Project Synopsis Commercial Bank Management

Entry of corporate houses in the formal banking space

Submitted to Prof. Prakash Singh
2nd November, 2011

Submitted By: Group 11

Ravi Makwana PGP26236 I Abhishek Ashat PGP26322 I Karan Sehgal PGP26348 I Manish Anand PGP26350 I Paramjyothi Akula PGP26356 I Rishikesh Tripathy PGP26362

Background and Scope

Indian Banking system is considered to be most well managed and stable financial system in the world. Strict restrictions accompanied by controlled aggression have been the main pillars on which RBI is building a sound financial system for the country. In recent development, the central bank has decided to open the doors to let corporate houses enter the banking space. The aim is to boost financial inclusion in the country through increased competition. Major conditions that have to be fulfilled before the RBI grants a license include sound credentials and integrity of the corporate, a 10-year record of successfully running their businesses, a minimum paid-up capital of Rs 5 bn, 25% of their branches to be set up in rural unbanked regions, listing within two years. In addition to this, such banks must be owned by a separate holding company that cannot borrow money to float the bank and many more such restrictions. Another catch is that meeting all these criteria automatically does not result in banking licenses being granted. This is because the RBI intends to be very selective and will have the last word when it comes to granting permission to set up banks. Hence the project aims to understand the underlying reason for such a move, its clauses, its effects on the Indian Banking landscape and the countrys progress as a whole.

Specific Objects of the Project

To analyze the rationale of the RBI to allow corporates into the Indian banking system To analyze the restriction placed on the corporates by RBI To analyze why banks are opposing the participation of corporate in the Indian banking system To analyze the effect of these restrictions on the profitability of the private players To study the success/failure of similar private sector participation in foreign markets

Research Methodology
The research will be based on the guidelines released by the reserve bank of India on the participation of corporate in the Indian banking system. Business articles and news will be analyzed to understand the different viewpoints and then secondary data and research papers from the world markets where private participation is already allowed will be analyzed to predict the success of such a move in India.

References
http://www.rbi.org.in http://rbidocs.rbi.org.in/rdocs/content/pdfs/fidis110810.pdf http://rbidocs.rbi.org.in/rdocs/content/pdfs/fidis110810.pdf http://rbidocs.rbi.org.in/rdocs/content/PDFs/79486.pdf http://economics.mit.edu/files/508 http://ibexindia.com/images/Indias-Ambassador.pdf