A

WINTER PROJECT
REPORT
On
BANKING
(IDBI BANK)

Submitted in partial fulfillment of degree

MASTERS OF BUSINESS ADMINISTRATION (MBA)

Submitted To: Submitted by:

Mr. Sumit Gupta Mudit Upadhyay
M.B.A 4th Sem
Roll no. 09020500048

AMRAPALI INSTITUTE OF MANAGEMENT STUDIES & COMPUTER

APPLICATIONS
(Affiliated to Uttrakhand Technical University, Dehradun)
Shiksha Nagar, Lamachaur, Haldwani
CONTENT

1. Topic

2. Why this industry?

3. Why is this suitable for you?

4. Salient feature

5. Development & growth of the selected industry

6. Tentative chart of your carrier growth

Banking Overview

The major participants of the Indian financial system are the commercial banks, the
financial institutions (FIs), encompassing term-lending institutions, investment
institutions, specialized financial institutions and the state-level development banks, Non-
Bank Financial Companies (NBFCs) and other market intermediaries such as the stock
brokers and money-lenders. The commercial banks and certain variants of NBFCs are
among the oldest of the market participants. The FIs, on the other hand, are relatively
new entities in the financial market place.

Historical perspective

Bank of Hindustan, set up in 1870, was the earliest Indian Bank . Banking in India on
modern lines started with the establishment of three presidency banks under Presidency
Bank's act 1876 i.e. Bank of Calcutta, Bank of Bombay and Bank of Madras. In 1921, all
presidency banks were amalgamated to form the Imperial Bank of India. Imperial bank
carried out limited central banking functions also 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 bank without major government ownership. Banking Regulations
Act was passed in 1949. This regulation brought Reserve Bank of India 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.

RBI was empowered in 1960, to force compulsory merger of weak banks with the strong
ones. The total number of banks was thus reduced 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 Narsimham Committee report suggested wide ranging reforms for the
banking sector in 1992 to introduce internationally accepted banking practices.
 COMMERCIAL & CO-OPERATIVE BANKS
The commercial banking structure in India consists of:
• Scheduled Commercial Banks

• Unscheduled Banks

Scheduled commercial Banks 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 (60 of the Act. Some co-operative banks are scheduled
 commercial banks albeit not all co-operative banks are. Being a part of the second
schedule confers some benefits to the bank in terms of access to accommodation
by RBI during the times of liquidity constraints. At the same time, however, this
status also subjects the bank certain conditions and obligation towards the reserve
regulations of RBI.
For the purpose of assessment of performance of banks, the Reserve Bank of
India categorize them as public sector banks, old private sector banks, new private
sector banks and foreign banks. This sub sector can broadly be classified into:
1. Public sector
2. Private sector
3. Foreign banks

Public sector banks have either the Government of India or Reserve Bank of India as the
majority shareholder. This segment comprises of:
State Bank of India (SBI)and its Subsidiaries
Other Nationalized Banks

CO-OPERATIVE BANKS

There are two main categories of the co-operative banks.

(a) Short term lending oriented co-operative Banks - within this category there are
three sub categories of banks viz state co-operative banks, District co-operative banks
and Primary Agricultural co-operative societies.

(b) Long term lending oriented co-operative Banks - within the second category there
are land development banks at three levels state level, district level and village level.

The co-operative banking structure in India is divided into following main 5 categories:
1. Primary Urban Co-op Banks

2. Primary Agricultural Credit Societies

3. District Central Co-op Banks

4, State Co-operative Banks

5. Land Development Banks

WHY THIS INDUSTRY

I would like to make my career in banking industry because it attracts me very much,
behind this there are two main reasons first is that in banking Industry there is a lot for
learning and to build up a good career and the other reason is that I like that type of job in
which I can find time for myself. Now I want to describe about this industry with a focus
on IDBI Bank in which I did my summer training.

Banks play very important role in the economic life of the nation. The health of the

economy is closely related to the soundness of its banking system. Although banks create

no new wealth but their borrowing, lending and related activities facilitate the process of

production, distribution, exchange and consumption of wealth.

In this way they become very effective partners in the process of economic development.

Today, modern banks are very useful for the utilization of the resources of the country.

The banks are mobilizing the savings of the people for the investment purposes. The

savings are encouraged and saving rate increases. If there would be no banks then a great

portion of a capital of the country would remain idle.

A bank as a matter of fact is just like a heart in the economic structure and the Capital

provided by it is like blood in it. As long as blood is in circulation the organs will remain

sound and healthy. If the blood is not supplied to any organ then that part would become

useless. So if the finance is not provided to Agriculture sector or industrial sector, it will

be destroyed. Loan facility provided by banks works as an incentive to the producer to

increase the production. Banking is now an essential part of our economic system.

Modern trade and commerce would almost be impossible without the availability of

suitable banking services.

First of all, banking promotes savings. All manner of people, from the ordinary laborers

and workers to the rich land owners and businessmen, can keep their money safely in
banks and saving centers.

Secondly, banking promotes investments. Banks easily invest the money they get in

industry , agriculture and trade. They either invest it directly or advance loans to other

investors.

Thirdly, it is most through banks that foreign trade is carried on. Whether we export or

import, it is through banks that money is transferred from one country to another. For

example, bills of exchange and letters of credit are the regular ways banks use to transfer

money.

Even the UN has the World Bank that is like a big deposit for all the members countries.

They can borrow from it according to their needs. But unwise borrowing and wasteful

spending by countries like ours leads to heavy debts and economic distress. Let us have a

modern , effective but simple banking system for our progress and prosperity. Importance

of banking in an economy cannot but be emphasized. Banking plays the role of an

intermediary is movement of resources from places of surplus to places of deficit. Via

this role resources are evenly distributed in the economy. The important of bank system

is the facilities for the of companies and production and necessary for economically

system, also controlled for the money circle and inflation.

Banking is financial institution that accepts deposit and channels those deposits into

lending activities.

WHY IS THIS SUITABLE FOR ME

As a part of an MBA I have an opportunity to make my career in banking industry and I

am extremely eager to work in this sector.

It has many projects and assignments with career growth and development this banking

sector is fastest and growing sector as are follows. Banks play very important role in the

economic life of the nation. The health of the economy is closely related to the soundness

of its banking system. Although banks create no new wealth but their borrowing, lending

and related activities facilitate the process of production, distribution, exchange In this

way they become very effective partners in the process of economic development. Today,

modern banks are very useful for the utilization of the resources of the country. The

banks are mobilizing the savings of the people for the investment purposes

A bank as a matter of fact is just like a heart in the economic structure and the Capital

provided by it is like blood in it. As long as blood is in circulation the organs will remain

sound and healthy. If the blood is not supplied to any organ then that part would become

useless. So if the finance is not provided to Agriculture sector or industrial sector, it will

be destroyed. Loan facility provided by banks works as an incentive to the producer to

increase the production

The Banking Industry was once a simple and reliable business that took deposits from

investors at a lower interest rate and loaned it out to borrowers at a higher rate.However

deregulation and technology led to a revolution in the Banking Industry that saw it

transformed. Banks have become global industrial powerhouses that have created ever

more complex schemes that use risk and securitization in models that only PhD students

can understand. Through technology development, banking services have become

available 24 hours a day, 365 days a week, through ATMs, at online banking, and in

electronically enabled exchanges where everything from stocks to currency futures

contracts can be traded .

The Banking Industry at its core provides access to credit. In the lenders case, this

includes access to their own savings and investments, and interest payments on those

amounts. In the case of borrowers, it includes access to loans for the creditworthy, at a

competitive interest rate.

Banking services include transactional services, such as verification of account details,

account balance details and the transfer of funds, as well as advisory services, that help

individuals and institutions to properly plan and manage their finances. Online banking

channels have become key in the last 10 years.

The collapse of the Banking Industry in the Financial Crisis, however, means that some

of the more extreme risk-taking and complex securitisation activities that banks

increasingly engaged in since 2000 will be limited and carefully watched, to ensure that

there is not another banking system meltdown in the future.

Find out more about banks, banking, cd rates and savings accounts Mortgage banking has

been encompassing for the publicity or promotion of the various mortgage loans to

investors as well as individuals in the mortgage business.

Online banking services has developed the banking practices easier worldwide.

Banking in the small business sector plays an important role.

SALIENT FEATURE OF THE BANKING INDUSTRY

From time to time RBI issued guidelines regarding restrictions on bank lending. For the
benefit of our readers, we reproduce below, the summary of these guidelines:

Advances against bank's Own Shares

In terms of Section 20(1) of the Banking Regulation Act, 1949, a bank cannot grant any
loans and advances on the security of its own shares.

Advances to banks Directors

Section 20(1) of the Banking Regulation Act, 1949 also lays down the restrictions on
loans and advances to the Directors and the firms in which they hold substantial interest.
The term `loans and advances' shall not include the loans or advances against
Government securities, life insurance policies or fixed deposits.

Restrictions on Power to Remit Debts

Section 20A of the Banking Regulation Act, 1949 stipulates that notwithstanding
anything to the contrary contained in Section 293 of the Companies Act, 1956, a banking
company shall not, except with the prior approval of the Reserve Bank, remit in whole or
in part any debt due to it by any of its directors, or any firm or company in which any of
its directors is interested as director, partner, managing agent or guarantor, or any
individual, if any of its director is his partner or guarantor.

Restrictions on Holding Shares in Companies

In terms of Section 19(2) of the Banking Regulation Act, 1949, the banks should not hold
shares in any company except as provided in sub-section (1) whether as pledgee,
mortgagee or absolute owner, of an amount exceeding 30 percent of the paid-up share
capital of that company or 30 percent of its own paid-up share capital and reserves,
whichever is less. Further, in terms of Section 19(3) of the Banking Regulation Act,
1949, the banks should not hold shares whether as pledgee, mortgagee or absolute owner,
in any company in the management of which any managing director or manager of the
bank is in any manner concerned or interested.

Restrictions on Credit to Companies for Buy-back of their Securities

In terms of Section 77A(1) of the Companies Act, 1956, the companies are permitted to
purchase their own shares or other specified securities out of their - free reserves, or
securities premium account, or the proceeds of any shares or other specified securities.
subject to compliance of various conditions specified in the Companies (Amendment)
Act, 1999. Therefore, the banks should not provide loans to companies for buy-back of
shares/securities.

Granting loans and advances to relatives of Directors

Without prior approval of the Board or without the knowledge of the Board, no loans and
advances should be granted to relatives of Bank's Chairman/Managing Director or other
Directors, Directors (including Chairman/Managing Director) of other banks and their
relatives, Directors of Scheduled Co-operative Banks and their relatives, Directors of
Subsidiaries/Trustees of Mutual Funds/Venture Capital Funds set up by the financing
banks or other banks.

Loans and Advances against Shares, Debentures and Bonds

-No loans to be granted against partly paid shares.

-No loans to be granted to partnership/proprietorship concerns against the primary
security of shares and debentures.
-Banks and their subsidiaries should not undertake financing of Badla transactions.

Advances against Fixed Deposit Receipts (FDRs) Issued by Other Banks

There have been instances where fake term deposit receipts purported to have been issued
by some banks were used for obtaining advances from other banks.In the light of these
happenings, the banks should desist from sanctioning advances against FDRs, or other
term deposits of other banks.

Issue of Bank Guarantees in favour of Financial Institutions

Banks are precluded from issuance of guarantees favouring financial institutions, other
banks and/or other lending agencies for the loans extended by the latter, as it is intended
that the primary lender should appraise and assume the risk associated with sanction of
credit and not pass on risk by securing itself with a guarantee.

Discounting/Rediscounting of Bills by Banks

Bills covering payments of electricity charges, customs duty, hire-purchase/lease rental

instalments, sale of securities and other type of financial accommodation should not be
discounted by banks.

Accommodation bills should never be discounted by the banks. The underlying trade
transactions should be clearly identified and proper record thereof should be maintained
at the branches discounting the bills.

VOLUNTARY RETIREMENT SCHEME IN BANKS

(Salient Features)
 The Banking Division, of Govt. of India, conveyed its assent to IBA recentlyfor
circulation among PSBs for adoption, a uniform VRS for the banking sector
giving PSBs a seven month time frame to attempt an optimal reduction of their
excess staff. Before offering VRS, banks are required to undertake a complete
manpower planning exercise. The salient features are:

Eligibility

• All permanent employees with 15 years of service or 40 years of age

• The following employees will not be eligible for this scheme.
• i) Specialists officers/employees, who have executed service bonds & have not
completed it, employees/officers serving abroad under special
arrangements/bonds, will not be eligible for VRS. The Directors may however
waive this, subject to fulfillment of the bond & other requirements.
• ii) Employees against whom Disciplinary Proceedings are contemplated/pending
or are under suspension.
• iii) Employees appointed on contract basis.
• iv) Any other category of employees as may be specified by the Board.

Amount of Ex-gratia
60 days' salary (pay plus stagnation increments plus special allowance plus
dearness relief) for each completed year of service or the salary for the number of
months service is left, whichever is less.

Other Benefits
• i) Gratuity as per Gratuity Act/Service Gratuity, as the case maybe.
• ii) Pensions (including commuted value of pension)/bank's contribution towards
PF, as the case may be.
• iii) Leave encashment as per rules.

DEVELOPMENT AND GROWTH IN BANKING INDUSTRY

The world’s second largest populated country, India, is the apple of the eye for the world
now. The world economies are seeing it as their potential market. This has been going on
since quite some time now, ever since 1991 reforms of liberalization, globalization and
privatization. Indian markets in urban areas have grown appreciably and are on the verge
of saturation, so corporates have started tapping rural markets, since more than 60 per
cent of India’s population lives in rural areas.

During this global meltdown and fall of exports, if the Fast Moving Consumer Goods
(FMCG) sector has been able to show rising quarterly growths, it is because of the Rural
Markets and their rising spending power, which have not been affected by this meltdown.
If we look at the strategies followed by Rural Marketers in the FMCG sector, it is to sell
many small sachets of Rs. 2 shampoo pouches, Rs. 5 Maggi packs and the Rs. 5 chota
Pepsi, because here, the strength lies in volume sale, considering the large consumer base
in these rural markets which won’t spend altogether at once on buying large family packs
of 500ml shampoo or super saver packs of Maggi or a Pepsi pet bottle of 2 litres.

Therefore, consumption trends followed by the rural Indian are considered to be the
driver of future growth of companies. And this trend of tapping rural markets is visible
across all sectors now, be it FMCG, IT, Banking, education etc. For example, today,
India is in better state than China because our GDP is less dependent on exports as
compared to them, where maximum revenues come from exporting to the European and
US markets. Thus, tapping the rural markets is most important for us to be a self
sustaining economy.

India has been considerably shielded from the global recession. Firstly, we are not very
dependent on the exports for our GDP and have a good consumer base in India.
Secondly, we are a saving prone economy, unlike western economies which are
consumption prone. Thirdly, when banks across the world are falling like a pyramid of
playing cards; we are safe, steady and strong, with our banks which have acted like a
strong backbone of our economy during present turmoil. And just like thr FMCG sector,
there is tremendous growth potential in the banking sector, because firstly, the rural
masses have the habit of saving and spending only when needed. Secondly, their small
credit requirements for agriculture, cottage industry and marriages etc.

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
don’t. 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 of13000.

Future challenges of Banks in India

The Indian banks are hopeful of becoming a global brand as they are the major source of
financial sector revenue and profit growth. The financial services penetration in India
continues to be healthy, thus the banking industry is also not far behind. As a result of
this, the profit for the Indian banking industry will surely surge ahead. The profit pool of
the Indian banking industry is probable to augment from US$ 4.8 billion in 2005 to US$
20 billion in 2010 and further to US$ 40 billion by 2015. This growth and expansion pace
would be driven by the chunk of middle class population. The increase in the number of
private banks, the domestic credit market of India is estimated to grow from US$ 0.4
trillion in 2004 to US$ 23 trillion by 2050. Third largest banking hub of the globe by
2040 - is that vision too far away?

Banks have to compare the cost of holding more reserves (pertaining to CRR) with the
benefit of doing so. This benefit is greater the more uncertain is its net flow of deposits.
So banks' lending is dependant on it and the other factors are interest rate, the repo rate,
CRR and call money market rate(market driven) e.t.c. Money multiplier is important as it
indicates how much is the deposit as a % of cash reserve from where we can find out
what is the increase in money supply with respect to change in monetary base. Banks'
lending depends also on other macroeconomic factors. Demands of the times are:
consolidation with moderate and selective expansion, social banking with financial
viability, selective modernization, mechanization and computerization, better customer
service, effective managerial culture, adequate profitability, strong organization culture,
internal supervision and control.

However there are few areas which one need to look at when it comes to banks.

1) Liquidity position: Indian banks are quite well off and never experienced any liquidity
crisis in last two years.

2) Disbursment of loan to Small and Medium scale industries: Still way to go for indian
banks. Even working capital loans were not been provided in many cases by large PSU
and private sector banks. Here small banks came to the rescue and find a new chunck of
their business.

3) Extension of credit facility: Not sure how much indian bank are going to learn from
the mistakes of their large foreign counterpart.

TENTATIVE CHART OF CARRER GROWTH

After 12 year
Area Manager

8-12 year
Branch Manager

6-8 year Assistant Manager

4-6 year Operation head

Customer care
2-3 year
manager

1year
Sales executive

CONCLUSION_
Thus the industry is having a successful position in the market & among customer.
Banking are having a wide range of schemes so that the customer can choose the schemes
according to their needs. IDBI which is a very old innovative bank & continuously
launching new schemes. It is the first bank to introduce zero charge scheme, under this
scheme they are not taking any charge from their customers. For example: There is no
yearly charge for ATM, we can deposit money from any branch of IDBI without any
charge, etc.
The Indian banking in order to understand the factors that will continue to serve as
growth saviors for the market in the forecast period we have found that various factors
such as favorable consumer behavior, rising affordability and advertising & promotions
of banking schemes have boosted the usage of banking in the country. The report also
gives an insight into the changing consumer behavior of Indians.

BIBLIOGRAPHY
www.wikipedia.com
www.scribed.com
www.idbi.com
www.bankindia.com
www.google.com
www.yahoo.finance.com