Title of the Project

Study of ICICI banks performance in Indian Commercial

Banking Sector

Name of the Researcher

NEHA SALUNKE

(Name of Academic Course and Academic Year Details)

Bachelors in Management Studies

Academic Year -2021-22

Under the Guidance of

Dr. Rakesh Malusare

University of Mumbai’s

Alkesh Dinesh Mody Institute for Financial and Management Studies

 University of Mumbai’s
Alkesh Dinesh Mody Institute For Financial and
Management Studies

Certificate

I, Professor DR.RAKESH MALUSARE hereby certify that Mr/Ms.NEHA SALUNKE,

TYBMS Student of Alkesh Dinesh Mody Institute for Financial and Management Studies,
has completed the project titled STUDY OF ICICI BANK PERFORMANCE IN INDIAN
COMMERCIAL in the area of specialization FINANCE for the academic year 2020-2021.
The work of the student is original and the information included in the project is true to the
best of my knowledge.

BMS Coordinator Director

External Examiner Internal Guide

DR.RAKESH MALUSARE
 Declaration

I,Mr./Ms.Neha Subhashchandra Salunke TYBMS Student of Alkesh Dinesh Mody

Institute for Financial and Management Studies, hereby declare that I have completed the
projecttitled Study of ICICI banks performance in Indian Banking Sector during the
academic year2021-2022.

The report work is original and the information/data included in the report is true to the best
of my knowledge. Due credit is extended on the work of Literature/Secondary Survey by
endorsing it in the Bibliography as per prescribed format.

Signature of the Student with Date

Name of Student

NEHA SALUNKE
 ACKNOWLEDGEMENT
To list who all have helped me in difficult because they are so
numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic

channels and fresh dimensions in the completion of this project.

I take this opportunity to thank the university of Mumbai for

giving me chance to do this project.

I would like to thank my Principle Dr. Smita Shukla for

providing the necessary facilities required for completion of this
project.

I would also like to express my sincere gratitude towards my

Project Guide Prof. Rakesh Malusare who's guidance and care
made the project successful.

I would like to thank my College library, for having provided

various references books and magazines related to my project.
 INDEX

SR.NO TOPIC
1 EXECUTIVE SUMMARY
2 INTRODUCTION OF BANKING
3 INTRODUCTION TO COMMERCIAL BANKING
4 FUNCTIONS OF COMMERCIAL BANKING
5 PERFORMANCE OF COMMERCIAL BANKS IN POST NATIONALIZED
PERIOD
6 TYPES OF COMMERCIAL BANK
7 CHALLENGES BEFORE INDIAN COMMERCIAL BANKS
8 OPPORTUNITIES OF INDIAN COMMERCIAL BANK
9 HISTORY OF ICICI BANK
10 PERFORMANCE OF ICICI BANK
11 CONCLUSIONS
12 RECOMMENDATIONS
13 BIBLOGRAPHY
 EXECUTIVE SUMMARY

Commercial banks occupy a dominant place in the money market. They, as a matter of fact,
form the largest component in the banking structure of any country. They are the oldest,
largest and fastest growing financial institutions in India. They are profit making institutions,
dealing in money and credit. Commercial banks play a major role in the growth and
development of the country due to the modern organization and functioning, huge funds and
wide network all over the country. Thus, they are like a reservoir into which flow the savings,
the idle surplus money of households and from which loans are given on interest to
businessmen and others who need them for investment or productive uses.
Commercial banks are very important source of institutional credit as they are the major
depository of people’s savings. They are very important devices for providing short term
credit to trade and commerce. Commercial Banks being repositories of deposits have played
significant role in garnering savings of the people particularly after the nationalization. Thus,
they have made praiseworthy efforts in pooling the savings.
Rationale of the study The Rationale of the study can be considered as follows:-

⚫ The study includes essential core topics.

⚫ It aims at giving a thorough grounding on the subject.
⚫ The study is comprehensive.
⚫ It helps to improve the research and investigation ability.
It enables to think logically and practically

Hypothesis: The hypothesis being put forth for this study about Commercial banking is that
awareness of Commercial banks is 100%, but there are still many people who do not know
about the Commercial banks and the amenities provided by them. Commercial banks are
coming up with new innovative ideas and schemes for increasing their customer base and
fulfilling the needs of the general public.

Research Methodology: The research methodology is data collection through:-

⚫ PRIMARY SOURCES
⚫ SECONDARY SOURCES

Primary Sources:

Survey by distributing questionnaire to the people taking sample size of 100, Interviews
conducted with bankers; accumulating knowledge and help from friends, professors, etc.
Secondary Sources:

Gathering data through books, journals, magazines, websites, newspapers, etc.

Expected Contribution

Expectations from the study are that it may contribute to the real scenario of commercial
banking demand and accordingly the banks can go for new innovative schemes. It will also
specify some recommendations and based Commercial Banking on that banks can make
suitable arrangements in a particular sector. It will also make people aware about Commercial
banking

INTRODUCTION TO BANKING
Banking, in its crude form, is an age-old phenomenon. It was in existence even in ancient
times, too. It is the business of providing financial services to consumers and businesses.
They are the single major source of institutional finance in the country.

According to Section 5 (c) of the Banking Regulation Act, 1949 - “Banking company means
any company which transacts the business of banking in India”. Section 5 (b) of the act
defines banking as accepting for the purpose of lending or investment of deposits of money
fro the public repayable on demand or otherwise and withdrawable by cheque, draft, order or
otherwise.

Banking services also serve two primary purposes. First, by supplying customers with the
basic mediums-of-exchange (cash, checking accounts, and credit cards), banks play a key
role in the way goods and services are purchased. Without these familiar methods of
payment, goods could only be exchanged by barter (trading one good for another), which is
extremely time-consuming and inefficient. Second, by accepting money deposits from savers
and then lending the money to borrowers, banks encourage the flow of money to productive
use and investments. This in turn allows the economy to grow. Without this flow, savings
would sit idle in someone’s safe or pocket, money would not be available to borrow, people
would not be able to purchase cars or houses, and businesses would not be able to build new
factories the economy needs to produce more goods and grow. Enabling the flow of money
from
savers to investors is called financial intermediation, and thus, banking is extremely
important to a free market economy.

Origin and Evolution of Indian Banking

Opinions differ as to the origin of the work "Banking". The word "Bank" is said to be of
Germanic origin, cognate with the French word "Banque" and the Italian word "Banca", both
meaning "bench". It is surmised that the word would have drawn its meaning from the
practice of the Jewish money-changers of Lombardy, a district in North Italy, who in the
middle ages used to do their business sitting on a bench in the market place. Again, the
etymological origin of the word gains further relevance from the derivation of the word
"Bankrupt" from the French word "Banque route" and the Italian word "Banca-rotta"
meaning "Broken bench" due probably to the then prevalent practice of breaking the bench of
the moneychanger, when he failed.

Banking is different from money-lending but two terms have in practice been taken to convey
the same meaning. Banking has two important functions to perform, one of accepting
deposits and other of lending monies and/or investment of funds. It follows from the above
that the rates of interest allowed on deposits and charged on advances must be known and
reasonable. The money-lender advances money out of his own private wealth hardly accepts
deposits and usually charges high rates of interest. More often, the rates of interest relate to
the needs of the borrower. Moneylending was practiced in all countries including India, much
earlier than the recent type of Banking came on scene.

Significance of Banks

The importance of a bank to modern economy, so as to enable them to develop, can be stated
as follows

(i) The banks collect the savings of those people who can save and allocate
them to those who need it. These savings would have remained idle due to
ignorance of the people and due to the fact that they were in scattered and
oddly small quantities. But banks collect them and divide them in the
portions as required by the different investors.

(ii) Banks preserve the financial resources of the country & it is expected
that they allocate them appropriately in the suitable & desirable manner.

(iii) They make available the means for sending funds from one place to
another and do this in cheap, safe and convenient manner.

(iv) Banks arrange for payments by cheques, order or bearer, crossed and
uncrossed, which is the easiest and most convenient. Besides they also care
for making such payments as safe as possible.

(v) Banks also help their customers, in the task of preserving their precious
possessions intact and safe. To advance money, the basis of modern
industry and economy and essential for financing the developmental
process, is governed by banks.

(vii) It makes the monetary system elastic. Such elasticity is greatly desired in the present
economy, where the phase of economy goes on changing and with such changes, demand for
money is required. It is quite proper and convenient for the government and R.B.I. to change
its currency and credit policy frequently, This is done by RBI, by changing the supply of
money with the changing needs of the public.
Structure of Banking System

At present, the organized banking system in India can be broadly divided into three
categories:

i) The Central Bank of the country, the Reserve Bank of India

ii) The Commercial Banks
iii) The Cooperative Banks.

The RBI is the apex monetary and banking authority in the country and has the responsibility
to control the banking system in India.

Commercial banks
Play a major role in the growth and development of the country. They mobilize savings and
make them available to large and small industrial enterprise and traders for working capital
requirements. After 1969, commercial banks are broadly classified into nationalized or public
sector banks and private sector banks. The SBI and its associate banks along with another 20
banks are the public sector banks. The private sector banks include Indian scheduled banks
which have not been nationalized and branches of foreign banks operating in India. The
Regional Rural Banks came into existence since the middle of 1970s with the specific
objective of providing credit and deposits facilities to the small and marginal farmers,
agricultural labourers and artisans and small entrepreneurs.
 Banking in India
RESERVE BANK OF INDIA
CENTRAL BANK AND SUPREME MONETARY AUTHORITY

SCHEDULED BANKS

COMMERCIAL BANKS CO-OPERATIVES

Regional
Foreign Urban State
Rural
Banks Cooperative Cooperatives
Banks
(40) (52) (16)
(196)

PUBLIC SECTOR BANKS PRIVATE SECTOR BANKS

(27) (30)

OLD NEW
(22) (8)

STATE BANK
OF INDIA AND OTHER NATIONALISED BANKS
ASSOCIATE (19)
BANKS
(8)
Banking in India act as a connected link between the borrowers and lenders of money. The
banks main activity should be to do the business of banking which should not be subsidiary to
any other business. Thus, a bank should always add the word “Bank” to its name to enable
people to know that it is a bank and is dealing in money.

INDIAN BANKING SYSTEM

A bank is a financial institution and a financial intermediary that
accepts deposits and channels those deposits into lending activities,
either directly or through capital markets. A bank connects customers
that have capital deficits to customers with capital surpluses. The term
bank is derived from the French word Bunco which means a Bench or
Money exchange table. In olden days, European money lenders or
money changers used to display (show) coins of different countries in
big heaps (quantity) on benches or tables for the purpose of lending or
exchanging.

CHARACTERISTICS / FEATURES

1. Dealing in Money:

Bank is a financial institution which deals with other people's money

i.e. money given by depositors.

2. Individual / Firm / Company:

A bank may be a person, firm or a company. A banking company

means a company which is in the business of banking.

3. Acceptance of Deposit:

A bank accepts money from the people in the form of deposits which
are usually repayable on demand or after the expiry of a fixed period. It
gives safety to the deposits of its customers. It also acts as a custodian
of funds of its customers.

4. Giving Advances:

A bank lends out money in the form of loans to those who require it for
different purposes.
5. Payment and Withdrawal:

A bank provides easy payment and withdrawal facility to its customers

in the form of cheques and drafts; it also brings bank money in
circulation. This money is in the form of cheques, drafts, etc.

6. Agency and Utility Services:

A bank provides various banking facilities to its customers. They

include general utility services and agency services.

7. Profit and Service Orientation:

A bank is a profit seeking institution having service oriented approach.

8. Ever increasing Functions:

Banking is an evolutionary concept. There is continuous expansion and

diversification as regards the functions, services and activities of a
bank.

Connecting Link:

A bank acts as a
connecting link
between
borrowers and
lenders of money.
Banks collect
money from
those who have
surplus money
and give the
same to those
who are in need
of money.

Banking Business:

A bank's main activity should be to do business of banking which

should not be subsidiary to any other business.
Name Identity:

A bank should always add the word "bank" to its name to enable
people to know that it is a bank and that it is dealing in money.

TYPES OF BANK

1. Central Bank
A central bank functions as the apex controlling institution in the
banking and financial system of the country. It functions as the
controller of credit, banker’s bank and also enjoys the monopoly of
issuing currency on behalf of the government. A central bank is usually
control and quite often owned, by the government of a country. The
Reserve Bank of India (RBI) is such a bank within an India.

2. Commercial Banks

It operates for profit. It accepts deposits from the general public and
extends loans to the households, the firms and the government. The
essential characteristics of commercial banking are as follows:
- Acceptance of deposits from public - For the purpose of lending or
investment - Repayable on demand or lending or investment. -
Withdrawal by means of an instrument, whether a cheque or
otherwise.
Another distinguish feature of commercial bank is that a large part of
their deposits are demand deposits withdraw able and transferable by
cheque.

3. Development Banks

It is considered as a hybrid institution which combines in itself the

functions of a finance corporation and a development corporation.
They also act as a catalytic agent in promoting balanced and viable
development by assuming promotional role of discovering project
ideas, undertaking feasibility studies and also provide technical,
financial and managerial assistance for the implementation of project.
In India ‘Industrial Development Bank on India’ (IDBI) is the unique
example of development bank. It has been designated as the principal
institution of the country for co-coordinating the working of the
institutions engaged in financing, promoting or development of
industry.

4. Co-operative Banks

The main business of co-operative banks is to provide finance to

agriculture. They aim at developing a system of credit. Agriculture
finance is a special field. The co-operative banks play a useful role in
providing cheap exit facilities to the farmers.
In India there are three wings of co-operative credit system namely –

(i) Short term,

(ii) Medium-term,
(iii) Long term credit.
(iv) The former has a three tier structure consisting of state

5. Specialized Banks
These banks are established and controlled under the special act of
parliament. These banks have got the special status. One of the major
bank is ‘National Bank for Agricultural and Rural development’
(NABARD) established in 1982, as an apex institution in the field of
agricultural and other economic activities in rural areas. In 1990 a
special bank named small industries development Bank of India (SIDBI)
was established. It was the subsidiary of Industrial development Bank
of India. This bank was established for providing loan facilities,
discounting and rediscounting of bills, direct assistance and leasing
facility.

6. Indigenous Bankers

That unorganized unit which provides productive, unproductive, long

term, medium term and short term loan at the higher interest rate are
known as indigenous bankers. These banks can be found everywhere
in cities, towns, mandis and villages.

7. Rural Banking

A set of financial institution engaged in financing of rural sector is

termed as ‘Rural Banking’. the policy of financing of these banks has
been designed in such a way so that these institution can play catalyst
role in the process of rural development.

8. Saving Banks

These banks perform the useful services of collecting small savings

commercial banks also run “saving bank” to mobilize the savings of
men of small means. Different countries have different types of savings
bank viz. Mutual savings bank, Post office saving, commercial saving
banks etc.

9. Export - Import Bank

These banks have been established for the purpose of financing

foreign trade. They concentrate their working on medium and long-
term financing. The Export-Import Bank of India (EXIM Bank) was
established on January 1, 1982 as a statutory corporation wholly
owned by the central government.

10. Foreign Exchange Banks

These banks finance mostly to the foreign trade of a country. Their

main function is to discount, accept and collect foreign bulls of
exchange. They also buy and self-foreign currencies and help
businessmen to convert their money into any foreign currency they
need. Over a dozen foreign exchange banks branches are working in
India have their head offices in foreign countries.
11. International Banks
The basic list of those International Banks within India which help the
banking sector of India to develop in International market.

INTRODUCTION OF COMMERCIAL BANKS:

Commercial banks play a vital role in the economic development of a
nation. They are the most important source of institutional credit in the
money market as they provide short term loans and advances to its
customers. They perform a variety of functions and are the main source of
credit which is the main input for trade and business activity. Credit created
by commercial banks is a major component of money supply in a modern
economy. Modern economies depend on the banking sector for production,
exchange and distribution.
A Commercial bank is a type of financial intermediary and a type of
bank. Commercial bank has two possible meanings:
a) It is the term used for a normal bank to distinguish it from an
investment bank.
b) Commercial banking can also refer to a bank or a division of a
bank that mostly deals with deposits and loans from corporations or large
businesses, as opposed to normal individual members of the public (retail
banking).
A commercial bank is a profit seeking organization dealing in the other people’s money, in
the sense that it accepts deposits of money from the public to keep them in its custody for
safety. So also, it deals in credit, i.e., it creates credit by making advances out of the funds
received as deposits to needy people. It charges higher rate of interests for the loans
sanctioned and offers lower rate of interest for the deposits. The difference between two is the
profit earned by the bank. Thus, a commercial bank functions as a mobiliser of saving in the
economy.
The most distinctive feature of a commercial bank is that it accepts deposits called demand
deposits from the public which are ch-equable, i.e., with drawable by means of cheque.
Acceptance of ch-equable deposits alone, however, does not give it a status of bank. Its
another essential function is to make use of these deposits for lending to others.
Commercial banks ordinarily are simple business or commercial concerns which provide
various types of financial services to 'customers in return for payments in one form or
another, such as interest, discounts, fees, commission, and so on. So, we can say that their
objective is to make profits.
A commercial bank is therefore like a reservoir into which flow the savings, the idle surplus
money of households and from which loans are given on interest to businessmen and others
who need them for investment or productive uses.

Definition:

Economists have defined a Commercial Bank in various ways.

- According to Prof. Crowther, “a banker is a dealer in debt, his own and
other people’s.”
- According to Prof. sayes, “Commercial Banks are institutions whose
debts – usually reffered to as bank deposits – are commonly accepted in
final settlement of other people’s deposits.”
Thus, all these definitions clearly indicate the essential function of a
bank namely dealing in money and credit.

FUNCTIONS OF COMMERCIAL BANKS

Commercial banks perform several crucial functions to satisy the

needs of the various sectors of the economy, which may be classified into
two categories:
(I) Primary functions, and
(II) Secondary functions.

(I) Primary banking functions of the commercial banks include:

1. Acceptance of deposits from the
public;
2. Lending of funds;
3. Use of cheque system; and
4. Remittance of funds.

1. Acceptance of Deposits from the Public

Accepting deposits is the primary function of a commercial bank. By
receiving deposits from the public, commercial banks mobilise savings of
the household sector.
Banks generally accept deposits in three types of accounts:
(i) Current Account,
(ii) Savings Account, and
(iii) Fixed Deposits Account.
Deposits in Current Account are withdrawable by the depositors by cheques for any amount
to the extent of the balance at their credit, at any time without any prior notice. Deposits of
current accounts are, thus, known as Demand deposits. Such accounts are maintained by
commercial and industrial firms and businessmen, and the cheque system is the most
convenient and very safe mode of payment. No interest is provided for such deposits. In fact
bank charge certain commission for providing the facility.
Saving Accounts are maintained for encouraging savings of households. Withdrawals from
deposits from savings account are not freely allowed as in the case of current account. There
are some restrictions on the amount to be withdrawn at a time and also on the number of
withdrawals made during a period. Indian commercial banks have, however, relaxed
these rules of savings accounts to a certain extent in recent times. Banks pay a rate of interest
on the savings account deposits as prescribed by the central bank. Presently, it is 5 % p.a. A
nominal rate of interest is provided for such deposits.

Deposits in Fixed Account are time deposits. In the normal course, deposits cannot be
withdrawn before the expiry of the specified time period of the deposits. A premature
withdrawal is, however, permitted only at the cost of forfeiture of the interest payable, at least
partly. On these deposits commercial banks pay higher rates of interest, and the rate becomes
higher with the increase in duration. Longer the time period, higher would be the
rate of interest and vice versa.
By creating such varieties of deposits, banks motivate savers and depositors in a variety of
ways and encourage savings in the economy. Further, by keeping deposits with banks,
depositors’ money is not secure and remains in safe custody, but it yields interest also.
Moreover, banks demand deposits are in the form of liquid cash, for they serve as money the
business community and, therefore, is called bank money.

2. Lending of funds
Another major function of commercial banks is to extend loans and advances out of the
money which comes to them by way of deposits to businessmen and entrepreneurs against
approved such as gold or silver bullion, government securities, easily saleable stocks and
shares, and marketable goods.
Banks advances to customers may be made in many ways:
(i) Overdrafts,
(ii) Cash Credits,
(iii) Discounting Trade Bills,
(iv) Money-at-call or very short-term advances,
(v) Term loans,
(vi) Consumer Credit,
(vii) Miscellaneous Advances.

(i) Overdraft: A commercial bank grants overdraft facility to an account holder by which he
is allowed to draw an amount in excess of the balance hels in the account, up to the extent of
stipulated limit. Overdrafts are permissible in current account only. Suppose, a customer has
Rs. 50,000 in his current account with the bank. Bank grants him overdraft facility up to Rs.
10,000. Then, this customer is entitled to issue cheques upto Rs. 60,000 on his account.
Obviously, overdraft facility sanctioned up to Rs.10,000 by the bank in this case is as good as
credit granted by the bank to that extent.
(ii) Cash credit: Bank give credit in cash to business firms in industry and
trade, against pledge or hypothecation of goods, or personal guarantee given by the
borrowers. It is essentially a drawing account against credit sanctioned by the bank and is
operated like a current account on which an overdraft is sanctioned. It is the most popular
mode of advance in the Indian banking system.
(iii) Discounting trade bill: The banks facilitate trade and commerce by discounting bills of
exchange called trade bills. Traders often draw bill of exchange to meet their obligations in
business transitions. Such a trade bill is payable in cash on maturity, after a stipulated date.
Discounting of bills by the bank amounts to granting of credit to the party concerned till the
maturity date of the bill. This method of bank lending is widely adopted for two reasons: (a)
such loans are self liquidatory in character; and (b) these trade bills are rediscountable with
the central bank.
(iv) Money at call or very short term advances: Bank also grants loans for a very short period,
generally not exceeding 7 days to the borrowers, usually dealers or brokers in stock exchange
markets against collateral securities like stock or equity shares, debentures, etc., offered by
them. Such advances are repayable immediately at notice hence, they are described as
money at call or call money.
(v) Term Loans: Banks give term loans to traders, industrialists and now to agriculturists also
against some collateral securities. Term loans are so- called because their maturity period
varies between 1 to 10 years. Term loans as such provide intermediate or working capital
funds to the borrowers. Sometimes, two or more banks may jointly provide large term
loans to the borrower against a common security.
 Such loans are called participation loans or consortium finance.
Consumer Credit: Banks also grant to households in a limited amount to buy some durable
consumer goods such as television sets, refrigerators, etc; or to meet some personal needs like
payment of hospital bills, etc. Such consumer credit is made in a lump sum and is repayable
in installments in a short time. Under the 20-point programme, the scope of consumer credit
has been extended to caver expenses on marriage funeral etc; as well.
(vi) Miscellaneous Advances: Among other forms of bank advances there are packing credits
given to exporters for a short duration, exports bills purchased/ discounted, import finance -
advances against import bills, finance to the self employed, credit to the public sector, credit
to the cooperative sector and above all, credit to the weaker sections of the community at
concessional rates.

3. Use of cheque system:

It is a unique feature and function of banks that they have introduced the cheque system for
the withdrawl of deposits.
There are two types of cheques:
i) the bearer cheque and
ii) the crossed cheque.
A bearer cheque is encashable immediately at the bank by its possessor.
Since, it is negotiable, it serves as good as cash on transferability. A crossed cheque, on the
other hand, is one that is crossed by two parallel lines on its face at the left hand corner and
such a cheque is not immediately encashable. It has to be deposited only in the payee’s
account. It is not negotiable. In modern business transactions, the use of cheques to settle
debts is found to be much more convenient than the use of cash. Commercial banks, thus,
render an important service by providing an inexpensive medium of exchange such as
cheques. In fact, a cheque is also considered as the most developed credit instrument.

4. Remittance of Funds:
Commercial banks, on account of their network of branches throughout the country, also
provide facilities to remit funds from one place to another for their customers by issuing bank
drafts, mail transfers or telegraphic transfers on nominal commission charges. As compared
to the postal money orders or other instruments, bank drafts have proved to be a
much cheaper mode of transferring money and has helped the business community
considerably.
(II) Secondary banking functions of the commercial banks are also known as non-banking
functions. They perform a multitude of other non-banking functions which may be classified
as:
1. Agency Services, and
2. General Utility Services.
1. Agency Services
Bankers perform certain functions for & on behalf of their clients, as:
a) To collect or make payments for bills, cheques, promissory notes,interest, dividends, rents;
subscriptions, insurance premia, etc. For these services, some charges are usually levied by
the banks.
b) To remit funds on behalf of the clients by drafts or mail or telegraphic
transfers.
c) To act as executor, trustee and attorney for the customer’s will.
d) Sometimes, bankers also employ income-tax exporters not only to prepare income-tax
returns for their customers but also to help them to get refund of income-tax in appropriate
cases.
e) To work as correspondents, agents or representatives of their clients. Often, bankers obtain
passports, traveller’s tickets, secure passages for their customers, and receive letters on their
behalf.

2. General Utility Services

Modern commercial banks usually perform certain general utility

services for their community, such as:
a) Letters of credit may be given by the banks at the behest of the importer
in favour of the exporter.
b) Bank drafts and traveller’s cheques are issued in order to provide facilities for transfer of
funds from one part of the country to another.
c) Banks may deal in foreign exchange or finance foreign trade by accepting or collecting
foreign bills of exchange. Shares floated by government, public bodies and corporations may
be underwritten by banks;
d) Certain banks arrange for safe deposit vaults, so that customers may entrust their securities
and valuables to them for safe custody.
e) Banks also compile statistics and business information relating to trade, commerce, and
industry. Some banks may publish valuable journals or bulletins containing research on
financial, economic and commercial matters.

• Commercial Banks Play an Important Role in a Modern Economy

1) They constitute the very life-blood of modern trade, commerce & industry, as they provide
the necessary funds for their working capital such as to buy raw materials, to pay wages, to
incur current business expenses in marketing of goods, etc
2) These banks encourage people’s savings habit through their various savings deposit
schemes.
3) They also mobilize idle saving resources from households to business
people for productive use.
4) They transmit money from place to place with economy and safety.
5) Their agency services are, no doubt, of immense value to the people at
large, as they case their difficulties, save their time & energy &provide them
safety & security.
 NATIONALISATION OF COMMERCIAL BANKS
By the 1960’s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. With effect from July 19, 1969, 14 largest commercial
banks were nationalized. A second dose of nationalization of 6 more commercial banks
followed in 1980. The stated reason for the nationalization was to give the government more
control of credit delivery. With the second dose of nationalization, the GOI controlled around
91% of the banking business of India. After this, until the 1990’s the nationalized banks grew
at a place of around 4%, closer to the average growth rate of the Indian economy. So, these
nationalization of banks was carried out with the aim of ‘removal of control by a few’ and to
bring about a more optimal allocation of bank funds. After nationalization, the credit
policy of public sector banks underwent a radical change, with special emphasis being placed
on credit to priority sectors including agriculture, small scale industry and programmes for
poverty alleviation.

The main objectives of nationalization were as follows:

1. To introduce social banking by directing bank funds at concessional rates to the weaker
sections of society for productive purposes.
2. To prevent monopolies in the banking sector caused due to use of major share of funds by
a few private entrepreneurs.
3. To introduce & promote banking facilities in backward areas & reduce
regional disparities in branch expansion and growth of banking.
4. To expand the role of Commercial banking in agricultural credit.
 PERFORMANCE OF COMMERCIAL BANKS IN THE
POST -NATIONALIZATION PERIOD
1. Achievements:

(a) Lead Bank Scheme: After nationalization, it was felt that banks should
be allotted particular districts where they would take the lead in studying the
need and scope for banking development. Under the scheme, districts were
allotted to the State Bank Group, 14 nationalised banks and 3 private banks.
Each bank was assigned the status of ‘lead bank’ in a particular district. The
lead bank had to study and understand the socio-economic condition of the
district and undertake surveys for this purpose. Through the surveys the lead
bank would collect useful information about the credit needs, development
needs and pattern of production and nature of employment in the district.
After such informations were gathered, the lead bank would then plan and
implement development programmes in the area, with the help of other
banks and financial institutions. This scheme was a unique experiment and it
helped in branch expansion, deposit mobilization and expansion of priority
sector lending.

(b) Branch Expansion: After nationalization, there was massive expansion

of bank branches, especially in the rural areas. The Lead Ban k scheme
played played a major role in this. During the first fifteen years after

nationalization, branches expanded at about 2,400 per year. Total number of

bank branches has increased from 8262 in 1969 to 67,283 in 2007.
Over 80% of bank offices are located in backward states and in semi-urban
areas and rural areas. This, to some extent took care of regional imbalance in
the spread of banking.
(c) Deposit Mobilization: As a result of expansion of banking facilities,
there was a large increase in deposits. In 1969, deposits amounted to 13% of
the GDP, by 2004 this ratio increased 350 times. The increase in rural
deposits as production of total has been from 3% to 15%. Bank deposits
now constitute about 40% of financial assets held by households.

(d) Bank Lending: Traditionally, banks in India had concentrated in

providing working capital to industry and trade. Only after nationalization,
loans are being given for agricultural operations. Bank credit stood at Rs. 3,
399 crore in 1969. In the next 3 decades, his increased by about 200 times.
In 1968, large and medium industries accounted for about 200 times. In
1968, large and medium industries accounted for about 60% of aggregate
bank credit. Agriculture accounted for about 2%. This changed drastically
after nationalization and bank credit to priority sector, including agriculture
was close to 40% of total credit.
(e) Directed Credit Programmes:
A major objective of bank nationalization was to make bank credit available the priority
sector, comprising of agriculture, small scale industries, exports, transporters and
small traders at concessional rates. This system of directed bank credit was
expected to contribute to contribute to economic growth as well as social
justice. Success was achieved in this direction after nationalization.

2. Shortcomings:
(a) Inadequate Banking facilities: Despite achievements in branch
expansion, banking facilities continue to remain inadequate to meet the
needs of the large population. The national average population per bank
branch is still very high at about 12000. This ratio is higher than the national
average in some states like Bihar, Orissa, West Bengal and Madhya Pradesh.
Banking facilities are still not equitably distributed among all states.

(b) Inadequate Deposit Mobilization: Banking habits of people in India

are still not very good. A large part of the population still prefer to carry out
transactions in cash and are not covered by the banking system . Therefore,
there is a large scope for further increasing deposits and bring in more
money in the banking system.

(c) Inadequate lending: Even though there has been significant increase
in lending to priority sectors, it is still inadequate in comparison to the needs
of these sectors. Because of these small farmers and traders have to still
depend on the unorganized sector for meeting their credit requirements.

(d) Increased Expenditure: After nationalization, there has been

significant increase in expenditure on banking operations. This is due to
aggressive and sometimes irrational branch expansion. There has been over-
staffing in nationalized banks and some of their operations in rural areas are
simply not economically feasible.

(e) Low Level of Efficiency: Public sector banks have suffered from lack
of proper supervision and control. Due to high degree of political
interference and lack of competition, these banks have become highly
insufficient. There work culture was poor compared to private sector banks.
However, this scenario has now changed with these banks becoming more
profit oriented and autonomous.

Thus, nationalization of Commercial banks was done with the

objective of social and economic development. But this resulted in several
problems and desortions in the banking system. Till 1990s public sector
banks operated with low profitability and efficiency. In early 1990s, the
government implemented the Narsimham Committee Recommendations in
order to bring about much needed reforms in the banking sector. Since then,
the sector has been performing with higher profitability and efficiency.

TYPES OF COMMERCIAL BANKS:

• Scheduled banks
• Non- Scheduled Banks

- Scheduled Banks:

A scheduled bank is one which is registered in the second schedule of the

Reserve Bank of India. The following conditions must be fulfilled by a bank
for inclusion in the schedule:
i) The banker concerned must be in business of banking in India;
ii) It is either a company defined in Section 3 of the Indian Companies
Act, 1956, or corporation or a company incorporated by or under any law in
force in any place outside India or an institution notified by the central
government in this behalf;
iii) It must have paid-up capital and reserves of an aggregate role of
exchangeable value of not less than rupees five lakhs;
iv) It must satisfy the Reserve Bank of India that its affairs are not
conducted in a manner detrimental to the interests of its depositors.

Scheduled banks come under the purview of the various credit control
measures of th Reserve Bank of India. They are required to maintain a
certain minimum balance in their accounts with the RBI, and do certain
things prescribed by law. The Scheduled banks are entitled to bprrowings
and rediscounting facilities from the RBI. These are similar to the member
banks of the U.S.A.

- Non- Scheduled Banks:

Banks, which are not included in the Second Schedule of the RBI, are
known as non-scheduled banks. They may be classified into 4 groups:
a) Banks with paid-up capital and reserves in excess of Rs. 5 lakhs;
b) Banks with paid-up capital and reserves ranging between Rs.
50,000 and one lakh of rupees;
c) Banks with paid-up capital and reserves ranging between one lakh
of rupees and 5 lakhs;
d) Banks with paid-up capital and reserves below Rs. 50,000.

Non- Scheduled banks are not entitled to all those facilities that the
scheduled banks avail of from the Reserve Bank of India. Since the
enactment of the Banking Regulation Act in 1949, non-scheduled banks
have also come under the ambit of the RBI control. It has become obligatory
on the part of these banks to carry a portion of their deposits with the RBI or
in the vault with the bank itself, and prepare their annual accounts and
balance sheets in accordance with the requirements stipulated in Section 29
of the Banking Companies Act.

Scheduled Banks may be classified into two groups: Indian Scheduled

Banks and Foreign Scheduled Banks. The Indian Scheduled Banks are those
which have their registered officers in India and are registered in the second
schedule if the RBI. As against this, foreign scheduled banks comprise those
commercial banks which are registered in the said schedule but have their
registered offices outside India. These banks have played a prominent role in
India’s foreign trade; in fact, they had complete sway in this sphere until the
Second World War. Since then, a number of leading Indian scheduled banks
entered the field of foreign trade and have in the course of time achieved an
important position in this field.
Indian scheduled banks may be distinguished in two broad sectors:
a) Public sector commercial banking comprising the State Bank of
Indian and its subsidiaries and the twenty nationalized banks;
b) Private sector commercial banking comprising all the other Indian
scheduled banks that do not fall in the above group.
COMMERCIAL BANKS IN INDIA
As part of the financial services industry, insurance, commercial banking,
and capital markets companies worldwide are attempting to compete better
by improving core operations and differentiating the customer experience.
However, this is not easily achieved because of the volume of business
challenges financial services companies deal with today.
Names of Banks providing Commercial Banking services in India:

➢ ABM AMRO India

➢ Abu Dhabi Commercial Bank (India)
➢ Allahabad Bank
➢ Andhra Bank
➢ Bank of Baroda Bank of India
➢ Bank of India U.S operation
➢ Bank of Punjab
➢ Bank of Madura
➢ Bank of Maharashtra
➢ Canara Bank
➢ Centurion Bank of Punjab
➢ Corporation Bank
➢ DCB (Development Credit Bank Ltd.)
➢ Dena Bank
➢ Deutsche Bank India
➢ Dhanalakshmi Bank
➢ Federal Bank
➢ HSBC in India
➢ ICICI Bank
➢ Indus Bank Ltd.
➢ State Bank of India, etc.

Services typically offered by Commercial Banks

Although the basic type of services offered by a

commercial bank depends upon the type of bank and
the country, services provided usually include:
- Taking deposits from their customers and issuing current (UK) or
checking (US) accounts and savings accounts to individuals and
businesses.
- Extending loans to individuals and businesses; Cashing cheques
- Facilitating money transactions such as wire transfers and cashier's
checks
- Issuing credit cards, ATM cards, and debit cards
- Storing valuables, particularly in a safe deposit box
- Cashing and distributing bank rolls
- Consumer & commercial financial advisory services
- Pension & retirement planning.

Financial transactions can be performed through many different channels:

- A branch, banking centre or financial centre is a retail location where
a bank or financial institution offers a wide array of face to face
service to its customers.
- ATM is a computerised telecommunications device that provides a
financial institution's customers a method of financial transactions in a
public space without the need for a human clerk or bank teller.
- Mail is part of the postal system which itself is a system wherein
written documents typically enclosed in envelopes, and also small
packages containing other matter, are delivered to destinations around
the world.
- Telephone banking is a service provided by a financial institution
which allows its customers to perform transactions over the telephone.
- Online banking is a term used for performing transactions, payments
etc. over the Internet through a bank, credit union or building society's
secure website.

DEBIT CARD CREDIT CARD MAIL

ATM ONLINE BANKING TELEPHONE BANKING

EFFECT OF COMMERCIAL BANKING ON BUSINESS AND

INDUSTRY IN INDIA?

he term Commercial Bank is not meant only for Business and

industry. Commercial bank is meant primarily for personal
banking and secondarily for commercial developments. The banks
looking mainly deposits from public and lending small and short term loans
to public and short businessmen.

Banking sector is called the “Nerve centres of the nation's economy” and
“Backbones of modern Industries and Commerce”. A minor change in the
basis points by the nation's central bank can make a huge impact on the
1. nation's production and
2. inflation.
Commercial banks facilitate the growth of the business. Be it rural small
scale (Cottage industries) or Very large scale investments. The deposits
from public is mobilised to fund the commercial activities. These activities
in turn generate income which is added to the gross domestic product of
the nation. Thus, banks are the most crucial sector that helps a nation grow
economically.

CHALLENGES BEFORE INDIAN COMMERCIAL BANKS

Major challenges which Indian commercial banks are facing today
and which are likely to be more poignant in the ensuing years in view of the
irreversible process of the reforms and resultant verisimilitude of more
players entering the banking sector are discussed below.

Problem of pressure on profitability:

The greatest challenge which PSBs are facing in recent years arises
out of pressure on their profitability. With continuous expansion in number
of branches and manpower, thrust on social and rural banking, directed
sector lending, maintenance of higher reserve ratios, waiver of loans under
ARDR-type concessions, repayment defaults by large industrial corporate
and other borrowers etc. had their telling impact on the profitability of the
banks.
Further with the introduction of prudential norms, to be effective from
March 1993 a majority of the commercial banks balance sheets had shown
huge losses. In order to improve financial health of these banks the

Government provided a dose of hybrid capital and in return these banks

were made to sign a memorandum of understanding with RBI. Accordingly,
the focus of operation of banks shifted from deposit mobilization to services
marketing. Further, accent of banks operation shifted to non-fund based
business with an eye on capital adequacy achievement and other ancillary
business which may cross subsidize the cost of certain unremunerative
services, the banks have to offer.

Problem of low productivity:

Another furious challenge which Indian commercial banks are
confronting is low productivity. The low productivity has been due to huge
surplus manpower, absence of good work culture, and absence of
employees commitment to the organization. .
The management have continued to prefer not to see the problem in its
proper perspective due to the fear of strong unions. They have camouflaged
the issue by diverting their attention to such apparent face saving devices
like redeployment, repositioning , retraining, etc.. There are various ways of
minimizing the size of the staff, such as voluntary retirement scheme or
golden shakehand. The problem before the management at present is how to
cut size of the staff and improve productivity of the bank.

Problem of Non-Performing Assets(NPA):

A serious threat to the survival and success of Indian banking

system is uncomfortably high level of non-performing assets. In its Report
on trend and Progress of banking In India, 1997-98, the RBI reported that
gross NPAs as percentage of advances of PSBs was 16 percent as on March
31, 2000 with a colossal amount of about Rs. 52,000 crore being locked up.
This might have recently recorded further increase due to default in
repayment by the industrial units affected by the two-year old recession.
This is much higher than the international level of below 5%. Spiraling non-
performing assets are hurting bank’s profitability and even the basic inability
of the banking system by way of both non-recognition of interest income
and loan loss provisioning.

Problem from customers:

In view of unleashing of competitive forces and fast changing

life styles and values of customers who are now better informed and more
sophisticated and discerning and who have a wide choice to choose from
various banking and non-banking intermediaries have become more demanding and their
expectations in terms of products, delivery and price are increasing, the PSBs lacking in
customers’ orientation are finding it difficult to even retain their highly valued customers
what to talk of attracting the new clients particularly when the foreign banks are also the new
breed of private sector banks have embarked upon aggressive marketing programme aiming
at niche markets. The telebanking, anywhere banking, virtual or internet banking, ATM,
credit cards and newly introduced interest rate swap, forward rate agreements, etc. are some
of the products innovated by the new players. Although the PSBs are trying to computerize
their operations, the pace of progress in this direction has been decidedly slow.
The rather tardy progress in the area has been due to the initial reservation of
the staff unions against computerization for the lurking fear of employment
cut, as also the existence of huge number of branches in the rural areas,
where suitable logistics are not available. Market share of PSBs both in
deposits and lending has declined. This has already become a serious cause
of concern for PSBs regulating strategic efforts for thwarting the challenges
from the new players.

Competition from New Banks:

The commercial banks in India which enjoyed monopoly position
until recently are facing perilous challenges particularly on quality, cost and
flexibility fronts from the newly emerging players who by dint of their
invigorating ambience and work culture supported by pragmatic leadership
committed, courteous, affable and trained staff and modern ultra gadgets are
offering excellent customers services and making inroads in the business
centres.
The new banks have set the tone and to extent also the standard for
technological improvements and product innovations which the vastly
dominating PSBs will have to bring about in their own operations if they
have to maintain their present position of dominance.
For instance, Bank of Punjab has opened a new savings bank product-swagat
with a minimum balance requirement . HDFC has launched q new retail
account-Freedom-for customers who would be using the non-branch
infrastructure of the bank like ATM, phone banking and internet banking .
The ICICI Bank has product offerings tailor-made to specific categories of
customers, such as students, traders, NRIs as well as the salary customers.It
is going to offer a special scheme for senior citizens.
By resorting to latest methods in human resources management as
well as information technology, the new entrants in the field have suddenly
sensitised even the ordinary user of the banking services in India to the type
and quality of services he can expect from his bank.

The market has become highly competitive and largely customers

centric. This calls for an ability to reach the client at his door step and meet
his requirements of products and services in a customized manner. The race
for customers could at times lead to adverse selections. This situation
demands aggression laced with caution, in turn, calls for highly efficient
management by the banks of both liabilities and assets.
These banks have to work in a market which will not know any
geographical barriers and therefore will have to develop abilities of product
innovation and delivery comparable to the best in the world.

Competition from global majors

Globalisation and integration of Indian financial market with world

and the consequent entry of foreign players in domestic market has infused,
in its wake, brutal competitive pressure on the Indian commercial banks.
Foreign players endowed with robust capital adequacy, high quality assets,
world-wide connectivity, benefits of economies of scale and stupendous risk
management skills are posing serious threats to the existing business of the
Indian banks. In order to compete successfully with the new entrants, Indian
banks need to possess matching financial muscle, as fair competition is
possible only along the equals. Average size of an Indian bank is niggardly
low in comparison to a foreign bank. The question before the major Indian
Commercial Banks, therefore, is how to acquire competitive size.

Problem of Managing Duality of Ownership: Managing duality of

Ownership is a peculiar problem which the PSBs have to encounter because
of participation of the private shareholders in their capital. A public sector
bank to survive and grow successfully is expected to operate according to
the expectations if one of its principal shareholders. In the changed scenario,
there would be two major groups of shareholders, viz., the government of
India and RBI on the one hand and the private shareholder , on the other .
Since the expectations of these two categories of owners are not necessarily
identical, the bankers will have to manage conflicting interests.

OPPORTUNITIES FOR INDIAN COMMERCIAL BANKS

Challenges are the driving forces that keep on going.

They prevent us from being vagary because they also bring
in their wake opportunities. In fact, challenges &
opportunities are like healthy twins, knocking at our door
steps. The process of globalization and liberalization have
thrown open tremendous opportunities for the banks in terms of widening of
scope of business, greater freedom to operate in financial markets – both
national and international freedom to deloy relatively largest funds because
of reduction in preemption requirements. The Commercial banks are now
enjoying greater autonomy in reviewing & revising existing branch network
& greater discretion to reduce amplitude of cross subsidization to priority
sector.
Indian Commercial banks have also got the autonomy in respect of pricing of bank products.
In the regulated regime, interest’s rates on both deposits and advances of Commercial banks
were tightly regulated and so was the product range.
With gradual deregulation of interest rates, banks are
blessed with more power in pricing and structuring their products.
As we know, Commercial banks are in the business of providing
banking services to individuals, small businesses and large organizations.
While the banking sector has been consolidating, it is worth noting that far
more people are employed in the commercial banking sector than any other
part of the financial services industry. Jobs in banking can be exciting and
offer excellent opportunities to learn about business interact with people and
build up a clientele. If you are well-prepared and enthusiastic about entering
the field, you are likely to find a wide variety of opportunities open to you.

STRENGTHS OF INDIAN COMMERCIAL BANKS:

Indian commercial banks possess the following strengths which are distinct
from others:
i. Tremendous branch network giving an access to almost entire spectrum
of customers
ii. High market coverage
iii. Diversified operations
iv. Intimate knowledge of local environment
v. High class human resource pool

WEAKNESS OF INDIAN COMMERCIAL BANKS:

Indian commercial banks have been ailing from the following weakness
because of which they are finding it to difficult to out beat the new players
and exploit the emerging opportunities:
i. Lower Profitability
ii. High Operating Costs
iii. High NPAs
iv. Low Productivity
v. High Provisioning
vi. Complex and Non- responsive organizational structure
vii. Poor asset management
viii. Inadequate HRD strategy
ix. Low work culture
x. Action flippant and inward looking management and employees
xi. Strong, militant and non-responsive unions
xii. Limited automation.

BASIC PROBLEM OF A COMMERCIAL BANK

The basic problem facing a bank manager is to have a satisfactory trade off between liquidity
and profitability - the two principal but conflicting goals of a bank. A bank deals in the
money of the people. The success of the business of a bank depends partly on the efficiency
with which it can provide services to its creditors (depositories), but mainly on the confidence
it inspires among the depositors. It has been able to attract the deposits of the people not only
by promising some returns on their money but also by committing itself to repayment on
demand. This is why the public accepts bank deposits as being “as good as cash.” The banker
must, therefore, ensure an adequate amount of liquidity in his assets so that he maybe able to
meet any claims upon it in cash on demand. The perfectly liquid asset is cash itself because it
can fully satisfy the depositors’ claims. The more cash a banker holds, the more obviously he
can, without difficulty of any kind, offer cash in exchange for deposits. Further, the banker
with an adequate amount of cash in hand can meet the credit needs of the community and can
make speculative gains. However, cash is a sterile asset which earns no income at all. A
banker cannot afford to ignore income because the ultimate object of a bank is to make
earnings on its business which are sufficient to compensate it for the cost which it incurs on
raising funds, besides paying the wages of the staff and meeting other expenses. If a banker
holds a large portion of his funds in ready cash without earning any income on it, his business
will result in losses, and sound the death-knell of the bank after some time. He must
therefore, employ the bulk of the bank’s resources in giving loans and advances, and in
investing them in high- yielding securities. Such investments are, however, subject to credit
risk – the risk arising from default in repayment money lent out and the money rate risk – the
risk arising out of fluctuations in the market rate of interest. The banker will not be able to
satisfy the cash requirements of the depositors on demand with the funds deployed in the
other investments. Once the depositor’s cheques are not honored, the bank will lose the
confidence of the public, which will result in a mass run on the bank’s counters and
jeopardize the liquidity position of the bank. Ultimately, the very survival of the bank is
endangered.

Liquidity and profitability are, therefore, inimical to each other. Cash has perfect liquidity but
lacks yield. At the other ends are some loans and investments which yield a high rate of
interest, but are hardly liquid at all. The conflict between liquidity and income is not as sharp
as it appears. In order to ensure long-run earnings, the commercial bank must retain public
confidence in order to continue to survive and provide for the liquidity needs of the bank.
The art of commercial banking lies in the resolution of the conflicts between liquidity and
profitability. “It is an art because science ha not furnished inviolable rules; banks must be
managed with discrimination and good judgement. Rules and scientific procedures for doing
the whole job cannot be framed.”1 A number of approaches, ways and means of resolving
the conflicts have been developed from time-to-time. These approaches subsequently came
to be known as theories of liquidity management.

ASSET-LIABILITY MANAGEMENT (ALM)

In the recent past, banks in India have started using the Asset-Liability
Management (ALM) as the technique or strategy for financial management.
ALM aims at planning, directing, and regulating the levels, changes, mixes
of assets and liabilities of banks in the short-run, usually three to twelve
months, with a view to enable them to achieve their long-term objectives.
The net interest margin and its variability are the focus of its attention so as
to maximise Return On Equity (ROE), and to minimise fluctuations in ROE.
It also links capital, non-interest income and expenses, and strategic choices
regarding products, markets, and bank structure. ALM involves giving
balanced emphasis necessary in a competitive environment characterised by
deregulatiom. and greater viability (volatility) of interest rates, variable rates
pricing, and the use of interest rates derivatives.

ALM is an integrated strategic managerial approach of managing a total

Balance Sheet dynamics having regard to the size and quality in such a way
that the net earnings from interest are maximized. This is done by matching
of liabilities and assets in terms of maturity, cost and yield rates.
The focus of ALM is not to build up deposits and loans/assets in isolation,
but on net interest income and recognizing interest rates and liquidity risks.
Thus, ALM is essentially a guide for survival of a bank in deregulated
environment.

Diagramatic presentation of ALM is brought out in the following

chart:

ASSET-LIABILITY MANAGEMENT STRUCTURE

 ASSET-LIABILITY MANAGEMENT

GENERAL

ASSET, LIABILITY & CAPITAL MANAGEMENT

SPECIFIC

LIABILITY ASSET
MANAGEMENT FINANCIAL MANAGEMENT

BALANCE SHEET INCOME & EXPENDITURE

MANAGEMENT MANAGEMENT

Objectives of ALM
Primary objective of ALM approach is to manage market risk in such away
as to minimize the impact of net interest income fluctuations in the short run
and protect the net economic value of the bank in the long run. Precisely
speaking, ALM has the following objectives:
1. To control the volatility of net interest income and net economic value
of a bank.
2. To control volatility in all target accounts .
3. To control liquidity risk, and
4. To ensure an acceptable Balance profitability and growth rate.

- ALM And Commercial Banks:

1) Reformed process in India has emerged mew players, new instrument
and new products at competitive rates has increased banks risks.
2) This new development forced the Commercial banks to take a re-look
on ALM to remain competitive & withstand the risk.
3) RBI also advised Commercial Banks to tighten their Asset-Liability
management and to furnish data in a format outlined by it.

In the recent past, banks in India have started using the Asset-Liability
Management (ALM) as the technique or strategy for financial management.
ALM aims at planning, directing, and regulating the levels, changes, mixes
of assets and liabilities of banks in the short-run, usually three to twelve
months, with a view to enable them to achieve their long-term objectives.
The net interest margin and its variability are the focus of its attention so as
to maximize Return On Equity (ROE), and to minimize fluctuations in ROE.
It also links capital, non-interest income and expenses, and strategic choices
regarding products, markets, and bank structure. ALM involves giving

balanced emphasis necessary in a competitive environment characterized by

Deregulation. and greater viability (volatility) of interest rates, variable rates
pricing, and the use of interest rates derivatives.

BANKS BALANCESHEET & PORTFOLIO MANAGEMENT

Conventionally, banks publish balance sheets in their annual reports. The

balance sheets contains particulars of a Bank’s current assets and current
liabilities. Assets items refer to all credit items in indicating the wealth and
claims possessed by the bank. Liability items refer to all debit items
indicating the obligations of the bank. Thus, the balance sheet indicates the
manner in which the bank has raised funds and invested them in various
types of assets. It is the means by which the banks financial position – its
solvency and liquidity – is judged. There is, of course the equity of assets
and liabilities in the balance sheet of a bank, as in the case of any other
balance sheet.

In a balance sheet, it is customary to state the liabilities on the left and assets
on the right. The liabilities of the banks are the items which are to be paid by
it either to its shareholders or depositors. The assets of the banks are those
items fro which it hopes to get an income. Thus, the assets include all the
amounts owed by others to the bank.

A much simplified format of a bank’s balance sheet may be illustrated as

follows:

The Format of Balance Sheet of A Bank

Liabilities Assets
1. Share capital 1. Cash in hand
2. Reserve Funds ’’ with central bank
3. Deposits: ’’ with other banks
a) Time deposits 2. Money at call and short notice.
b) Demand deposits 3. Bills discounted, including
c) Savings deposits treasury bills.
4. Borrowings 4. Investments
5. Other items 5.Advances
6.Other Items
Objectives of portfolio management:
A commercial bank has to manage its assets and liabilities with three
considerations in mind namely, liquidity, profitability and solvency.

Liquidity means the capacity of the bank to give cash on demand in

exchange for deposits. But since a bank is a commercial concern, it aims at
profitability. Profits come from the income accruing from the assets the bank
holds. The banker must arrange hiss assets in such a way that he makes more
income. Hence, in acquiring assets, the banker will be influenced by the
consideration of profit. A bank acquires assets mainly out of the deposits of
the public. Public confidence in the bank, however, depends on the belief
that the bank will always be able to exchange deposits for cash. A bank,

therefore, must keep a sufficient amount of cash balance to meet the actual
demand, while for meeting the potential demand, it has to keep its assets
sufficiently liquid. Cash has perfect liquidity, but yields no returns at all,
while other income-yielding assets such as loans are profitable but have no
liquidity. Liquidity and profitability are, therefore, conflicting consideration
for the bankers.

Another consideration of the bank is its solvency and security. This refers to
the liquidity and shiftability of assets. Liquidity is the capacity to produce
cash on demand. Shiftability means that type of assets acquired by a bank be
easily shiftable to other banks or to the central bank. Therefore a banker will
prefer securities which can be quickly disposed of and which are easily
shiftable without any loss to the bank or to those which are highly risky but
more profitable. But a bank is liquid only to the extent that it can turn its
assets into cash to meet the demands of depositors and other creditors.

Thus, the two motives of a banks liquidity and profitability are

contradictory, but have to be reconciled. A good banker is one who follows a
wise investment policy and distributes the assets in such a way both the
requirements of liquidity and profitability are satisfied. The assets should
bring in maximum profit and should provide maximum security to the
depositors. The secret of success of a bank lies in striking a sound balance
between liquidity and profitability.

In reading a balance sheet of a bank, we have to examine the liabilities and

assets portfolios which reveals how best the two objectives of liquidity and
profitability have been reconciled by the banker.

o Liabilities Portfolio
The liabilities portfolio of a bank is comparatively simple. It shows how the
bank raises funds. Every commercial bank usually gets its funds in three
ways: by share capital, reserve fund and deposits from the general public.
For instance, liabilities may be incurred by accepting or endorsing bills of
exchange on behalf of customers.
o Assets Portfolio
The assets portfolio of the bank is both complex and interesting. It
represents more faithfully the varied nature and ramification of the banks
functions and investment policies.

In fact the asset side of the balance sheet indicates the manner in
which the funds entrusted to the bank are deployed. Usually, every banker
seems to arrange its assets in an ascending order of profitability and
descending order of liquidity. Thus, the structure of a balance sheet indicates
assets appearing in the descending order or liquidity
HISTORY
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian
financial institution, and was its wholly-owned subsidiary. ICICI's
shareholding in ICICI Bank was reduced to 46% through a public
offering of shares in India in fiscal 1998, an equity offering in the form
of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of
Bank of Madura Limited in an all-stock amalgamation in fiscal 2001,
and secondary market sales by ICICI to institutional investors in fiscal
2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the
World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial
institution for providing medium-term and long-term project financing
to Indian businesses. ICICI Bank has formulated a Code of Business
Conduct and Ethics for its directors and employees. ICICI Bank is one of
the Big Four banks of India, along with State Bank of India, Punjab
National Bank and HDFC Bank.

Loans provided by ICICI Banks :

ICICI Bank offers wide variety of Loans Products to suit your

requirements. Coupled with convenience of networked branches/ ATMs
and facility of E-channels like Internet and Mobile Banking, ICICI Bank
brings banking at your doorstep. Select any of our loan product and
provide your details online and our representative will contact you for
getting loans.

Different types of loans provided by ICICI Bank:

Home Loans

The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans
offers some unbeatable benefits to its customers - Doorstep Service,
Simplified Documentation and Guidance throughout the Process. It's
really easy!

Personal Loans
If you're looking for a personal loan that's easy to get, your search
ends here. ICICI Bank Personal Loans are easy to get and absolutely
hassle free. With minimum documentation you can now secure a loan
for an amount up to Rs. 15 lakhs.

Car Loans

The most preferred financier for car loans in the country. Network of
more than 1000 channel partners in over 200 locations. Tie-ups with all
leading automobile manufacturers to ensure the best deals. Flexible
schemes & quick processing. Hassle free application process on the
click of a mouse.

Commercial Vehicle Loans

We have extended products like funding of new vehicles, finance on

used vehicles, top up on existing loans, working capital loans & other
banking products.

Loans against Securities

You don’t have to sell your securities. All you have to do is pledge your
securities in favor of ICICI Bank. We will then grant you an overdraft
facility up to a value determined on the basis of the securities pledged
by you.
ICICI BANK
 HISTROY OF ICICI BANK

ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses. Until the late 1980s, ICICI primarily focused its activities on project finance,
providing long-term funds to a variety of industrial projects. With the liberalization of the
financial sector in India in the 1990s, ICICI transformed its business from a development
financial institution offering only project finance to a diversified financial services provider
that, along with its subsidiaries and other group companies, offered a wide variety of products
and services. As India’s economy became more market-oriented and integrated with the
world economy, ICICI capitalized on the new opportunities to provide a wider range of
financial products and services to a broader spectrum of clients. ICICI Bank was incorporated
in 1994 as a part of the ICICI group. In 1999, ICICI became the first Indian company and the
first bank or financial institution from non-Japan Asia to be listed on the New York Stock
Exchange.

The issue of universal banking, which in the Indian context meant conversion of long-term
lending institutions such as ICICI into commercial banks, had been discussed at length in the
late 1990s. Conversion into a bank offered ICICI the ability to accept low-cost demand
deposits and offer a wider range of products and services, and greater opportunities for
earning non-fund based income in the form of banking fees and commissions. After
consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking,
the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with
ICICI Bank would be the optimal strategic alternative for both entities, and would create the
optimal legal structure for ICICI group's universal banking strategy. The merger would
enhance value for ICICI shareholders through the merged entity's access to low-cost deposits,
greater opportunities for earning fee-based income and the ability to participate in the
payments system and provide transaction-banking services. The merger would enhance value
for ICICI Bank shareholders through a large capital base and scale of operations, seamless
access to ICICI's strong corporate relationships built up over five decades, entry into new
business segments, higher market share in various business segments, particularly fee-based
services, and access to the vast talent pool of ICICI and its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of
ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial
Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of
Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, were integrated in a single entity.
PERFORMANCE OF ICICI BANK

Performance Review: Quarter ended December 31, 2021

Core operating profit (profit before provisions and tax,

excluding treasury income) grew by 25% year-on-year to ₹
10,060 crore (US$ 1.4 billion) in the quarter ended December
31, 2021 (Q3-2022)

Net interest income grew by 23% year-on-year

Profit after tax grew by 25% year-on-year to ` 6,194 crore (US$
833 million) in Q3-2022

Total period-end deposits crossed ₹ 10 lakh crore

Total deposits grew by 16% year-on-year to ` 10,17,467
crore (US$ 136.9 billion) at December 31, 2021
Average CASA ratio was 45% in Q3-2022

Domestic loan portfolio grew by 18% year-on-year

Net NPA ratio declined from 0.99% at September 30, 2021 to

0.85% at December 31, 2021, the lowest since March 31, 2014

Provision coverage ratio was 79.9% at December 31, 2021

Total capital adequacy ratio was 19.79% and Tier-1 capital
adequacy ratio was 18.81% on a standalone basis at December
31, 2021 (including profits for the nine months ended
December 31, 2021 (9M-2022))
Profit & loss account

⚫ The core operating profit (profit before provisions and tax, excluding
treasury income) increased by 25% year-on-year to ₹ 10,060 crore (US$
1.4 billion) in Q3-2022 from ₹ 8,054 crore (US$ 1.1 billion) in the quarter
ended December 31, 2020 (Q3-2021)

⚫ Net interest income (NII) increased by 23% year-on-year to ` 12,236

crore (US$ 1.6 billion) in Q3-2022 from ` 9,912 crore (US$ 1.3 billion) in
Q3-2021

⚫ The net interest margin was 3.96% in Q3-2022 compared to 3.67% in

Q3-2021 and 4.00% in the quarter ended September 30, 2021 (Q2-2022)

⚫ Non-interest income, excluding treasury income, increased by 25%

year-on-year to ₹ 4,899 crore (US$ 659 million) in Q3-2022 from ₹ 3,921
crore (US$ 527 million) in Q3-2021

⚫ Fee income grew by 19% year-on-year to ₹ 4,291 crore (US$ 577 million)
in Q3-2022 from ₹ 3,601 crore (US$ 484 million) in Q3-2021. Fees from
retail, business banking and SME customers constituted about 76% of
total fees in Q3-2022

⚫ Treasury income was ` 88 crore (US$ 12 million) in Q3-2022 compared

to ` 766 crore (US$ 103 million) in Q3-2021. The treasury income in Q3-
2021 included gain of ` 329 crore (US$ 44 million) from sale of shares of
ICICI Securities

⚫ Provisions (excluding provision for tax) declined by 27% year-on-year to

` 2,007 crore (US$ 270 million) in Q3-2022 from ` 2,742 crore (US$ 369
million) in Q3-2021

⚫ The profit before tax grew by 34% year-on-year to ₹ 8,141 crore (US$ 1.1
billion) in Q3-2022 from ₹ 6,078 crore (US$ 818 million) in Q3-2021

⚫ On a standalone basis, the profit after tax grew by 25% year-on-year to

` 6,194 crore (US$ 833 million) in Q3-2022 from ₹ 4,940 crore (US$ 665
million) in Q3-2021

⚫ On a standalone basis, the profit after tax grew by 38% year-on-year to

` 16,321 crore (US$ 2.2 billion) in 9M-2022 from ₹ 11,790 crore (US$ 1.6
billion) in 9M-2021
Growth in digital and payments platforms

In December 2020, the Bank had expanded its mobile banking app, iMobile,
to iMobile Pay which offers payment and banking services to customers of
any bank. There have been 53 lakh activation from non-ICICI Bank account
holders as of end-December 2021. The value of transactions by non-ICICI
Bank account holders increased by 73% sequentially in Q3-2022.

The business banking and SME franchise continues to grow on the back of
digital offerings and platforms like InstaBIZ. InstaBIZ offers various services
such as instant overdraft facility, payment of Goods and Services Tax (GST),
foreign exchange deal booking, business loans based on revenues reported
in GST returns, automatic bank reconciliations and inward and outward
remittances. The value of financial transactions on InstaBIZ grew by about
68% year-on-year in Q3-2022. The Bank’s supply chain platforms enable
corporates to seamlessly manage their supply chain financing and
payments, collection and reconciliation requirements of their dealers and
vendors in a convenient and paperless manner. The value of transactions
through these supply chain platforms in Q3-2022 was 3.5 times the value of
transactions in Q3-2021.

The value of the Bank’s merchant acquiring transactions through Unified

Payments Interface (UPI) in Q3-2022 was 2.2 times the value of transactions
in Q3-2021 and grew by 34% sequentially.

The value of mobile banking transactions increased by 50% year-on-year to

₹ 4,55,326 crore (US$ 61.3 billion) in Q3-2022. Digital channels like internet,
mobile banking, PoS and others accounted for over 90% of the savings
account transactions in 9M-2022. The Bank is the market leader in electronic
toll collections through FASTag. The Bank had a market share of 39% by
value in electronic toll collections through FASTag in Q3-2022, with a 42%
year-on-year growth in collections.

The Bank had launched ICICI STACK for corporates and has created more
than 20 industry specific STACKs which provide bespoke and purpose-
based digital solutions to corporate clients and their ecosystems. The
volume of transactions through these solutions in Q3-2022 was 3.7 times the
volume of transactions in Q3-2022. These solutions along with the Bank’s
extensive client coverage have supported the growth in average current
account deposits. The value of transactions on the Bank’s Trade Online
platform, which allows customers to carry out most of their trade finance
and foreign exchange related transactions digitally, grew by about 90%
year-on-year in Q3-2022. The Bank recently launched TradeEmerge for
importers and exporters across India, offering banking as well as value-
added services. This initiative makes cross border trade hassle-free, quick
and convenient, as it offers an array of services in one place.

Credit growth

The retail loan portfolio grew by 19% year-on-year and 5% sequentially, and
comprised 61.3% of the total loan portfolio at December 31, 2021. Including
non-fund outstanding, the retail loan portfolio was 51.3% of the total
portfolio at December 31, 2021. The value of credit card spends in Q3-2022
was 2.2 times the value of credit card spends in Q3-2021 and grew by 27%
sequentially. The business banking portfolio grew by 39% year-on-year and
9% sequentially at December 31, 2021. The SME business, comprising
borrowers with a turnover of less than ` 250 crore (US$ 34 million), grew by
34% year-on-year and 10% sequentially at December 31, 2021. Growth in
the domestic wholesale banking portfolio was 13% year-on-year and 9%
sequentially at December 31, 2021. The domestic advances grew by 18%
year-on-year and 6% sequentially at December 31, 2021. Total advances
increased by 16% year-on-year and 6% sequentially to ` 813,992 (US$ 109.5
billion) at December 31, 2021.

Deposit growth
Total deposits increased by 16% year-on-year and 4% sequentially to `
10,17,467 crore (US$ 136.9 billion) at December 31, 2021. Average current
account deposits increased by 34% year-on-year. Average savings account
deposits increased by 25% year-on-year. Total term deposits increased by
12% year-on-year to ` 536,811 crore (US$ 72.2 billion) at December 31,
2021.

The Bank had a network of 5,298 branches and 13,846 ATMs at December
31, 2021.

Asset quality

The net non-performing assets declined by 10% sequentially to ` 7,344 crore

(US$ 988 million) at December 31, 2021 from ` 8,161 crore (US$ 1.1 billion)
at September 30, 2021. The net NPA ratio declined to 0.85% at December
31, 2021 from 0.99% at September 30, 2021.

During Q3-2022, there were net deletions from gross NPAs of ` 191 crore
(US$ 26 million), excluding write-offs and sale, compared to net additions
of ` 96 crore (US$ 13 million) in Q2-2022. The gross NPA additions declined
to ` 4,018 crore (US$ 541 million) in Q3-2022 from ₹ 5,578 crore (US$ 750
million) in Q2-2022 and ` 7,231 crore (US$ 973 million) in the quarter ended
June 30, 2021 (Q1-2022). Recoveries and upgrades of NPAs, excluding
write-offs and sale, were ` 4,209 crore (US$ 566 million) in Q3-2022. The
gross NPAs written-off in Q3-2022 were ` 4,088 crore (US$ 550 million).

Excluding NPAs, the total fund based outstanding to all borrowers under
resolution as per the various extant regulations/guidelines was ` 9,684 crore
(US$ 1.3 billion) or 1.2% of total advances at December 31, 2021, a similar
level compared to September 30, 2021. The Bank holds provisions
amounting to ` 2,436 crore (US$ 328 million) against these borrowers under
resolution, as of December 31, 2021. In addition, the Bank continues to hold
Covid-19 provisions of ` 6,425 crore (US$ 864 million) as of December 31,
2021, the same level as September 30, 2021. The loan and non-fund based
outstanding to performing borrowers rated BB and below reduced to `
11,842 crore (US$ 1.6 billion) at December 31, 2021 from ` 12,714 crore (US$
1.7 billion) at September 30, 2021.

Capital adequacy

The Bank’s total capital adequacy at December 31, 2021 was 19.79% and
Tier-1 capital adequacy (including profits for 9M-2022) was 18.81%
compared to the minimum regulatory requirements of 11.70% and 9.70%
respectively.

Consolidated results
The consolidated profit after tax increased by 19% year-on-year to ` 6,536
crore (US$ 879 million) in Q3-2022 from ` 5,498 crore (US$ 740 million) in
Q3-2021 (Q2-2022: ` 6,092 crore (US$ 820 million)).

Key subsidiaries and associates

Value of New Business (VNB) of ICICI Prudential Life Insurance (ICICI Life)
increased by 35% year-on-year to ₹ 1,388 crore (US$ 187 million) in 9M-
2022 from ₹ 1,030 crore (US$ 139 million) in the nine months ended
December 31, 2020 (9M-2021). The new business premium increased by
30% year-on-year to ₹ 10,248 crore (US$ 1.4 billion) in 9M-2022 from ₹ 7,899
crore (US$ 1.1 billion) in 9M-2021. The new business margin increased from
25.1% in FY2021 to ₹ 27.1% in 9M-2022. The profit after tax was ` 311 crore
(US$ 42 million) in Q3-2022 compared to ` 306 crore (US$ 41 million) in Q3-
2021.

The Gross Direct Premium Income (GDPI) of ICICI Lombard General

Insurance Company (ICICI General) grew by 26% year-on-year to ₹ 13,311
crore (US$ 1.8 billion) in 9M-2022 from ₹ 10,525 crore (US$ 1.4 billion) in
9M-2021. The combined ratio was 111.0% in 9M-2022 compared to 99.1%
in 9M-2021. The profit after tax of ICICI General was ₹ 318 crore (US$ 43
million) in Q3-2022 compared to ₹ 314 crore (US$ 42 million) in Q3-2021.
Prior period numbers are not comparable due to the reflection of the
Scheme of Arrangement between ICICI General and Bharti AXA General
Insurance Company in current period numbers.
BALANCE SHEET OF ICICI BANK

Balance sheet of ICICI

bank March 2021 March 2020
(in Rs. Cr.) (12months) (12months)
Equities and liabilities
Shareholders funds
Equity share Capital 1383.41 1294.76
Total share capital 1383.41 1294.76
Revaluation reserve 3093.59 3114.87
Reserve and Surplus 143,029.08 112,091.29
Total reserves and surplus 146,122.67 115,206.16
Total shareholders funds 147,509.19 116504.41
Deposits 932,522.16 770,968.99
Borrowings 91,630.96 162,896.76
Other liabilities and 58,770.37 47,994.99
provisions
Total Capital and liabilities 1,230,432.68 1,098,365.15
ASSETS
Cash and balance with
reserve bank of India 46,031.19 35,283.96
Balance with banks money
at call and short notice 87,097.06 83,871.78
Investments 281,286.54 249,531.48
Advances 733,729.09 654,289.97
Fixed assets 8,877.58 8,410.29
Other assets 73,411.21 75,977.67
Total assets 1,230432.68 1,098,365.15
Other additional information
Number of branches 5,266.00 5,324.00
Number of employees 98,750.00 99,319.00
Capital adequacy ratios (%) 19.12 16.00
Key performance indicators
Tier 1 (%) 18.06 15.00
Tier 2 (%) 1.06 1.00
Assets quality
Gross NPA 40,841.42 40,829.09
Gross NPA(%) 8.00 6.00
Net NPA 9,117.66 9,923.24
Net NPA (%) 2.10 1.54
Net NPA in advances(%) 2.00 2.00
Contingent liabilities commitments
Bills of collection 54,643.42 48,216.24
Contingent liabilities 2,648,640.67 2,523,825.80
Article on ICICI Bank

ICICI Bank follow SBI; revise FD rates by up to 0.5 pc

MUMBAI: Private sector banks like ICICI Bank and HDFC Bank on
Wednesday reduced interest rates on fixed deposits by at least 50
basis point. The reduction in deposit rates comes at a time when the
economy is slowing down and credit pick up is slack. One basis point is
equal to one hundredth of a percentage. Last week, State Bank of India
had reduced interest rate on deposits by as much as 100 basis points
across maturities to maintain profitability after lowering lending rates.
ICICI Bank has cut rates across maturities ranging from 91 days to less
than five years. It now offers a maximum 8.75 per cent interest on
retail term deposits compared to 9.25 per cent earlier. In the shorter
tenure ranging between seven days to 45 days, however, the bank has
increased rate by 50-75 basis points.
A reduction in statutory reserve ratio, the amount of funds to be held in
government bonds, by a percentage point is also help the banks lend
Rs 15,000 crore more to corporate or retail customers. Deposits grew
14.1% year on year against RBI's projection of 16%.
Pratip Chaudari, chairman State Bank of India had said, “As of now, we
are surplus in deposit for SBI," said Chaudhuri. ""The challenge is more
on pushing credit."" Also, the cut in SLR is providing some comfort.
This is helping banks in meeting the credit demand, which is climbing
marginally. Recent RBI data shows that credit has grown 16.7% year on
year.

We could see the private players now reduce lending rates to get
competitive as many public sector banks like State Bank of India and
Andhra Bank have cut rates on select retail products,'' said a banking
analyst with a domestic brokerage.
ICICI Bank is also doing this to maintain a healthy margin of over 3%,''
he added.
Questions Asked To the
Branch Manager of ICICI Bank

1. What is the Balance that is required for ICICI Savings

Account?
- ICICI Savings account requires an Average Monthly Balance of Rs.
75,000 in a combination of savings account/ current account and fixed
deposits including a minimum monthly balance of Rs. 25,000 in the
savings account / current account or Smart Money facility with a
minimum fixed deposit of Rs. 200,000. However, a "No Frills" Account
can be opened with Zero balance.

2. What is the Average Monthly Balance (AMB) required to

be maintained in the case of an ICICI Savings Account? How is
the AMB calculated?
- The minimum AMB required to be maintained for ICICI Savings
Account is Rs. 75,000. The AMB is calculated by adding the end of day
balances for each day in the month and dividing it by the number of
days in that month.

3. Is there a charge for non-maintenance of Average

Monthly Balance (AMB)?

- There is a charge levied for non-maintenance of AMB. The charge is

Rs. 250+ per month. You may please refer to our tariff on
www.icici.co.in for further details on applicable charges.

4. Do I need to give an advance notice for withdrawal of

cash beyond a limit from a branch?
- Prior notice (normally 24 hours) is to be given to the branch from
where the cash withdrawal is to be made for an amount greater than
Rs.1, 00,000.

5. How can I earn higher returns on funds in my Current /

Savings Account?
- Currently, as per RBI regulations you earn interest at 4.00% p.a. (paid
half yearly) on your Savings Account balances and NIL interest on your
Current Account balances. However, if you choose, the moment your
savings cross the required balance amount, the excess amount will get
transferred to a Fixed Deposit, thereby earning you a higher rate of
interest.
6. Can I access my account when I am out of town /
travelling in India?
- Yes, you can check both the balances in your account as well as your
transaction history at any of our branches or ATMs. Moreover you can
also apply for our Internet Banking or Phone Banking facility which will
give you access to your account balances and other services anytime,
anywhere.

7. Can I withdraw cash in any other city where I do not have

a Current / Savings Account?
- It is possible to withdraw cash using the debit card at any ICICI or non
ICICI VISA ATM in India or overseas (a transaction fee is applicable for
withdrawals from non-ICICI ATMs in India and from any ATM overseas).
8. What if I need foreign exchange for my current account
transactions?
- In respect of any other current account transaction please approach
the branch with:
A letter detailing and self-certifying the details of remittance and the
beneficiary to whom it is being made.
Supporting document detailing the nature of the transaction, value and
beneficiary
Complete the following forms given to you by the branch:
Application in Form A2 signed by the remitter
FEMA declaration
Draft or Telegraphic transfer application form
Once the Bank is satisfied with the nature of the transaction the Bank
will be able to effect the remittance as required. While most
transactions would be processed by the bank on the basis of the
above, there could be situations that could call for supplementary
information or reference to Reserve Bank. The Branch staff will guide
you on this when they are contacted.

9. Can I use my International credit/debit card to meet my

expenses?
Your International/debit card can be put to good use on various
occasions:
While you are on holiday outside India to meet your expenses
. When you are outside India to purchase an item of import.
When you are in India, to make a payment in foreign exchange for
purchase of books and other items through Internet.
10. I am having a Saving Bank / Current account with ICICI. I
want to register for Online ICICI now. What do I do?
- By visiting the branch we can request for internet banking password.
After 8 days we can access our account online. It passes through 3
channels:
Branch
Phone-banking
Internet banking

11. What is the present CRR & SLR in ICICI BANK?

- CRR-4.5% & SLR-23%.
12. What is impact of IT development on commercial banks?
- As it is in need to adopt supervision technology, it develops the
transaction of banks faster. It is also convenient to customers, staff as
well as experts.
13. How much % of loan is given against asset?
- Maximum 85% of asset value is given by ICICI Bank.
14. Is the prime lending rate same for all types of loan?
- It depends on the loan taken by the borrower.
15. How the NPA’s are managed?
- The NPA’s are managed by experts. It’s not branch activity; it’s
conducted by divisional head office. The managed activities of overall
bank’s NPAs are under RBI guidelines.
CONCLUSION

Friends, as we know, over five decades the Commercial banks in

India achieved astounding success by enormously spreading banking
services in far-flung and unbanked areas of the country through their
massive branch network are garnering burgeoning amount of savings which
represent half of the GDP of the country. A major portion of these resources
had been deployed to meet the needs of priority sectors which are critical to
the economy.

However, it is crucial for the commercial banking industry to meet the

increasingly complex savings and financing needs of the economy by
offering a wider and flexible range of financial products tailored for all types
of customers. In recent years, it is being felt widely that the commercial
banking system has not actually grown as sound & vibrant as it needed to
be. Strong capital positions and balance sheets places the Commercial banks
in a better position to deal with and absorb the economic shocks. These
Banks need to face competition without diluting the operating standards.
In banking, there is no such thing as "one size fits all." But today's
commercial banks are more diverse than ever. You'll find a tremendous
range of opportunities in commercial banking, starting at the branch level
because commercial bankers, now are highly experienced in working with
businesses to develop the right financial package to meet your unique
business needs. The face of Commercial banking is changing rapidly.

Competition is going to be tough Banks should avail of the existing and

upcoming opportunities as well as address the above-discussed issues if they
have to succeed, not just survive, in the changing environment.
Thus, Commercial Banks occupy a dominant place in the money
market, they are like a reservoir into which flow the savings, the idle
surplus, money of households and from which loans are given on interest to
businessmen & others who need them for investment or productive uses.
RECOMMENDATIONS

Banking in India has made a remarkable progress in its growth and

expansion, as well as business with social perspective in the fulfillment of
national objectives. Indian Commercial banking has developed, but, its
perfection is yet to be seen. There still remains many tasks to be fulfilled.

1. Still there are villages left without banking facilities, so many more rural
banks branches need to be opened.

2. Quality of Commercial banking facilities should be improved to the

Almost satisfaction of the customer.

3. Operational costs of Commercial banks should be reduced to the

minimum profitability and working results must be maximized.

4Banking staff should be adequately trained.

5. More lending should be made in favour of priority sectors.

6. Malpractices, fraud, corruption and red-tapism must be done away with.

7. More attention should be paid to the development of exports.

8. Nationalised banks should give more technical assistance to the small

industrialists.

9. Interest rates on deposits should be enhanced reasonably up to 12-13 %

so that savers get their legitimate returns.

10. The high level of overdues of banks have become a matter of concern.
So, banks should make all possible efforts to reduce their overdues. This
all requires that no loans should be given without proper identification
and address of the deserving rural poor.

Thus, in order that the association of banks with industry is more fruitful and
rewarding, many innovations have to be planned and introduced
systematically and greater degree of managerial competence will have to be
developed in Commercial banking sector.
 FUTURE PROSPECTS OF COMMERCIAL BANKING:
Indian banking has developed. But, its perfection is yet to be seen. There
still remain many tasks to be fulfilled. Historically, profitability from lending activities has
been cyclic and dependent on the needs and strengths of loan customers. In recent history,
investors have demanded a more stable revenue stream and banks have therefore placed more
emphasis on transaction fees, primarily loan fees but also including service charges on
array of deposit activities and ancillary services (international banking, foreign exchange,
insurance, investments, wire transfers, etc). However, lending activities still provides and in
future, too will provide bulk of a Commercial bank's income.

As part of the financial services industry, commercial banking are worldwide attempting to
compete better by improving core operations and differentiating the customer experience.
The banking sector has been consolidating; it is worth noting that far more people are
employed in the Commercial banking sector than any other part of the financial services
industry. Jobs in banking can be exciting and offer excellent opportunities to learn about
business, interact with people and build up a clientele. In future, if we are well-prepared and
enthusiastic about entering the field, we are likely to find a wide variety of opportunities open
to us.

Thus, we can predict the future of Commercial bank, to be spreaded world wide. They will be
providing an unprecedented level of service to a wide range of business clients, from small
business, through to multi-national corporate clients. In future, Commercial Bank will come
up with more innovative and experienced depth knowledge of specific sectors, to meet all
of our banking requirements.