded. It is
different from some other countries like Mexico where hasty privatization led to
serious problems. Also, while IPOs, as a means to privatization, succeeded in
India due to a well developed capital market, it did not in Polands case of Bank
Slaski. Appropriate changes in the regulatory and supervisory regimes also
helped a smoother transition and avoided financial crisis in India that some
other countries had to face.
1) Private Sector Banks profitability is much higher than that of Public Sector
Banks.
2) The economic liberalization measures introduced by the Indian government
coupled with trends towards globalization have substantially altered the banking
sector and the profitability of public sector banks has declined to a large extent.
So Public Sector Banks will have to introduce new financial instruments and
innovations in order to remain in business.
3) It is clear from the analysis that the public sector banks are less profitable
than the private sector banks in terms of overall profitability.
4) All these developments in Indian banking are says that, the Indian banks are
moving towards modern banking changing a face of traditional banking of
Indian economy .It is grate change of banking industry. They having a installing
an information technology for 191 banking business and they trying to provide
technology based banking products and services to their customers.
5) Indian banks also trying to Universalization of banking products and services
to one top banking shop for customer delight, but comparatively private and
foreign banks existing in Indian economy are having a higher level of
54

modernization and those providing numbers of modern services to their

customers.
6) For a long term success of banking institution to require effective
management of credit risk and diversified into fee based activities. Nontraditional activities of banks are more sophisticated and versatile instrument for
risk assessment.

55

QUESTIONNAIRE
QUESTIONNAIRE CUSTOMERS PREFERENCE FOR PUBLIC
AND PRIVATE SECTOR BANK
Sex (M/F):
Area (Rural/Urban):
Age:
15-30 years:

30-45 years:

45-60 years:

Above 65 years:

Income (Monthly in Rs.):

Less than 15000:

15000 and less than 30000:

30000 and less than 45000:

45000 and above:

Q1. Do you use the services of bank?

a) Yes
b) No
Q2. If no, then what is reason behind this behavior?
a) Lack of awareness
b) Low income
c) Any other

Q. 3 Are you satisfied with service of bank?

56

a) Yes
b) No
Q4. How often do you visit your bank?
a) Weekly
b) 2-3 times in a week
c) Monthly
d) Any other
Q5. Which banking sector services do you avail?
a) Public sector
b) Private sector
c) Both
Q6. Which type of account do you have in public and private sector banks?
a) Savings account
b) Current account
c) Fixed deposits
d) Any other
Q7. Have you ever availed loan facility from your bank?
a) Yes
b) No
If Yes, then answer following questions:

57

Q8. From which bank you have availed loan?

a) Public Bank
b) Private Bank
c) Both
Q9. Rate the loan service facility availed from your respective bank according
to given scale:
1) Excellent
2) Good
3) Average
4) Poor
5) Very poor
Q10. Do you agree that minimum account limit is not high and it is easy to
maintain?
a) Strongly agree
b) Agree
c) Somewhat agree
d) Disagree
e) Strongly disagree

Q. 11 Your open account decision are influenced by..

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a) Oneself
b) Broker
c) Market Research
d) Friends/ Relatives
e) An Other
Q. 12 Are you using mobile Banking service offered by Bank?
a) Yes
b) No
Q.13 Are you aware of all the accounts provided by your Bank?
a) Yes
b) No
Q.14 Can you tend to buy gold form your bank by the way of pure gold
investment opportunity?
a) Yes
b) No
Q.15 Are you aware of home insurance facilities provide by our bank?
a) Yes
b) No

Webliography
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www.google.com
www.scribd.com

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