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Summer Internhip




5/31/2011




            By: Deepika Agrawal, Praxis Business School Kolkata
Praxis Business School




                               A report on

Retail Banking business in Bihar with special reference to IDBI Bank



                              Submitted to

                           Mr. Rizwan Khan
                        Deputy General Manager

                             IDBI Bank Ltd.

        In partial fulfillment of the requirements of the course

                                 of the

                     Summer Internship Program

                            (2010-2012)



                                  By

                           Deepika Agrawal

 Retail Banking business in Bihar with special reference to IDBI Bank
Certificate of approval


The following Summer Project Report titled " Retail Banking business in Bihar with special
reference to IDBI Bank" is hereby approved as a certified study in management carried out
and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the
award of Post-Graduate Diploma in Management for which it has been submitted. It is
understood that by this approval the undersigned do not necessarily endorse or approve any
statement made, opinion expressed or conclusion drawn therein but approve the Summer
Project Report only for the purpose it is submitted.




                                                                                 Signature




                                                                                             (i)

          Retail Banking business in Bihar with special reference to IDBI Bank
EXECUTIVE SUMMARY

Banking Industry which is basically my concern industry around which my project has to be
revolved is really a very complex industry. The project titled “RETAIL BANKING BUSINESS IN
BIHAR WITH SPECIAL REFERENCE TO IDBI BANK” was basically a research based project. The
main motive behind doing this project is to

        know the industry,
        have an overview of retail banking,
        Know the different products available for retail banking by the bank, current situation
        and problems and their solutions.


My project was totally based on primary data. The project started with studying the various
products of IDBI Bank. This was done throughly in order to understand about retail banking
and which products do it covers.


My next step was to come out of the bank and do a comparative analysis of the bank with its
peer banks.My basic objective was to find out what is the scope of retail banking business in
Bihar. The comparative analysis between the banks helped me to understand their perceptions
about the business they see in Bihar.


My main findings through this project was that there is a huge market which still need to be
catered in Bihar. Bihar being a developing state has the capacity to give good business to the
banks. So, IDBI should continue its expansion strategy in Bihar as it would stand profitable for
the bank.




                                                                                           (ii)

            Retail Banking business in Bihar with special reference to IDBI Bank
Acknowledgement

I would, at the very onset, like to thank Mr. Rizwan Khan, Deputy General Manager, IDBI Bank

for providing me the opportunity to perform my Summer Internship Program in the Company.

I, would like to, give special thanks and gratitude to Mr.Chandan Kumar, Mr. Sanjay Kumar,
Miss. Pragya Nidhi for mentoring and providing the necessary data and information as and
when required throughout the project. Their support and encouragement has been a source of
inspiration for me and made my journey in IDBI a delight.

I, would also offer my thanks to my Dean Mr. Srinivasan Govindrajan, Praxis Business School,
Kolkata.

My thanks also go to Mr. Charanpreet Singh, Asso. Dean, and Prof. Anindra Kumar Halder ,
Praxis Business School.

I would also like to thank my classmates and seniors for extending me their help and
cooperation whenever I approached them.




                                                                                        (iii)


           Retail Banking business in Bihar with special reference to IDBI Bank
Table of contents

S.No    Chapter     Particulars                                    Page no.
1       i)          Certificate Of approval                        (i)
2       ii)         Executive Summary                              (ii)
3       iii)        Acknowledgement                                (iii)
4       1)          Introduction                                   1
                    1.1 A Brief Introduction                       2
                    1.2 Obejective Of The Study                    2
                    1.3 Relevance of The Study                     2
                    1.4 Scope Of The study                         3
                    1.5 Limitations                                3
5       2)          A Journey Through Banking                      4
                    2.1 Origin Of Banking                          4
6       3)          IDBI Profile                                   11
                    3.1 Journey From IDBI To IDBI Ltd.             11
                    3.2 IDBI Bank Ltd.- A Profile                  13
                    3.3 IDBI Groups                                16
                    3.4 IDBI- Its Products And Services            17
7       4)          Retail Banking                                 21
                    4.1 What Is Retail Banking                     21
                    4.2 SWOT Ananlysis Of Retail Bnaking           22
                    4.3 Need For Retail Banking (The Ultimate      27
                    Service Provider)
                    4.4 Retail Banking in India                    28
                    4.5 Advantages Of Retail Banking               29
                    4.6 Disadvantages                              30
                    4.7 Scope For Retail Banking In India          31
                    4.8 Present Snario                             31
                    4.9 What Are Various Retail Banking Services   32
                    4.10 Retail Lending                            34
                    4.11 Role Of IT In Retail Banking              35
8       5)          Retail Banking Of IDBI Bank                    38
                    5.1 An Overview Of the product                 38
                    5.2 The IDBI Bank Advantage                    46
9       6)          Methodology                                    47
                    6.1 Research Type                              47
                    6.2 Data type                                  47
                    6.3 Sample Selection                           47


       Retail Banking business in Bihar with special reference to IDBI Bank
6.4 Data Collection Method                     47
                  6.5 Tools Used For Data Analysis               48
10    7)          The Study                                      49
                  7.1 What The Stats Say                         50
11    8)          Colclusions And Suggestions                    60
                  Basic Findings                                 60
                  Suggestions                                    62
12    9)          Bibliography And References                    65




     Retail Banking business in Bihar with special reference to IDBI Bank
List of figures

Fig. No. 1- Banking structure in India

Fig. No. 2- Main Events In The History Of IDBI Bank

Fig. No.3- Number of Branches And ATM’s
Fig. No. 4-IDBI Bank Business Chart

Fig. No.5- Branches In Bihar

Fig. No.6- ATM’s In Bihar

Fig. No.7- Factors Considered

Fig. No.8- Bank’s USP

Fig. No.9- Special Rural Sheme

Fig. No.10- Obstacles Faced

Fig. No.11- Main Driver Of Bank’s Profitability

Fig. No.12- CASA As % Of Total Deposits

Fig. No.13- Current Account As % Of CASA

Fig. No.14- Profitability Or Growth % Of Banks




          Retail Banking business in Bihar with special reference to IDBI Bank
List of tables

Table No. 1-Categorization of Retail Bank services

Table No. 2- Interest Rates




         Retail Banking business in Bihar with special reference to IDBI Bank
List of appendices
Annexure

     Annexure 1- questionnaire
     Annexure 2- master sheet
     Annexure 3- schedule of facilities




       Retail Banking business in Bihar with special reference to IDBI Bank
Abbreviations
DFI- Development Financial Institution

SLR- Statuory Liquidity Ratio

SSI- Small Scale Industries

GOI- Government Of India

SME- Small And Medium Enterprises

PFS- Provident Funds

IPO- Initial Public Offer

NPA- Non performing Assets

CRM- Customer Relatitionship Management

DD- Demend Draft

EFT- Electronic Fund Transferring

ECS- Electronic Clearing Services

PAP- Payable At Par

BR- Base Rate

FCNR- Foreign Currency Accounts

AQB- Average Quarterly Balance




          Retail Banking business in Bihar with special reference to IDBI Bank
1



       1) INTRODUCTION
        “We don’t want satisfied customers…we want delighted customers.” It is the new
    marketing mantra today. The same applies to banking as well. Retail banking and rural
    banking were once considered as taboos by the leading foreign and domestic banks. But cut-
    throat competition, innovation and advanced technology have altogether changed the face of
    banking sector. Now all banks have recognized the importance of retail banking.

      Retail banking is that part of a bank that offers products and services primarily to individual
    customers, professional, self-employed individuals or small businesses. The focus is on
    creating products and services that meet the needs of the target customers and are profitable
    for the bank as well.

         The approach to retail banking products is more is more on a mass production basis
    wherein all risk and operations are based on and geared to cater to a large number of
    customers. This is therefore, significantly different from corporate banking or wholesale
    banking where focus is on large sized customer accounts rather than large numbers of
    customers.

           Understanding retail banking will help in servicing your customer better as it would give
    you a perspective and insight into how such products are structured and specific requirements
    for each set of products. This would help you advice your customer in a more informed manner
    besides making you a more informed consumer.

          With the advent of ATMs, ‘Anytime banking’ has come into picture. Satellites and
    telecom networks across the world have made ‘Anywhere banking’ possible. Now it is the turn
    of ‘Anyhow banking’, and the leading bank of the next century will be the one which has all
    these three A’s.




              Retail Banking business in Bihar with special reference to IDBI Bank
2


    1.1 A Brief Overview:
    “IDBI Bank Ltd. – A New Generation Govt. Owned Bank”. The Industrial Development Bank of
    India Limited, now more popularly known as IDBI Bank, was established as a wholly-owned
    subsidiary of Reserve Bank of India. The foundation of the bank was laid down under an Act of
    Parliament, in July 1964. The main aim behind the setting up of IDBI was to provide credit and
    other facilities for the Indian industry, which was still in the initial stages of growth and
    development. Since, 2005 IDBI expanded its wings in the retail section. Hence, it became
    necessary to study the various scope of retail banking and the future prospects of IDBI in the
    retail business. The project thus undertaken is for the purpose to know the scope of retail
    banking business.

    1.2 Objective Of The Study:
    My project entitled “Retail Banking Business In Bihar With Special Reference To IDBI Bank”
    aims at studying the scope of retail banking business in Bihar. The objective of doing this
    project is defined as under.

       1) To study the retail banking business in Bihar
       2) To study the retail banking business of IDBI in Bihar
       3) To study how can IDBI improve on its retail banking business
       4) To compare the position of retail banking business in IDBI Bank with its peer banks
           (Axis Bank, ICICI Bank, Induslnd, Corporation Bank, Oriental Bank Of Commerce).

    1.3 Relevance Of The Study:
    Banks are in the business of giving several services to its customers. Retail Banking and
    Corporate Banking are its two main sections. Retail banking is the section where banks cater
    the individual customers. It accepts deposits, give out loans and provide several other value
    added benefits such as phone banking, internet banking, sms banking and many more.
    Through retail banking banks get personally connected to the customers and deal them
    individually. Hence, it is essential to evaluate different factors impacting the retail business of
    the bank. Relevance of this project lies in the fact that it attempts to study the scope that retail

              Retail Banking business in Bihar with special reference to IDBI Bank
3


    banking has in Bihar with special reference to IDBI Bank. The study also attempts to find the
    outcome of retail business of peer banks which will give the bank understudy an idea of its
    position to its peer banks in the area.

    1.4 SCOPE OF THE STUDY:
    To achieve the above objective I have not restricted my study to just IDBI Bank. In order to
    study about the retail banking business in Bihar, and to understand the scope that IDBI has in
    this business, I have extended my project to do a detailed study of retail banking in the peer
    banks of the bank undertaken. Through a comparative study between the peer banks and IDBI,
    I could arrive to a conclusion of the scope of retail business in Bihar.

    1.5 Limitations:
    To make mistake is human nature and I’m no exception. I have tried to make this project
    approachable and helpful for the bank, but at the same time I accept the occurrence of
    intermittent mistakes and do accept them sincerely.




              Retail Banking business in Bihar with special reference to IDBI Bank
4



    2) A Journey Through Banking

    2.1 Origin Of Banking
           Banks are among the main participants of the financial system in India. Banking offers
    several facilities and opportunities.
    Banks in India were started on the British pattern in the beginning of the 19 th century. The first
    half of the 19th century, The East India Company established 3 banks The Bank of Bengal, The
    Bank of Bombay and The Bank of Madras. These three banks were known as Presidency
    Banks. In 1920 these three banks were amalgamated and The Imperial Bank of India was
    formed. In those days, all the banks were joint stock banks and a large number of them were
    small and weak. At the time of the 2nd world war about 1500 joint stock banks were operating
    in India out of which 1400 were non- scheduled banks. Bad and dishonest management
    managed quiet a few of them and there were a number of bank failures.                  Hence the
    government had to step in and the Banking Company’s Act (subsequently named as the
    Banking Regulation Act) was enacted which led to the elimination of the weak banks that were
    not in a position to fulfill the various requirements of the Act. In order to strengthen their weak
    units and review public confidence in the banking system, a new section 45 was enacted in the
    Banking Regulation Act in the year 1960, empowering the Government of India to compulsory
    amalgamate weak units with the stronger ones on the recommendation of the RBI. Today
    banks are broadly classified into 2 groups namely—
    (a) Scheduled banks.
    (b) Non-Scheduled banks.



    There are three different phases in the history of banking in India:
     Pre-Nationalization Era.
     Nationalization Stage.
     Post Liberalization Era.



              Retail Banking business in Bihar with special reference to IDBI Bank
5

    1. Pre-Nationalization Era:
    In India the business of banking and credit was practiced even in very early times. The
    remittance of money through Hundies, an indigenous credit instrument, was very popular. The
    hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in different
    parts of the country.
    The modern type of banking, however, was developed by the Agency Houses of Calcutta and
    Bombay after the establishment of Rule by the East India Company in 18 th and 19th centuries.
    During the early part of the 19th Century, the volume of foreign trade was relatively small.
    Later on as the trade expanded, the need for banks of the European type was felt and the
    government of the East India Company took interest in having its own bank. The government
    of Bengal took the initiative and the first presidency bank, the Bank of Calcutta (Bank
    of Bengal) was established in 1806. In 1840, the Bank of Bombay and in 1843, the Bank of
    Madras was also set up.
    These three banks were known as “Presidency Bank”. The Presidency Banks had their branches
    in important trading centers but mostly lacked in uniformity in their operational policies. In
    1899, the Government proposed to amalgamate these three banks in to one so that it could
    also function as a Central Bank, but the Presidency Banks did not favor the idea. However, the
    conditions obtaining during world war period (1914-1918) emphasized the need for a unified
    banking institution, as a result of which the Imperial Bank was set up in1921. The Imperial Bank
    of India acted like a Central bank and as a banker for other banks.
    The RBI (Reserve Bank of India) was established in 1935 as the Central Bank of the Country. In
    1949, the Banking Regulation act was passed and the RBI was nationalized and acquired
    extensive regulatory powers over the commercial banks.
    In 1950, the Indian Banking system comprised of the RBI, the Imperial Bank of India,
    Cooperative banks, Exchange banks and Indian Joint Stock banks.


    2. Nationalization Stages:
    After Independence, in 1951, the All India Rural Credit survey, committee of Direction with
    Shri. A. D. Gorwala as Chairman recommended amalgamation of the Imperial Bank of India
    and ten others banks into a newly established bank called the State Bank of India (SBI). The
              Retail Banking business in Bihar with special reference to IDBI Bank
6


    Government of India accepted the recommendations of the committee and introduced the
    State Bank of India bill in the Lok Sabha on 16thApril 1955 and it was passed by Parliament and
    got the president’s assent on 8th May 1955. The Act came into force on 1st July 1955, and the
    Imperial Bank of India was nationalized in 1955 as the State Bank of India.
    The main objective of establishing SBI by nationalizing the Imperial Bank of India was “to
    extend banking facilities on a large scale more particularly in the rural and semi-urban areas
    and to diverse other public purposes.”
    In 1959, the SBI (Subsidiary Bank) act was proposed and the following eight state-associated
    banks were taken over by the SBI as its subsidiaries.
    Name of the Bank                         Subsidiary with effect from
    1. State Bank of Hyderabad                         1st October 1959
    2. State Bank of Bikaner                           1st January 1960
    3. State Bank of Jaipur                           1st January 1960
    4. State Bank of Saurashtra                        1st May 1960
    5. State Bank of Patiala                          1st April 1960
    6. State Bank of Mysore                           1st March 1960
    7. State Bank of Indore                           1st January 1968
    8. State Bank of Travancore                        1st January 1960
    With effect from 1st January 1963, the State Bank of Bikaner and State Bank of Jaipur with
    head office located at Jaipur. Thus, seven subsidiary banks State Bank of India formed the SBI
    Group.
    The SBI Group under statutory obligations was required to open new offices in rural and semi-
    urban areas and modern banking was taken to these unbanked remote areas.
    On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced the nationalization
    of 14 major scheduled Commercial Banks each having deposits worth Rs. 50 crore and above.
    This was a turning point in the history of commercial banking in India.
    Later the Government Nationalized six more commercial private sector banks with deposit
    liability of not less than Rs. 200 crores on 15th April 1980, viz.
     Andhra Bank.

               Retail Banking business in Bihar with special reference to IDBI Bank
7

     Corporation Bank.
     New Bank if India.
     Oriental Bank of Commerce.
     Punjab and Sind Bank.
     Vijaya Bank.
    In 1969, the Lead Bank Scheme was introduced to extend banking facilities to every corner of
    the country. Later in 1975, Regional Rural Banks were set up to supplement the activities of the
    commercial banks and to especially meet the credit needs of the weaker sections of the rural
    society.
    Nationalization of banks paved way for retail banking and as a result there has been an all
    round growth in the branch network, the deposit mobilization, credit disposals and of course
    employment.
    The first year after nationalization witnessed the total growth in the agricultural loans and the
    loans made to SSI by 87% and 48% respectively. The overall growth in the deposits and the
    advances indicates the improvement that has taken place in the banking habits of the people
    in the rural and semi-urban areas where the branch network has spread. Such credit expansion
    enabled the banks to achieve the goals of nationalization, it was however, achieved at the
    coast of profitability of the banks.
    Consequences of Nationalization:
     The quality of credit assets fell because of liberal credit extension policy.
     Political interference has been as additional malady.
     Poor appraisal involved during the loan meals conducted for credit disbursals.
     The credit facilities extended to the priority sector at concessional rates.
     The high level of low yielding SLR investments adversely affected the profitability of the
     banks.
     The rapid branch expansion has been the squeeze on profitability of banks emanating
     primarily due to the increase in the fixed costs.
     There was downward trend in the quality of services and efficiency of the banks.



               Retail Banking business in Bihar with special reference to IDBI Bank
8


    3. Post-Liberalization Era—Thrust on Quality and Profitability:
    By the beginning of 1990, the social banking goals set for the banking industry made most of
    the public sector resulted in the presumption that there was no need to look at the
    fundamental financial strength of this bank. Consequently they remained undercapitalized.
    revamping this structure of the banking industry was of extreme importance, as the health of
    the financial sector in particular and the economy was a whole would be reflected by its
    performance.
    The need for restructuring the banking industry was felt greater with the initiation of the real
    sector reform process in 1992. The reforms have enhanced the opportunities and challenges
    for the real sector making them operate in a borderless global market place. However, to
    harness the benefits of globalization, there should be an efficient financial sector to support
    the structural reforms taking place in the real economy. Hence, along with the reforms of the
    real sector, the banking sector reformation was also addressed.
    The root causes for the lackluster performance of banks, formed the elements of the banking
    sector reforms. Some of the factors that led to the dismal performance of banks were.
     Regulated interest rate structure.
     Lack of focus on profitability.
     Lack of transparency in the bank’s balance sheet.
     Lack of competition.
     Excessive regulation on organization structure and managerial resource.
     Excessive support from government.


    Against this background, the financial sector reforms were initiated to bring about a paradigm
    shift in the banking industry, by addressing the factors for its dismal performance.
    In this context, the recommendations made by a high level committee on financial sector,
    chaired by M. Narasimham, laid the foundation for the banking sector reforms. These reforms
    tried to enhance the viability and efficiency of the banking sector. The Narasimham
    Committee suggested that there should be functional autonomy, flexibility in operations,
    dilution of banking strangulations, reduction in reserve requirements and adequate financial

              Retail Banking business in Bihar with special reference to IDBI Bank
9

    infrastructure in terms of supervision, audit and technology. The committee further advocated
    introduction of prudential forms, transparency in operations and improvement in productivity,
    only aimed at liberalizing the regulatory framework, but also to keep them in time with
    international standards. The emphasis shifted to efficient and prudential banking linked to
    better customer care and customer services



    Fig. No.1- Banking structure in India

                                                                          Reserve Bank
                                                                          of India (The
                                                                          central bank)



                                                              Commercial
                                                                                   Cooperatives
                                                              Banks (171)



                                                                             Non-
                                                     Scheduled
                                                                          Scheduled (4)



                                                                                             Regional
                      Public sector                 Private banks           Foreign
                                                                                            Rural Banks
                       Banks (27)                        (22)              Banks (32)
                                                                                               (86)


              State Bank          Other
                and its        Nationalized   Old                   New
              associates          Banks



    Reserve Bank of India was nationalized in the year 1949. The general superintendence and
    direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor
    and four Deputy Governors, one Government official from the Ministry of Finance, ten
    nominated Directors by the Government to give representation to important elements in the
    economic life of the country, and four nominated Directors by the Central Government to
    represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New
    Delhi. Local Boards consist of five members each Central Government appointed for a term of
    four years to represent territorial and economic interests and the interests of co-operative and
    indigenous banks.



              Retail Banking business in Bihar with special reference to IDBI Bank
10


     The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934)
     provides the statutory basis of the functioning of the Bank.


     The Bank was constituted for the need of following:

            To regulate the issue of banknotes
            To maintain reserves with a view to securing monetary stability and
            To operate the credit and currency system of the country to its advantage.




     The Reserve Bank of India declared that IDBI Bank Limited, a public sector bank, is
     clubbed along with nationalized banks. RBI acknowledged this in the F.No. 7/95/2005-BOA
     with effect from 31st December, 2007 stating that IDBI Ltd. Will now be treated on par with
     nationalized banks.




               Retail Banking business in Bihar with special reference to IDBI Bank
11



     3) IDBI PROFILE

                                                                      Change of name of
                                                     IDBI Ltd. to IDBI Bank Ltd. became effective from May
                                                                            07, 2008



                                                        Merger of United Western bank with IDBI Ltd on
                                                                       October 03, 2006.



                                                        Merger of IDBI bank Ltd. with IDBI Ltd. became
                                                                effective from April 02, 2005.


                                                         a new company under the name of Industrial
                                                       Development Bank of India Limited (IDBI Ltd.) was
                                                          incorporated as a Govt. Company under the
                                                         Companies Act, 1956 on September 27, 2004.


                                                        Industrial Development bank of India (IDBI) was
                                                       constituted under Industrial Development bank of
                                                                         India Act, 1964




     Fig. No. 2- Main Events In The History Of IDBI Bank

     3.1 Journey From IDBI To IDBI Bank Ltd.
     Industrial Development Bank of India Industrial Development bank of India (IDBI) was
     constituted under Industrial Development bank of India Act, 1964 as a Development Financial
     Institution and came into being as on July 01, 1964 vide GoI notification dated June 22, 1964. It
     was regarded as a Public Financial Institution in terms of the provisions of Section 4A of the
     Companies Act, 1956. It continued to serve as a DFI for 40 years till the year 2004 when it was
     transformed into a Bank.


     Industrial Development Bank of India Limited In response to the felt need and on
     commercial prudence, it was decided to transform IDBI into a Bank. For the purpose, Industrial


               Retail Banking business in Bihar with special reference to IDBI Bank
12


     Development bank (transfer of undertaking and Repeal) Act, 2003 [Repeal Act] was passed
     repealing the Industrial Development Bank of India Act, 1964. In terms of the provisions of the
     Repeal Act, a new company under the name of Industrial Development Bank of India Limited
     (IDBI Ltd.) was incorporated as a Govt. Company under the Companies Act, 1956 on
     September 27, 2004. Thereafter, the undertaking of IDBI was transferred to and vested in IDBI
     Ltd. with effect from the effective date of October 01, 2004. In terms of the provisions of the
     Repeal Act, IDBI Ltd. has been functioning as a Bank in addition to its earlier role of a Financial
     Institution.

     Merger of IDBI bank Ltd. with IDBI Ltd. Towards achieving the faster inorganic growth of the
     Bank, IDBI Bank Ltd., a wholly owned subsidiary of IDBI Ltd. was amalgamated with IDBI Ltd.
     in terms of the provisions of Section 44A of the Banking Regulation Act, 1949 providing for
     voluntary amalgamation of two banking companies. The merger became effective from April
     02, 2005.

     Merger of United Western bank with IDBI Ltd. The United Western bank Ltd. (UWB), a
     Satara based private sector bank was placed under moratorium by RBI. Upon IDBI Ltd.
     showing interest to take over the said bank towards its further inorganic growth, RBI and Govt.
     of India amalgamated UWB with IDBI Ltd. in terms of the provisions of Section 45 of the
     Banking Regulation Act, 1949. The merger came into effect on October 03, 2006.

     Change of name of IDBI Ltd. to IDBI Bank Ltd. In order that the name of the Bank truly
     reflects the functions it is carrying on, the name of the Bank was changed to IDBI Bank Limited
     and the new name became effective from May 07, 2008 upon issue of the Fresh Certificate of
     Incorporation by Registrar of Companies, Maharashtra. The Bank has been accordingly
     functioning in its present name of IDBI Bank Limited.




                 Retail Banking business in Bihar with special reference to IDBI Bank
13


     3.2 IDBI Bank Ltd. – A Profile

     IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank
     has essayed a key nation-building role, first as the apex Development Financial Institution (DFI)
     (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service
     commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas
     beyond mere project financing to cover an array of services that contributed towards balanced
     geographical spread of industries, development of identified backward areas, emergence of a
     new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1,
     2004, the erstwhile IDBI converted into a Banking company (as Industrial Development Bank of
     India Limited) to undertake the entire gamut of Banking activities while continuing to play its
     secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI
     Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the
     erstwhile The United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy,
     new generation Bank with majority Government shareholding today touches the lives of
     millions of Indians through an array of corporate, retail, SME and Agri products and services.
     Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a
     highly competent and dedicated workforce and a state-of-the-art information technology
     platform, to structure and deliver personalized and innovative Banking services and
     customized financial solutions to its clients across delivery channels. As an Universal Bank, IDBI
     Bank, besides its core Banking and project finance domain, has an established presence in
     associated financial sector businesses like Capital Market and Investment Banking, Home
     Finance, Primary Dealership area and more recently, the Life Insurance Business. Recently,
     IDBI Bank reorganized its business and structure commensurate with its aspiration to become
     a 'Top 5' Bank by asset size & market capitalization by the year 2012. As a first step, to give the
     organization the focus necessary for accelerated growth, the Bank has reorganized its
     businesses around nine verticals, six customer verticals, each focusing on distinct customer
     segments and three business verticals. Going forward, IDBI Bank is strongly committed to
     work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate',
     besides generating wealth and value to all its stakeholders.
               Retail Banking business in Bihar with special reference to IDBI Bank
14


     Vision of IDBI

     The vision for the Bank is for it to be the
     trusted partner in progress, by leveraging
     quality human capital and setting global
     standards of excellence, to build the most
     valued      financial    conglomerate.         Our
     experience of financial markets helps us to
     effectively cope with challenges and capitalize
     on the emerging opportunities by participating
     effectively in our country’s growth process.




     Management and Organization

     IDBI Bank is a Board-managed organization. The responsibility for the day-to-day
     management of operations of the Bank is vested with the Chairman & Managing Director and
     two Deputy Managing Directors, who draw upon the support and expertise of a cross-
     disciplinary Top Management Team. IDBI Bank Ltd employee base includes professionals from
     the fields of accountancy, management, engineering, law,
     computer technology, banking and economics.

              R M Malla- Chairman and Managing director
              B P Singh- Deputy Managing Director
              K Narasimha Murthy- Director
              SubhashTuli-Director
              R P Singh- Director
              Lila Firoz Poonawalla- Director
              H L Zutshi- Director
              B S Bisht- Director
              Rakesh Singh- Director

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15


     Fig. No. 3- Number of Branches And ATM’s


     Branches/ATM




     No. of Branches
     Metro                       241
     Urban                       310
     Semiurban                   188
     Rural                        87
     Overseas                    1




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16



     3.3 IDBI Groups

     IDBI is a pioneer Institute in Nation building. To cater to its ever-expanding needs, IDBI formed
     subsidiaries & joint ventures across diverse areas of Banking & Financial System.


     IDBI Capital Market Services

     A wholly owned subsidiary, offers a full suite of financial products. Its business includes stock
     broking, distribution of financial products, Portfolio management of Pension / PF funds &
     Research services, etc.


     IDBI Gilts Ltd

     A wholly owned subsidiary commenced its operations as Primary Dealer. The company
     presently focuses on Bond trading, underwriting in auctions of G-sec and T-bills.


     IDBI Intech Ltd

     A wholly owned subsidiary, deals in the Information Technology Services, Information Security
     Practice, Knowledge Management Services, national contact centre and outbound contact
     centre.


     IDBI Home Finance

     A wholly owned subsidiary, deals in the Home finance arena. It was acquired in September
     2003 from Tata Home Finance Ltd


     IDBI Fortis Life Insurance Company Ltd

     A joint venture with Federal Bank and Fortis Insurance International. It primarily deals in Life
     insurance space.




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17



     3.4 IDBI- Its Products And Services

     IDBI Bank offers a wide array of products and services to its customers. For different customer
     groups and needs, there are different types of products and services including Personal
     Banking, Corporate Banking, SME Finance and Agriculture Business etc.

     Personal Banking

     Following products and services are offered under Personal Banking:

            Deposits
                    Savings Account
                    Current Account
                    Fixed Deposits
                    Suvidha Tax Saving Fixed Deposit
                    Pension Accounts
                    Sabka Account
                    Super Shakti Account for Women
                    Jubilee Plus Account
            Loans
                    Home Loans
                    Loans Against Property
                    Education Loans
                    Personal Loan
                    Loan Against Securities
                    Reverse Mortgage Loan
                    Auto Loan
            Payments
                    Tax Payments
                    Stamp Duty payments
                    Easy Fill
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18


             Bill Payment
             Card to Card Money Transfer
             Online Payments
             Pay Mate
     Investments Advisory
             Smart Financial Planning
             Mutual Fund
             Insurance
             Fixed Income Securities
     Cards
             Gold Debit Card
             International Debit cum ATM Card
             Gift Card
             World Currency Card
             Cash Card
             KIDS Debit Card
             Foundation Day Cash Back Scheme 2009
             Platinum Card
     Institutional Banking
             Institutional Savings Account
             Corporate Payroll Account
     24 Hours Banking
             Phone Banking
             SMS Banking
             Account Alerts
             Internet Banking
     Other products
             Lockers
             India Post
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            Preferred Banking
            NRI Services
            Capital Market
                   IPO
                   Demat

     Corporate Banking

     Following products and services are offered by IDBI Bank for the corporates:

            Project Finance
            Infrastructure Finance
            Syndication, Underwriting & Advisory Services
            Carbon Credits Business
            Working Capital
            Cash Management Services
            Trade Finance
            Tax Payments
            Derivatives
            Technology Upgradation Fund Scheme (TUFS)
            Film Financing Scheme
            Direct Discounting Bills
            Rehabilitation Finance

     SME Finance

     Following SME Finance products are offered by the IDBI Bank:

            Sulabh Vyapar Loan
            Dealer Finance
            Funding under CGFMSE
            Direct Credit Scheme - SIDBI

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           Preferred customer scheme - IDBI Bank / SIDBI
           Vendor financing (Pre - Sale)
           Vendor financing (Post - Sale)
           Lending Against the Security of Future Credit Card Receivables
           Finance to Medical Practitioners
           Loan to SRWTO
           SME Hosiery Special Current Account

     Fig. No.4-IDBI Bank Business Chart



                                            IDBI BANK



      RETAIL BANKING                                                 DEVELOPMENT BANK.




      SAVING ACCOUNT                 CURRENT ACCOUNT                 INVESTMENT




      PERSONAL SAVING                CORPORATE SAVING




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21


     4) Retail Banking
     4.1 WHAT IS RETAIL BANKING?

     Retail banking is however; quite broad in nature it refers to the dealing of commercial banks
     with individual customers, both on liabilities and assets sides of the balance sheet. Fixed
     current/savings accounts on the liabilities side; and mortgages, loans (e.g. personal, housing,
     auto and educational) on the assets side are the more important of the products offered by
     banks. Related ancillary services include credit cards, or depository services.


     Today’s retail banking sector is characterized by three basic characteristics.
                  Multiple products (deposits, credit card, insurance, investments and securities).
                  Multiple channels of distribution (call center, branch, internet and kiosk); and
                  Multiple customer groups (consumer, small business, and corporate)



     DEFINITION:


     Retail Banking Services:-


     Banking services provided to individual members of the public as opposed to those
     provided to businesses and institutions.




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     4.2 SWOT Analysis Of Retail Banking

     STRENGTH:-

       1) Emerging as a new growth driver:
          For several years banks viewed consumer loan with skepticism. Commercial loans
          denominated the loan portfolio as they generated high net yield with low credit risk.
          Consumer loans on the other hand involved smaller amount, large staff to handle
          account and high default rates. Even regulators across the globe have not encouraged
          retail banking until now till very recently. However, over past few years, fierce
          competition among the banks lowered the spread and profitability a commercial loan
          with deregulation and increase in consumer loan rate, the risk adjusted return in retail
          sector have exceed the return on consumer loan.

       2) Provides diversified asset portfolio:
          Retail banking includes comprehensive range of financial product and services i.e.
          deposit product, auto loan, car loan, home loan, loan against equity shares, mortgage
          loan, payment of bills, debit card, credit card, etc.     These products provide an
          opportunity for banks to diversify the asset portfolio with higher profit and relatively
          lower NPA.

       3) Improves standard of living:
          Due to major economic reforms in Indian economy there has been an increase in per
          capita income which has led to change in life style and growing urbanization have made
          the Indian population rise from oblivion and resurge in modern era on this front role of
          retail banking arises. Retail banking provide all such product and services(home loan,
          car loan, personal loan, etc) to its customer which are required by them to maintain
          change in their life style in short it helps in fulfilling aspiration of people through
          affordable credit.

       4) CRM tool: The individual customer is deity of bank in retail banking segment. All
          product and services are designed to satisfy need and wants of its customer. As
             Retail Banking business in Bihar with special reference to IDBI Bank
23
        customer in retail banking belong to different economic, cultural, educational, and
        social background there demand is also varied. It is acceptance of the banking product
        and satisfaction of customer that yield profit in this segment. Hence customer Service
        and Quality implementation through use of CRM tools will help banks Success in this
        competitive world of retail banking.
     5) Innovative product development :
        The scope for development in financial services is unlimited. In retail banking ball is in
        the court of bankers where they approach the customer finds out there financial need
        and problem, designs the product and services, market them and finally sells them to
        satisfy its customer.

     6) Economies of scale:
        Retail banking enables banks to utilize existing capacities and reaching wider
        population of customer. Banks can get the benefits of information and transaction. In
        process of extending variety of services, banks are acquiring enormous amount of
        customer information .if this information is systematically recorded , banks can
        efficiently utilize this information in order to explore new segment and to cross sell new
        services.

        WEAKNESS:-

     1) Avoids corporate sector :
        Retail banking avoids corporate sector totally which is the backbone of Indian
        economy. Main reason put forth or this is decline in corporate borrowing. However
        bank can take certain step to manage there corporate clients such as lower arte credit,
        higher amount of loan etc. Managing corporate client is more easier as they have well
        defined financial policy and project and they concentrate on product and services
        offered rather than on CRM of bank unlike individual clients.

     2) Marketing (Internal and External):



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24

     Retail banking requires strong marketing strategies to be adopted by bank both internal
     and external. under retail banking segment top level management need employees to
     introduce product properly to its employees because if the employees are not aware
     regarding the product they are offering that product will fail however effective the product
     is also bank require to spend lot on its marketing of product to general public because if
     public is not aware regarding the product and service how will they opt for it. All this
     increases the cost and time required to introduce the product in the market which can
     reduce or make the product out dated immediately on its arrival.
     3) Changes in technology:
        Future of retail banking lies in the hand of IT. Various It solution used by banks such as
        E-banking, phone banking, ATM leverage the retail banking product and service offered
        by banks. But this has weekend the segment some how. If banks are not able to adopt
        the latest technology it may pull back the growth of bank also this technology requires
        lot of capital investment and if at all the technology fails then it may shake the
        customer’s confidence on bank and bank may land up in loosing its customer.

     4) Reduces the profitability:
        It is claimed that retail banking increases overall profitability of the bank but in reality
        this is not the case because managing wide range of product and service requires high
        quality technology , large number of staff and all this requires high capital investment
        which reduces banks profitability.

     5) Co-ordination among various department:

        Success of retail banking is not the result of one department but is result of various
        departments together. If there is lack of co-ordination among various department of
        the bank then however strong and effective the may be the product it will fail. Suppose
        if the front office is successful in attracting the customer but back office is not able to
        execute the delivery of product or service on time then bank may land up loosing the
        customer although its CRM was effective.



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     OPPORTUNITIES:-

        1) Scope for innovation:
           Under retail banking as banks try to provide all those product and services which are
           desired by its customer this segment has more scope for innovation banks can keep
           on modifying its products as per the market demand which helps them from not
           being out dated .

        2) Rise in per capita income:

         The rise of the Indian middle class is an important contributory factor in this segment.
         The percentage of middle to high-income Indian households is expected to continue
         rising. The younger population not only wields increasing purchasing power, but as far
         as acquiring personal debt is concerned, they are perhaps more comfortable than
         previous generations. Improving consumer purchasing power, coupled with more
         liberal attitudes toward personal debt, is contributing to India's retail banking segment.

        3) Economic growth:

         Retail banking has immense opportunities in a growing economy like India. In the BRIC
         Report India is stated as an economic superpower. According to A. T. Kearney, a global
         management-consulting firm, recently identified India as the 'second most attractive
         retail destination' of 30 emergent markets. Hence retail banking has high opportunities
         in India.

     THREATS:

        1) Large disbursement of loans:
           The boom in the field of retail banking and the intense composition among the to
           increases the customer base has resulted in the large disbursement of customer
           loans, loans on credit cards, auto loans, educational loans etc. on easy terms without
           much scrutiny this has brought with in an increase in the number of cases of default in
           loan repayment thus increasing the bank’s NPAs.


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     2) Issue of customers dignity:
         Banks have been adopting carrot and stick policy by renegotiating loan terms where
         the default is genuine and handing over recovery to third parties where default is
         willful. Most of the time, the third parties or external agents are not trained to handle
         the loan repayment process. Hence, they restore to strong arms tactics with
         defaulting customers. Many cases of harassment and invasion of privacy have been
         reported by the affected parties. Such instances may hamper the image and
         corporate vision of the bank in near future.

     3) Issue of customer privacy:

        Customer privacy is also affected in another way wherein customer service
         representatives of the banks ring up customers at any times at their places of work,
         informing them about new products and services. This may cause inconvenience to
         busy customers. It is also obligation on part of the banks not to share the private
         information from the records of the customers with outside agencies like market
         research groups and other advertisers.

     4) IT:

         The growth of IT has brought with it a number of frauds perpetrated with the help of
         technology and which come under the domain of cyber crimes. Banks are the victims
         of unscrupulous elements who have in many instance hacked banks website and
         stolen credit card number, pass word and other confidential information relating to
         customer.




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     4.3 Need For Retail Banking- (The Ultimate Service Provider)

            Until now banks were relying on financing, production based activities. Retail finance
     was not favored by Indian banks, But they have to tune to it now with the demand for loans
     from industrial sector is coming downing the past because of the economic slowdown. As a
     result banks have become selective in their lending activities. Further changing demographics,
     a rapidly growing ,middle-class, rise in disposable income changing life style and increasing
     ability of people to take credit risk are providing banks with an opportunity to shift their
     lending operation to retail finance. Hence bankers have been increasingly shifting to retail to
     increase profitability and reduce delinquency rates. Customer shifting, cost pressure and
     increasing competition are some of the other reasons.

            Retailing is now favored because of the better returns lesser asset quality problem and
     low NPA. Further it provides many opportunities for credit expansion. It helps banks in risk
     diversification and is important for low-cost resources mobilization by banks.

            For Banks, retail segment is the principal growth driver as they are slowly gaining
     market share in the retail space. Foreign banks are securitizing vehicle loans to raise off-
     balance sheet resources and to reduce overall cost of funding. For example, Bank of Muscat is
     taking over auto loans and personal loans from other banks signaling a softer interest rate
     regime for consumer finance and giving indication to the intensifying competition in business.

            The objective of the Retail Bank is to provide its target market customers a full range of
     financial products and banking services, giving the customer a one-stop window for all his/her
     banking requirements. The products are backed by world-class service and delivered to the
     customers through the growing branch network, as well as through alternative delivery
     channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

     .




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     4.4 Retail Banking In India
             The Indian players are bullish on the Retail business and this is not totally unfounded.
     There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian
     consumer is changing. This is reflected in a change in the urban household income pattern. The
     direct fallout of such a change will be the consumption patterns and hence the banking habits
     of Indians, which will now be skewed towards Retail products. At the same time, India
     compares pretty poorly with the other economies of the world that are now becoming
     comparable in terms of spending patterns with the opening up of our economy. For instance,
     while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India
     stands at less than 5%. The comparison with the West is even more staggering. Another
     comparison that is natural when comparing Retail sectors is the use of credit cards. Here also,
     the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1%
     was through plastic, the corresponding US figure standing at 18%.

            Retail banking in India is not a new phenomenon. It has always been prevalent in India
     in various forms. For the last few years it has become synonymous with mainstream banking
     for many banks.

             The typical products offered in the Indian retail banking segment are housing loans,
     consumption loans for purchase of durables, auto loans, credit cards and educational loans.
     The loans are marketed under attractive brand names to differentiate the products offered by
     different banks. As shown that the loan values of these retail lending typically range between
     Rs.20, 000 to Rs.100 lakh. The loans are generally for duration of five to seven years with
     housing loans granted for a longer duration of 15 years. Credit card is another rapidly growing
     sub-segment of this product group.

     In recent past retail lending has turned out to be a key profit driver for banks with retail
     portfolio constituting 21.5 per cent of total outstanding advances as on March 2004. The
     overall impairment of the retail loan portfolio worked out much less then the Gross NPA ratio
     for the entire loan portfolio. Within the retail segment, the housing loans had the least gross
     asset impairment. In fact, retailing make ample business sense in the banking sector.
               Retail Banking business in Bihar with special reference to IDBI Bank
29

             While new generation private sector banks have been able to create a niche in this
     regard, the public sector banks have not lagged behind. Leveraging their vast branch network
     and outreach, public sector banks have aggressively forayed to garner a larger slice of the retail
     pie. By international standards, however, there is still much scope for retail banking in India.
     After all, retail loans constitute less than seven per cent of GDP in India vis-à-vis about 35 per
     cent for other Asian economies — South Korea (55 per cent), Taiwan (52 per cent), Malaysia (33
     per cent) and Thailand (18 per cent). As retail banking in India is still growing from modest
     base, there is a likelihood that the growth numbers seem to get somewhat exaggerated. One,
     thus, has to exercise caution is interpreting the growth of retail banking in India.

           The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus
     and the Investment Advisory Services programs have been designed keeping in mind needs of
     customers who seek distinct financial solutions, information and advice on various investment
     avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans
     against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading
     provider of Depository Participant (DP) services for retail customers, providing customers the
     facility to hold their investments in electronic form.

            HDFC Bank was the first bank in India to launch an International Debit Card in
     association with VISA (VISA Electron) and issues the Master debit card as well. The Bank
     launched its credit card business in late 2001. By March 2005, the bank had a total card base
     (debit and credit cards) of 4.2 million cards. The Bank is also one of the leading players in the
     “merchant acquiring” business with over 42,000 Point-of-sale (POS) terminals for debit / credit
     cards acceptance at merchant establishments. The Bank is well positioned as a leader in
     various net based B2C opportunities including a wide range of internet banking services for
     Fixed Deposits, Loans, Bill Payments, etc.




     4.5 Advantages Of Retail Banking
     Retail Banking has inherent advantages outweighing certain disadvantages.


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30

     RESOURCES SIDE:

          Retail deposit are stable and constitute core deposit
          They are interest insensitive and less bargaining for additional interest
          They constitute the low cost for banks
          Effective CRM with the retail customer builds a strong customer base.
          Retail banking increases the subsidiary business of a bank.



     ASSETS SIDE:

          Retail banking results in better yield and improve bottom line of a bank.
          Retail segment is a good avenue for funds deployment.
          The consumer loan is presumed to be of lower risk and NPA perception.
          Help economic revival of the nation through increased production activities.
          Improves lifestyle and fulfills aspiration of people through affordable credit.
          Innovative product development.
          Retail segment involves minimum marketing efforts in a demand driven economy.


     4.6 DISADVANTAGES
       v Designing own and new financial products is very costly and time
         Consuming for the bank.

       v Customers now-a-days prefer net banking to branch banking. The banks that are slow
         in introducing technology-based products, are finding it difficult to retain the
         customers who wish to opt for net banking.

       v Customers are attracted towards other financial products like
        Mutual funds etc.

       v Though banks are investing heavily in technology, they are not able to exploit the same
         to the full extent.
       v A major disadvantage is monitoring and follows up of huge volume of loan accounts
         inducing banks to spend heavily in human resource department.


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31

        v Long term loans like housing loan due to its long repayment term in the absence
        of proper follow-up, can become NPAs.

        v The volume of amount borrowed by a single customer is very low as compared
        to wholesale banking. This does not allow banks to exploit the advantage of earning huge
        profits from single customer as in case of wholesale banking.



     4.7 Scope For Retail Banking In India
            All round increase in economic activity.

            Increase in the purchasing power. The rural areas have the large purchasing power at
            their disposal and this is an opportunity to market Retail Banking.

            India has 200 million households and 400 million middleclass population more
        than 90% of the savings come from the house hold sector. Falling interest rates have
        resulted in a shift.

        “Now People Want To Save Less And Spend More.”

            Nuclear family concept is gaining much importance which may lead to large savings,
            large number of banking services to be provided are day-by-day increasing.

             Tax benefits are available for example in case of housing loans the borrower can avail
            tax benefits for the loan repayment and the interest charged for the loan.



     4.8 Present Senario

           There has been a considerable growth in the retail-banking sector in India, which makes
     up for about 1/5th of the overall bank credit. Typically, the retail banking industry encompasses
     the services such as credit cards, Housing loans, Education loans, Auto loan, etc

          Retail banking has brought in a drastic makeover in the overall banking scenario in India.
     The exceptional improvement in the banking system in India is a result of strong initiatives
     taken up by both the government and private companies. A recent market research report
     named, “Indian Retail Banking Sector Analysis (2006)” published by RNCOS provides an
     exclusive tour to the entire retail-banking industry of India. As per the report, “Mainstream

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32


     banking and retail banking has become one and the same thing for the past several years now.
     Approximately, 22% of the total outstanding advances were derived from the retail portfolios
     of the banks in India till March 2004”.

          “The contribution of retail banking to the overall banking sector has been outstanding.
     Growing at a rate of 122%, the retail-banking sector of India managed to reach a worth of $67
     billion in the year 2005”, as per experts at RNCOS. “The retail banking sector in India should
     reach a worth of $310 billion by the year 2010”, anticipate the experts. Profiles of key players
     along with the strategies and plans adopted by them for the growth of the industry are also
     talked about in it. Besides discussing the present scenario of the financial system in India the
     report offers a reliable prediction of the market in the years to come.

           The ratio of retail credit to net credit at the global level is around 5%. In India, it is
     interesting to note that this ratio is over 10% as on March31, 2002 (Source: RBI, Annual
     Report). With the economy reforms set in motion, the country is already rated as a major hub
     for economic development. Increase in per capita income, change in life style and growing
     urbanization has made the Indian population rise from oblivion and resurge in modern era. The
     po licy of and spent is gradually giving way to spend and save concept.

     4.9 What Are Various Retail Banking Services?

     Retail banking includes comprehensive range of financial product and services i.e. deposit
     product, auto loan, car loan, home loan, loan against equity shares, mortgage loan, payment
     of bills, debit card, credit card, etc. These products provide an opportunity for banks to
     diversify the asset portfolio with higher profit and relatively lower NPA. Today the most
     proactive banks have entered the retail banking segment and have identified it as a principal
     growth driver.




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     Table No. 1-Categorization of Retail Bank services

     Core services         Facilitating services                Supporting services

     Payment services             Cash                                Making payment at door step
                                  Foreign     currency                Internet banking
                                  requirements                        Telephone banking
                                  Traveller cheque
                                  DD/bankers cheque
                                  IT
                                  EFT



     Current account and          ATM card                            Credit card
     saving account               Standing instruction from           Debit card
                                  customer       for   making         Service to senior citizen
                                  payments                            Telephone banking
                                  Inter branch transfer of            Internet banking
                                  fund                                Conversion of excess balance
                                  Safety vault                        to time deposit
     Loan product:                Current account                     Delivery of loan at promised
                                  Saving account                      time
     Consumer loan
                                  Time deposit account                Interest loan option
     Housing loan                                                     Flexibility in
                                                                      paying loan
     Personal loan
                                                                      Counseling on Real estate
     Education loan
                                                                      market
                                                                      Legal         services      for
                                                                      documentation
                                                                      ECS for payment of loan


              Retail Banking business in Bihar with special reference to IDBI Bank
34


                                                                         installment
     Insurance product:            Current account                       Additional insurance facility
                                   Saving account                        for family members.
     Life insurance
                                   Time         deposit                  Counseling       on       post
     Pension scheme                account                               retirement saving
                                   Safety vaults



     4.10 Retail Lending




           Everyone dreams of living a comfortable life and does all one can to make this dream
     come true. Today this has become much easier, as with higher levels of income and multiple
     earning members in the family, it is easy to avail loans to fulfill aspirations. Buying a home, car
     or any small household item such as TV or a refrigerator using money borrowed from a bank or
     a finance company has become the way of life today. This has created a big business
     opportunity for finance companies.

           They are offering loans to all types of customers for all types of assets. Retail lending has
     thus become one of the key business verticals for finance companies. This necessitates banks
     to follow processes for conducting business profitably. There are two main areas in lending.
     Loan Origination and Loan Servicing. The process of validating customers, convincing them
     that the finance company is the right source for their loan requirement and finally offering the
     loan with terms and conditions that make business sense to the finance company is Loan
     Origination and once the loan is disbursed, the process of managing the repayments from




               Retail Banking business in Bihar with special reference to IDBI Bank
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     customers and responding to the customer requests for pre payments, early settlement,
     rescheduling, etc. is Loan Servicing.


           Lending has become very competitive as customers are in the mode of shopping for
     loans. Finance companies have to continuously offer new financial products to customers and
     thus two of the important aspects of the business are time-to-market and flexibility. But as
     number of customers increase, the risk of increase in the number of defaulters prevails. Thus
     finance companies have to do the balancing act. On one hand they have to acquire more
     business by lending to more customers and on the other hand they have to lend to select
     customers so that the rate of delinquency is under control.


     4.11 Role Of It In Retail Banking

          The growth in retail banking has been facilities by the growth in banking technology and
     automation in banking process that enables in extension of reach and rationalization of cost.
     ATM has emerged as an alternative channel which has facilitated low cost transaction. It also
     has the advantage of reducing the branch traffic and enable bank with small network to offset
     traditional disadvantage by increasing their reach and spread.

           Indian retail banks have been extensively using Information and Communication
     technologies for their operations like central accounting, customer information management,
     transaction-processing and importantly, for numerous customer-facing solutions. Besides
     there are supporting or ancillary solutions such as security and compliance in addition to the
     "middleware" that banks uses to link their customer-facing applications to their core systems.
     The major business focus of the IT savvy retail banks is in providing products and services to
     the customers through a diversified base of channels - bank branches, ATMs, e-banking, e-
     branch, mobile-banking, SMS-banking, etc. In India, the business growth is driving technology
     spending in the retail banking segment. Indian retail banks are looking to move beyond their
     branch-centric distribution models. Extending ATMs networks, advancing online and phone
     banking, and rationalizing branch infrastructure are all on the cards.


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36

     Technology provides Retail Banks with various delivery channels:-


     1) Automated Teller Machines(ATM):


                The trend in banking has evolved from a cash economy to cheque economy and
        thereon to the plastic card economy. One of the channels of banking services delivery is
        vide the ATM or the Automated Teller Machines, whose traditional and primary use is to
        dispense cash upon insertion of a plastic card and its unique PIN or Personal Identification
        Number.

            Current and savings account holders of a bank who hold a certain minimum balance in
        their accounts (determined by each bank as per their policy) are issued an ATM card. The
        card is a plastic card with a magnetic strip with the account number of the individual. When
        the card is inserted into the ATM, the machines sensing equipment identifies the account
        holder and asks for his/her identification code number. This is referred to, usually, as the
        PIN and is issued by the banks computers. This number is unknown to the banks staff and is
        secret and unique to that individual. When the person uses the ATM and it asks for the PIN,
        the cardholder identifies himself/herself by pressing the relevant number buttons on the
        machine. The machine then verifies the account number on the ATM card along with the
        secret code number stored in the ATM. When the matches found, the ATM pops a menu
        screen, which allows the user to transact almost all types of bank transactions.

        1) Tele banking: -
              Tele banking or phone banking service offered by banks to enable customers to
        access their accounts for information or transactions. Similar to the ATM PIN, a telephone
        PIN (T-PIN) is provided to each account holder. The customer can call the exclusive tele-
        banking numbers and provide the details to identify himself/herself to the automated
        voice. Typically, the bank account number and the T-PIN are asked for. Upon the
        respective numbers matching the computerized systems the customer is given access to
        his account to query or transact on his account. Though cash withdrawal and deposit are



              Retail Banking business in Bihar with special reference to IDBI Bank
37

        not enabled through this service many banks offer cash delivery or collection service to
        certain classes of customers.

        2) Internet Banking:
             One of the channels of service delivery to a banking customer is through the Internet.
     The access to account information as well as transaction is offered through the worldwide
     network of computers on the Internet. Every bank has special firewalls & its own security
     measures to protect the accounts from non-authentic use from unauthorized users. Data are
     encoded using algorithms with a 128-bit key or, in some cases, with a 1,024-bit encryption.

            Each account holder is provided a PIN similar to that of the ATM or Phone banking PIN.
     The access to the account is allowed upon a match of the account details & PIN entered on the
     computer system. A higher level of security may be reached by an electronic finger-print. The
     finger print is taken before & after the transaction. Then both versions are compared. In case of
     any difference, the transaction is aborted.

             Account querying as well as transaction is possible on the Internet banking platform.
     The accounting is instantaneous & funds transfers can be affected immediately.

     Though cash transactions are not possible at present, the next phase of evolution in Internet
     banking will allow those as well.




               Retail Banking business in Bihar with special reference to IDBI Bank
38


     5) RETAIL BANKING OF IDBI BANK
     5.1 An Overview Of The Product

        1. Preferred Banking
     PowerPlus Account

     We bring to you a product that reflects and matches your financial needs and requirements at
     every step. Power Plus account allows you to access a complete suite of product and services
     and enjoy world class banking experience, complimenting your professional and personal
     goals. This account helps you take complete charge of your banking by providing multiple
     channel and products and a wide range of benefits to help your time and money.

     Features

            25% discount on locker rates.
            Higher ATM Cash withdrawal and Point-of-sale limit on International debit cum ATM
            card.
            Free Demat AMC for first year.
            Free Personalized PAP Cheque Book.
            Free Demand Draft and Pay order


     Preferred banking program is designed to offer services to a select group of discerning and
     deserving individual like you. Preferred banking special features help you to save your time,
     and help you build wealth through efficient deployment of assets.
     Your Lifestyle reflects your personality. Every element of the preferred banking attempts to
     complement your status and style. Preferred banking investment advisory, offers you a one
     stop solution with all products range from fixed deposits to Govt.of2 India Bonds and Mutual
     funds to Unit Linked Insurance Plans.

     Royale Account

     The IDBI Bank Royale Account has been designed to make banking services more convenient
     for esteemed customers. This new service guarantees you as our privileged customer elaborate
     and personalized service of the highest order. For all the banking requirements a dedicated
     relationship manager would be attached to the account.

                Retail Banking business in Bihar with special reference to IDBI Bank
39

     With the Royale Account comes the Platinum Debit Card that provides enhanced daily cash
     withdrawal limit. This lifetime free debit card provides you privileges, which span lifestyle
     pursuits like shopping, dining and travel.

     Features of IDBI Royale Account:

            Zero balance Power Plus account for the one family member
            Free Locker (5x6x19) or 50% discount in other locker rentals.
            Higher limit of cash withdrawal from any bank ATM. (with Platinum/Gold debit card).
            Higher Limit for Point of sale.
            Discount on Demat transaction charges
            Doorstep banking.
            Free Personalized PAP Cheque Book.
            Free Demand Draft and Pay order

     Deposits

     Savings Bank accounts commonly referred to as Savings accounts, have huge potential for
     mobilizing low cost deposit and stable deposits. In our Bank, savings accounts are offered to
     prospective customers as value added retail liability product.

     Regular Savings Account

     At IDBI Bank, we believe that different people have different needs. Thus, we offer various
     different types of Savings Account to cater to our diverse customer base. Be it individuals, kids,
     women, corporate, senior citizens, we have an account tailor-made for each one of them. The
     various types of Savings Account offered By IDBI Bank are as follows:

     Choose from various range of Personal Banking services like:

            SuperSavings Account
            SuperShakti (Womens') Account
            Jubilee Plus (Senior Citizens) Account
            Power Kidz Account
            Sabka Account -No Frill account
            Pension Savings Account (Central Government Employees)

     At IDBI Bank, it is our constant endeavor to provide you products and services that will
     enhance your banking experience. From time to time we identify your needs and produce
     quality products that will simplify banking for you. Our extensive branch and ATM network,
     technology initiatives, and correspondent banking arrangement with banks across the globe


               Retail Banking business in Bihar with special reference to IDBI Bank
40

     have leveraged us to provide superior services.
     Savings Account Interest Rate - 4.00% p.a. (w.e.f. May 03,2011)

     Current Accounts

      Current accounts are meant for customers who have to carry out business and/ or large
     number of transactions in the account every day. There are no restrictions on the number of
     transactions in current accounts.
     Core Current Account

     No two businesses are the same, which is why at IDBI Bank; we offer different types of Current
     Accounts to choose from, to our customers. The types of Current Accounts that we offer are as
     follows:

     Our Core Current Account is a straightforward and easy to use Current Account designed to
     make even the smallest of business experience hassle free. The Core Current Account comes
     loaded with a number of features, which include:

            Free PAP (payable at par) chequebook
            Free PAP utilisation
            Free Electronic Funds Transfer
            Free Pay Orders and Demand Drafts
            Free Demand Drafts on non-branch locations
            Free home / non-home branch cash deposit
            Free any branch cash withdrawal
            Free Internet/ mobile/ Phone Banking and ATM services
            Free other bank ATM transactions

     Fixed Deposits
     Fixed Deposits, also known as Term Deposits or Time Deposits, are deposits accepted by the
     bank for fixed period and are repayable on expiry of the fixed period. Interest is paid at
     quarterly rests to the depositor. At the specific request of the depositor, interest could be paid
     at monthly rests also, but at a discounted rate. The Bank decides the rates of interest on fixed
     deposits of various maturities from time to time by taking into account the market conditions
     and directives of the Reserve Bank of India in this regard. IDBI Bank revises fixed deposit rates
     at an attractive interest rate of 9.50% p.a. for 500 days for normal deposits and 10.25% p.a. for
     senior citizens w.e.f May 5,2011.




               Retail Banking business in Bihar with special reference to IDBI Bank
41


     Recurring deposit

     Ideal for those who want to save a fixed sum every month
     This type of deposit helps you add to your savings at your complete convenience. You can
     start saving any amount from Rs. 100 to Rs. 1 lakh every month. The amount as decided by
     you, will be deducted every month from your savings account. Further, there is no Tax
     deducted at source on these deposits and also no charges for executing your standing
     instructions.

     Loans

     We, at IDBI Bank offer a wide range of loan products to suit all your needs ranging from home
     to education, a holiday to buying a laptop. Select from our loan offerings and we shall be glad
     to service you on the same. The various loan offerings by IDBI Bank are as follows:

     Choose from various range of Personal Banking services like:

                Home Loans
                Loan Against Property
                Education Loan
                Personal Loan
                Loans Against Securities
                Reverse Mortgage Loan
                Auto loans

     Table No. 2- Interest Rates

     Home Loans (Fixed)


                                           Below Rs 75 lacs
                                             ROI(%) p.a               Rs. 75 lacs and above
               Options
                                                                           ROI(%) p.a

       • Fixed for 3 years            • 12.25%                       • 12.50%

       • Fixed for 5 years            • 12.75%                       • 13.00%


     Loan for commercial property purchase (Floating)

     15.25% p.a (Linked to BR)



               Retail Banking business in Bihar with special reference to IDBI Bank
42

     Reverse Mortgage Loan (Fixed)

     Fixed (Re-Phasement after every 5 years )- 12.25%


     Educational Loan (Floating)

     Type                                           ROI(%) p.a
     Up to Rs 4 lakhs                               12.75% p.a
                                                    (Linked to BR)
     Above Rs 4 lakhs                               12.75% p.a
                                                    (Linked to BR)
     For the students of IIT,IIM and ISB            12.00% p.a
     (up to Rs 20 lakhs )                           (Linked to BR)


     Auto Loan(Fixed)

     Vehicle Segment                  ROI(%) p.a

                                      Tenor up to 36 months              Tenor up to 60 months
     Segment A: Small/Mid-size/       11.50% p.a                     12.00% p.a
     Utility & Premium
     MUVs                             12.00% p.a                     13.00% p.a
     Segment B: Premium               11.50% p.a                     12.00% p.a
     Segment C: Luxury & SUV          11.50% p.a                     11.75% p.a
     Segment D: Classic               11.50% p.a                     11.75% p.a


     IDBI Bank Debit Cards

                International Debit-cum-ATM Card
                Gold Debit-cum-ATM Card
                IDBI Bank Cash Card
                IDBI Bank Gift Card
                World Currency Card
                Kids Debit Card
                Platinum Card
                Debit Card Offers




               Retail Banking business in Bihar with special reference to IDBI Bank
43


     24Hrs Banking

     Phone Banking
     IDBI Bank Phone Banking service enables you to access authentic, instantaneous
     information on your account balances and transactions. The service is available totally free of
     cost round the clock, 365 days a year.

     Mobile Banking

     Our SMS banking initiatives permit you to access your Bank account and carry out various
     banking transactions and inquires. No need of visiting the bank time and again!

     Account Alerts

     IDBI Bank's new Account Alert service gives you all this and more. With Account Alert, your
     bank account transaction information will be delivered to you automatically, wherever you are.
     No more visiting the bank branch or ATM to check routine things like account balances,
     cheque clearance, verification of ATM transactions, bill payment verifications, etc. Account
     Alerts allows you to monitor finely any type of activity on your accounts, and be notified by e-
     mail or cell phone SMS as and when they are executed.

     Internet Banking

     With IDBI's Internet Banking, your Bank travels with you around the world and you have on-
     line, real-time access to your accounts.

     Admittedly, such a service requires security of the highest nature and complete privacy
     protection. We provide a completely secure environment, using 128-bit encryption SSL
     (Secure Sockets Layer), digitally certified by Verisign. 128-bit SSL guarantees world-class
     security for Internet and e-commerce applications.

     Pay Mate

     IDBI Bank Pay Mate Service presenting a simple, convenient and secure way to make
     payments
     The Pay Mate service has a tie up with various merchants across India (click here for the list of
     merchants). You can now shop with any of these merchants and can pay simply through your
     Mobile Phone. IDBI Bank offers this service to its customers absolutely free of charge. .

     Money Transfer

     Sending money within India has never been this simple, convenient, fast and safe. IDBI’s Card
     to Card Money Transfer facility; a first of its kind money transfer service in India is the absolute

                Retail Banking business in Bihar with special reference to IDBI Bank
44


     way to send money anywhere, anytime to any Visa Debit or Credit cardholder in India. Bank’s
     customers can now transfer money from their Bank account or Visa card to any other Visa
     debit or Credit card across the country through this service.

     Transfer Funds

     We can use Internet Banking; ATM’s or branches for transferring money across the country.
     The only information we need to know is the 16-digit card number of the transferee. To carry
     out a transfer, simply log on to IDBI’s Internet Banking at www.idbibank.com, or visit the
     nearest IDBI ATM or branch and transfer the required amount. The money is directly credited
     into the recipient’s card, no matter where he is.

     Investment

     We believe that all the investors share a common goal, regardless of their objectives: superior
     and sustained returns with a tight control over risk. Meeting your long-term investment goal is
     dependent on a number of factors: your investment capital, your expected rate of return,
     inflation, taxes and your investment time horizon. To meet your requirements, we offer you
     investment options based on your risk tolerance and return expectations. Relationship
     Managers are equipped to advise you on various investment profiles. They then help you with
     your investments and subsequently support you by tracking your investments on a regular
     basis.

     Mutual Funds

     Mutual funds offer a simple and effective way to diversify your investment without the hassles
     of tracking individual stocks on a daily basis. Click here for more details on the options we offer
     GoI 8.0% Savings (Taxable) Bonds. 8% GoI Savings Bonds is a good option for investors
     looking for high yielding risk free instruments.

     Capital Gain Bonds

     Invest your long-term capital gains on sale of your asset in the specified assets.


               Retail Banking business in Bihar with special reference to IDBI Bank
45


     Insurance Services

     IDBI brings to you Birla Sun Life Insurance, one of the leading providers of life insurance
     products.

     NRI a/c

     Being an NRI (non-resident Indian) and privy to special benefits and privileges in India, its only
     but natural to expect world class levels- be it banking or any other service. Welcome to IDBI,
     where you are treated as special and your needs exclusive. While we offer basic NRI banking
     products like Non Resident Rupee Checking Account, Non Resident Rupee Term Deposits and
     Foreign Currency Non Resident Deposit, we realize that the requirements of the customers are
     manifold.

     Non-Resident External (NRE)

     Repatriable account for your investment needs your account anytime, anywhere with Internet
     Banking, shop at more than 8.3 million locations and withdraw funds in 140 countries.

     Non-Resident Ordinary (NRO)

     An account for your income and expenses, access your account at more than 250 ATM’s across
     the country, pay your bills in India from anywhere in the world.

     FCNR

     Retain your funds in foreign currency, no exchange risk; earn attractive returns on your fund.

     ATM

     Automated Teller Machine (ATM) is a sophisticated computer terminal which makes it possible
     for a customer holding Debit cum ATM Card to avail specified banking services through ATMs
     at any time (24 hours) without any personal interaction with the bank personnel. Our Bank has
     ATMs with ‘On-Line’ connectivity across all its branches. The Bankhas also installed many off-
     site ATMs. IDBI Bank is a member of VISA, MASTERCARD, CASHNET, NFS, BANCS &
     AMERICAN EXPRESS ATM networks. With this, Debit cum ATM Card holder of any of the net
     worked banks / institutions can transact specified banking transaction at any ATM of the
     networked banks / institutions.
                 Retail Banking business in Bihar with special reference to IDBI Bank
46


     At present, Debit cum ATM Card customers can undertake following transactions on our Banks
     ATMs:

     i) Withdraw cash up to the daily cash withdrawal limits stipulated for the type of the card.
     These limits can be enhanced on request of customer.

     ii) Deposit cash / cheque (not more than 20 notes / cheques at a time). This facility is not
     available on cash dispenser.

     iii) Carry out certain functions like balance enquiry, print mini statement recording last 10
     transactions and/or inform balance in the account.

     iv) Register request for cheque book and statement of account.

     v) Change Personal Identification Number (PIN).

     vi) Avail other value added services like Bill Payments, mobile recharge, VISA money transfer
     etc.

     Debit card customers can also withdraw cash and make balance inquiry from ATMs of other
     Banks which are members of CASHNET, NFS, BANCS, VISA & MasterCard networks. The
     amount of cash withdrawals through these ATMs is maximum of Rs.10,000/- per transaction.



     5.2 The IDBI Bank Advantage

            Maximum Funding
            Services at doorstep
            Simple documentation
            Personalized services
            Free legal and technical assistance
            Attractive rate of interest

     Applying for a Reverse Mortgage Loan against Home is absolutely simple. Just call our Phone
     Banking numbers and our representative will contact you at the earliest




               Retail Banking business in Bihar with special reference to IDBI Bank
47


        6) Methodology
     6.1 Research Type

     My research is based on the primary data. Primary data has been used to understand the
     scope of retail banking business in Bihar and then to make suggestions useful for the bank
     under study i.e. IDBI Bank ltd.

     6.2 Data Type

     Primary data has been used for the purpose of study of ' Retail banking business in Bihar
     with special reference to IDBI Bank '.

     6.3 Sample Selection:

     To collect primary data regarding the scope of retail banking business of IDBI Bank in Bihar, I
     selected a list of peer banks and compared it with the bank under study. The list of peer banks
     was selected on the basis of their visibility in Bihar, scale of operation in Bihar and the products
     they offer. If all these factors were similar to IDBI, the banks were finalized as peer banks. To
     collect their details the branches in the main area were selected.

     6.4 Data Collection Method

     In order to collect the primary data, the method used was personal interview of branch
     managers peer banks of IDBI bank’s in the area. A questionnaire was prepared in order to
     collect the data a sample of which is attached in the report.

     Apart from talking to the branch managers, an interaction with the staff members and the
     customers at the branch gave an overview of the performance of the Bank on the individual
     level. This helped to look at the retail business from different perspectives and better
     suggestion could be given to the bank under study to improve upon the same.




               Retail Banking business in Bihar with special reference to IDBI Bank
48


     6.5 Tools Used for Data Analysis

     As no study could be successfully completed without proper tools and techniques, same with
     my project. For the better presentation and right explanation I used tools of statistics and
     computer very frequently. And I am very thankful to all those tools for helping me a lot. Basic
     tools which I used for project from statistics are-

            Bar Charts
            Tables

     Bar charts proved really useful tools to show the result in a well clear, ease and simple way.
     Because I used bar charts in project for showing data in a systematic way, so it need not
     necessary for any observer to read all the theoretical detail, simple on seeing the charts any
     body could know that what is being said.




               Retail Banking business in Bihar with special reference to IDBI Bank
49



     7) The Study
     To carry on the survey work, six banks were considered including the IDBI Bank. A comparative
     study has been done between the banks. The banks taken were on the basis of their size and
     their integration in Bihar. The banks selected on this basis were as under.




     The above branches have been compared on various parameters. Factors taken for comparison
     were the visibility of the banks, factors which they consider before opening a branch, their
     profitability and few more. The comparison helped me to come to a conclusion of the scope of
     retail business in Bihar and what IDBI Bank should do in order to improve on its already
     flourishing business.




               Retail Banking business in Bihar with special reference to IDBI Bank
Summer project report
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Summer project report
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Summer project report

  • 1. Summer Internhip 5/31/2011 By: Deepika Agrawal, Praxis Business School Kolkata
  • 2. Praxis Business School A report on Retail Banking business in Bihar with special reference to IDBI Bank Submitted to Mr. Rizwan Khan Deputy General Manager IDBI Bank Ltd. In partial fulfillment of the requirements of the course of the Summer Internship Program (2010-2012) By Deepika Agrawal Retail Banking business in Bihar with special reference to IDBI Bank
  • 3. Certificate of approval The following Summer Project Report titled " Retail Banking business in Bihar with special reference to IDBI Bank" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted. Signature (i) Retail Banking business in Bihar with special reference to IDBI Bank
  • 4. EXECUTIVE SUMMARY Banking Industry which is basically my concern industry around which my project has to be revolved is really a very complex industry. The project titled “RETAIL BANKING BUSINESS IN BIHAR WITH SPECIAL REFERENCE TO IDBI BANK” was basically a research based project. The main motive behind doing this project is to know the industry, have an overview of retail banking, Know the different products available for retail banking by the bank, current situation and problems and their solutions. My project was totally based on primary data. The project started with studying the various products of IDBI Bank. This was done throughly in order to understand about retail banking and which products do it covers. My next step was to come out of the bank and do a comparative analysis of the bank with its peer banks.My basic objective was to find out what is the scope of retail banking business in Bihar. The comparative analysis between the banks helped me to understand their perceptions about the business they see in Bihar. My main findings through this project was that there is a huge market which still need to be catered in Bihar. Bihar being a developing state has the capacity to give good business to the banks. So, IDBI should continue its expansion strategy in Bihar as it would stand profitable for the bank. (ii) Retail Banking business in Bihar with special reference to IDBI Bank
  • 5. Acknowledgement I would, at the very onset, like to thank Mr. Rizwan Khan, Deputy General Manager, IDBI Bank for providing me the opportunity to perform my Summer Internship Program in the Company. I, would like to, give special thanks and gratitude to Mr.Chandan Kumar, Mr. Sanjay Kumar, Miss. Pragya Nidhi for mentoring and providing the necessary data and information as and when required throughout the project. Their support and encouragement has been a source of inspiration for me and made my journey in IDBI a delight. I, would also offer my thanks to my Dean Mr. Srinivasan Govindrajan, Praxis Business School, Kolkata. My thanks also go to Mr. Charanpreet Singh, Asso. Dean, and Prof. Anindra Kumar Halder , Praxis Business School. I would also like to thank my classmates and seniors for extending me their help and cooperation whenever I approached them. (iii) Retail Banking business in Bihar with special reference to IDBI Bank
  • 6. Table of contents S.No Chapter Particulars Page no. 1 i) Certificate Of approval (i) 2 ii) Executive Summary (ii) 3 iii) Acknowledgement (iii) 4 1) Introduction 1 1.1 A Brief Introduction 2 1.2 Obejective Of The Study 2 1.3 Relevance of The Study 2 1.4 Scope Of The study 3 1.5 Limitations 3 5 2) A Journey Through Banking 4 2.1 Origin Of Banking 4 6 3) IDBI Profile 11 3.1 Journey From IDBI To IDBI Ltd. 11 3.2 IDBI Bank Ltd.- A Profile 13 3.3 IDBI Groups 16 3.4 IDBI- Its Products And Services 17 7 4) Retail Banking 21 4.1 What Is Retail Banking 21 4.2 SWOT Ananlysis Of Retail Bnaking 22 4.3 Need For Retail Banking (The Ultimate 27 Service Provider) 4.4 Retail Banking in India 28 4.5 Advantages Of Retail Banking 29 4.6 Disadvantages 30 4.7 Scope For Retail Banking In India 31 4.8 Present Snario 31 4.9 What Are Various Retail Banking Services 32 4.10 Retail Lending 34 4.11 Role Of IT In Retail Banking 35 8 5) Retail Banking Of IDBI Bank 38 5.1 An Overview Of the product 38 5.2 The IDBI Bank Advantage 46 9 6) Methodology 47 6.1 Research Type 47 6.2 Data type 47 6.3 Sample Selection 47 Retail Banking business in Bihar with special reference to IDBI Bank
  • 7. 6.4 Data Collection Method 47 6.5 Tools Used For Data Analysis 48 10 7) The Study 49 7.1 What The Stats Say 50 11 8) Colclusions And Suggestions 60 Basic Findings 60 Suggestions 62 12 9) Bibliography And References 65 Retail Banking business in Bihar with special reference to IDBI Bank
  • 8. List of figures Fig. No. 1- Banking structure in India Fig. No. 2- Main Events In The History Of IDBI Bank Fig. No.3- Number of Branches And ATM’s Fig. No. 4-IDBI Bank Business Chart Fig. No.5- Branches In Bihar Fig. No.6- ATM’s In Bihar Fig. No.7- Factors Considered Fig. No.8- Bank’s USP Fig. No.9- Special Rural Sheme Fig. No.10- Obstacles Faced Fig. No.11- Main Driver Of Bank’s Profitability Fig. No.12- CASA As % Of Total Deposits Fig. No.13- Current Account As % Of CASA Fig. No.14- Profitability Or Growth % Of Banks Retail Banking business in Bihar with special reference to IDBI Bank
  • 9. List of tables Table No. 1-Categorization of Retail Bank services Table No. 2- Interest Rates Retail Banking business in Bihar with special reference to IDBI Bank
  • 10. List of appendices Annexure Annexure 1- questionnaire Annexure 2- master sheet Annexure 3- schedule of facilities Retail Banking business in Bihar with special reference to IDBI Bank
  • 11. Abbreviations DFI- Development Financial Institution SLR- Statuory Liquidity Ratio SSI- Small Scale Industries GOI- Government Of India SME- Small And Medium Enterprises PFS- Provident Funds IPO- Initial Public Offer NPA- Non performing Assets CRM- Customer Relatitionship Management DD- Demend Draft EFT- Electronic Fund Transferring ECS- Electronic Clearing Services PAP- Payable At Par BR- Base Rate FCNR- Foreign Currency Accounts AQB- Average Quarterly Balance Retail Banking business in Bihar with special reference to IDBI Bank
  • 12. 1 1) INTRODUCTION “We don’t want satisfied customers…we want delighted customers.” It is the new marketing mantra today. The same applies to banking as well. Retail banking and rural banking were once considered as taboos by the leading foreign and domestic banks. But cut- throat competition, innovation and advanced technology have altogether changed the face of banking sector. Now all banks have recognized the importance of retail banking. Retail banking is that part of a bank that offers products and services primarily to individual customers, professional, self-employed individuals or small businesses. The focus is on creating products and services that meet the needs of the target customers and are profitable for the bank as well. The approach to retail banking products is more is more on a mass production basis wherein all risk and operations are based on and geared to cater to a large number of customers. This is therefore, significantly different from corporate banking or wholesale banking where focus is on large sized customer accounts rather than large numbers of customers. Understanding retail banking will help in servicing your customer better as it would give you a perspective and insight into how such products are structured and specific requirements for each set of products. This would help you advice your customer in a more informed manner besides making you a more informed consumer. With the advent of ATMs, ‘Anytime banking’ has come into picture. Satellites and telecom networks across the world have made ‘Anywhere banking’ possible. Now it is the turn of ‘Anyhow banking’, and the leading bank of the next century will be the one which has all these three A’s. Retail Banking business in Bihar with special reference to IDBI Bank
  • 13. 2 1.1 A Brief Overview: “IDBI Bank Ltd. – A New Generation Govt. Owned Bank”. The Industrial Development Bank of India Limited, now more popularly known as IDBI Bank, was established as a wholly-owned subsidiary of Reserve Bank of India. The foundation of the bank was laid down under an Act of Parliament, in July 1964. The main aim behind the setting up of IDBI was to provide credit and other facilities for the Indian industry, which was still in the initial stages of growth and development. Since, 2005 IDBI expanded its wings in the retail section. Hence, it became necessary to study the various scope of retail banking and the future prospects of IDBI in the retail business. The project thus undertaken is for the purpose to know the scope of retail banking business. 1.2 Objective Of The Study: My project entitled “Retail Banking Business In Bihar With Special Reference To IDBI Bank” aims at studying the scope of retail banking business in Bihar. The objective of doing this project is defined as under. 1) To study the retail banking business in Bihar 2) To study the retail banking business of IDBI in Bihar 3) To study how can IDBI improve on its retail banking business 4) To compare the position of retail banking business in IDBI Bank with its peer banks (Axis Bank, ICICI Bank, Induslnd, Corporation Bank, Oriental Bank Of Commerce). 1.3 Relevance Of The Study: Banks are in the business of giving several services to its customers. Retail Banking and Corporate Banking are its two main sections. Retail banking is the section where banks cater the individual customers. It accepts deposits, give out loans and provide several other value added benefits such as phone banking, internet banking, sms banking and many more. Through retail banking banks get personally connected to the customers and deal them individually. Hence, it is essential to evaluate different factors impacting the retail business of the bank. Relevance of this project lies in the fact that it attempts to study the scope that retail Retail Banking business in Bihar with special reference to IDBI Bank
  • 14. 3 banking has in Bihar with special reference to IDBI Bank. The study also attempts to find the outcome of retail business of peer banks which will give the bank understudy an idea of its position to its peer banks in the area. 1.4 SCOPE OF THE STUDY: To achieve the above objective I have not restricted my study to just IDBI Bank. In order to study about the retail banking business in Bihar, and to understand the scope that IDBI has in this business, I have extended my project to do a detailed study of retail banking in the peer banks of the bank undertaken. Through a comparative study between the peer banks and IDBI, I could arrive to a conclusion of the scope of retail business in Bihar. 1.5 Limitations: To make mistake is human nature and I’m no exception. I have tried to make this project approachable and helpful for the bank, but at the same time I accept the occurrence of intermittent mistakes and do accept them sincerely. Retail Banking business in Bihar with special reference to IDBI Bank
  • 15. 4 2) A Journey Through Banking 2.1 Origin Of Banking Banks are among the main participants of the financial system in India. Banking offers several facilities and opportunities. Banks in India were started on the British pattern in the beginning of the 19 th century. The first half of the 19th century, The East India Company established 3 banks The Bank of Bengal, The Bank of Bombay and The Bank of Madras. These three banks were known as Presidency Banks. In 1920 these three banks were amalgamated and The Imperial Bank of India was formed. In those days, all the banks were joint stock banks and a large number of them were small and weak. At the time of the 2nd world war about 1500 joint stock banks were operating in India out of which 1400 were non- scheduled banks. Bad and dishonest management managed quiet a few of them and there were a number of bank failures. Hence the government had to step in and the Banking Company’s Act (subsequently named as the Banking Regulation Act) was enacted which led to the elimination of the weak banks that were not in a position to fulfill the various requirements of the Act. In order to strengthen their weak units and review public confidence in the banking system, a new section 45 was enacted in the Banking Regulation Act in the year 1960, empowering the Government of India to compulsory amalgamate weak units with the stronger ones on the recommendation of the RBI. Today banks are broadly classified into 2 groups namely— (a) Scheduled banks. (b) Non-Scheduled banks. There are three different phases in the history of banking in India: Pre-Nationalization Era. Nationalization Stage. Post Liberalization Era. Retail Banking business in Bihar with special reference to IDBI Bank
  • 16. 5 1. Pre-Nationalization Era: In India the business of banking and credit was practiced even in very early times. The remittance of money through Hundies, an indigenous credit instrument, was very popular. The hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in different parts of the country. The modern type of banking, however, was developed by the Agency Houses of Calcutta and Bombay after the establishment of Rule by the East India Company in 18 th and 19th centuries. During the early part of the 19th Century, the volume of foreign trade was relatively small. Later on as the trade expanded, the need for banks of the European type was felt and the government of the East India Company took interest in having its own bank. The government of Bengal took the initiative and the first presidency bank, the Bank of Calcutta (Bank of Bengal) was established in 1806. In 1840, the Bank of Bombay and in 1843, the Bank of Madras was also set up. These three banks were known as “Presidency Bank”. The Presidency Banks had their branches in important trading centers but mostly lacked in uniformity in their operational policies. In 1899, the Government proposed to amalgamate these three banks in to one so that it could also function as a Central Bank, but the Presidency Banks did not favor the idea. However, the conditions obtaining during world war period (1914-1918) emphasized the need for a unified banking institution, as a result of which the Imperial Bank was set up in1921. The Imperial Bank of India acted like a Central bank and as a banker for other banks. The RBI (Reserve Bank of India) was established in 1935 as the Central Bank of the Country. In 1949, the Banking Regulation act was passed and the RBI was nationalized and acquired extensive regulatory powers over the commercial banks. In 1950, the Indian Banking system comprised of the RBI, the Imperial Bank of India, Cooperative banks, Exchange banks and Indian Joint Stock banks. 2. Nationalization Stages: After Independence, in 1951, the All India Rural Credit survey, committee of Direction with Shri. A. D. Gorwala as Chairman recommended amalgamation of the Imperial Bank of India and ten others banks into a newly established bank called the State Bank of India (SBI). The Retail Banking business in Bihar with special reference to IDBI Bank
  • 17. 6 Government of India accepted the recommendations of the committee and introduced the State Bank of India bill in the Lok Sabha on 16thApril 1955 and it was passed by Parliament and got the president’s assent on 8th May 1955. The Act came into force on 1st July 1955, and the Imperial Bank of India was nationalized in 1955 as the State Bank of India. The main objective of establishing SBI by nationalizing the Imperial Bank of India was “to extend banking facilities on a large scale more particularly in the rural and semi-urban areas and to diverse other public purposes.” In 1959, the SBI (Subsidiary Bank) act was proposed and the following eight state-associated banks were taken over by the SBI as its subsidiaries. Name of the Bank Subsidiary with effect from 1. State Bank of Hyderabad 1st October 1959 2. State Bank of Bikaner 1st January 1960 3. State Bank of Jaipur 1st January 1960 4. State Bank of Saurashtra 1st May 1960 5. State Bank of Patiala 1st April 1960 6. State Bank of Mysore 1st March 1960 7. State Bank of Indore 1st January 1968 8. State Bank of Travancore 1st January 1960 With effect from 1st January 1963, the State Bank of Bikaner and State Bank of Jaipur with head office located at Jaipur. Thus, seven subsidiary banks State Bank of India formed the SBI Group. The SBI Group under statutory obligations was required to open new offices in rural and semi- urban areas and modern banking was taken to these unbanked remote areas. On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced the nationalization of 14 major scheduled Commercial Banks each having deposits worth Rs. 50 crore and above. This was a turning point in the history of commercial banking in India. Later the Government Nationalized six more commercial private sector banks with deposit liability of not less than Rs. 200 crores on 15th April 1980, viz. Andhra Bank. Retail Banking business in Bihar with special reference to IDBI Bank
  • 18. 7 Corporation Bank. New Bank if India. Oriental Bank of Commerce. Punjab and Sind Bank. Vijaya Bank. In 1969, the Lead Bank Scheme was introduced to extend banking facilities to every corner of the country. Later in 1975, Regional Rural Banks were set up to supplement the activities of the commercial banks and to especially meet the credit needs of the weaker sections of the rural society. Nationalization of banks paved way for retail banking and as a result there has been an all round growth in the branch network, the deposit mobilization, credit disposals and of course employment. The first year after nationalization witnessed the total growth in the agricultural loans and the loans made to SSI by 87% and 48% respectively. The overall growth in the deposits and the advances indicates the improvement that has taken place in the banking habits of the people in the rural and semi-urban areas where the branch network has spread. Such credit expansion enabled the banks to achieve the goals of nationalization, it was however, achieved at the coast of profitability of the banks. Consequences of Nationalization: The quality of credit assets fell because of liberal credit extension policy. Political interference has been as additional malady. Poor appraisal involved during the loan meals conducted for credit disbursals. The credit facilities extended to the priority sector at concessional rates. The high level of low yielding SLR investments adversely affected the profitability of the banks. The rapid branch expansion has been the squeeze on profitability of banks emanating primarily due to the increase in the fixed costs. There was downward trend in the quality of services and efficiency of the banks. Retail Banking business in Bihar with special reference to IDBI Bank
  • 19. 8 3. Post-Liberalization Era—Thrust on Quality and Profitability: By the beginning of 1990, the social banking goals set for the banking industry made most of the public sector resulted in the presumption that there was no need to look at the fundamental financial strength of this bank. Consequently they remained undercapitalized. revamping this structure of the banking industry was of extreme importance, as the health of the financial sector in particular and the economy was a whole would be reflected by its performance. The need for restructuring the banking industry was felt greater with the initiation of the real sector reform process in 1992. The reforms have enhanced the opportunities and challenges for the real sector making them operate in a borderless global market place. However, to harness the benefits of globalization, there should be an efficient financial sector to support the structural reforms taking place in the real economy. Hence, along with the reforms of the real sector, the banking sector reformation was also addressed. The root causes for the lackluster performance of banks, formed the elements of the banking sector reforms. Some of the factors that led to the dismal performance of banks were. Regulated interest rate structure. Lack of focus on profitability. Lack of transparency in the bank’s balance sheet. Lack of competition. Excessive regulation on organization structure and managerial resource. Excessive support from government. Against this background, the financial sector reforms were initiated to bring about a paradigm shift in the banking industry, by addressing the factors for its dismal performance. In this context, the recommendations made by a high level committee on financial sector, chaired by M. Narasimham, laid the foundation for the banking sector reforms. These reforms tried to enhance the viability and efficiency of the banking sector. The Narasimham Committee suggested that there should be functional autonomy, flexibility in operations, dilution of banking strangulations, reduction in reserve requirements and adequate financial Retail Banking business in Bihar with special reference to IDBI Bank
  • 20. 9 infrastructure in terms of supervision, audit and technology. The committee further advocated introduction of prudential forms, transparency in operations and improvement in productivity, only aimed at liberalizing the regulatory framework, but also to keep them in time with international standards. The emphasis shifted to efficient and prudential banking linked to better customer care and customer services Fig. No.1- Banking structure in India Reserve Bank of India (The central bank) Commercial Cooperatives Banks (171) Non- Scheduled Scheduled (4) Regional Public sector Private banks Foreign Rural Banks Banks (27) (22) Banks (32) (86) State Bank Other and its Nationalized Old New associates Banks Reserve Bank of India was nationalized in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. Retail Banking business in Bihar with special reference to IDBI Bank
  • 21. 10 The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following: To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage. The Reserve Bank of India declared that IDBI Bank Limited, a public sector bank, is clubbed along with nationalized banks. RBI acknowledged this in the F.No. 7/95/2005-BOA with effect from 31st December, 2007 stating that IDBI Ltd. Will now be treated on par with nationalized banks. Retail Banking business in Bihar with special reference to IDBI Bank
  • 22. 11 3) IDBI PROFILE Change of name of IDBI Ltd. to IDBI Bank Ltd. became effective from May 07, 2008 Merger of United Western bank with IDBI Ltd on October 03, 2006. Merger of IDBI bank Ltd. with IDBI Ltd. became effective from April 02, 2005. a new company under the name of Industrial Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the Companies Act, 1956 on September 27, 2004. Industrial Development bank of India (IDBI) was constituted under Industrial Development bank of India Act, 1964 Fig. No. 2- Main Events In The History Of IDBI Bank 3.1 Journey From IDBI To IDBI Bank Ltd. Industrial Development Bank of India Industrial Development bank of India (IDBI) was constituted under Industrial Development bank of India Act, 1964 as a Development Financial Institution and came into being as on July 01, 1964 vide GoI notification dated June 22, 1964. It was regarded as a Public Financial Institution in terms of the provisions of Section 4A of the Companies Act, 1956. It continued to serve as a DFI for 40 years till the year 2004 when it was transformed into a Bank. Industrial Development Bank of India Limited In response to the felt need and on commercial prudence, it was decided to transform IDBI into a Bank. For the purpose, Industrial Retail Banking business in Bihar with special reference to IDBI Bank
  • 23. 12 Development bank (transfer of undertaking and Repeal) Act, 2003 [Repeal Act] was passed repealing the Industrial Development Bank of India Act, 1964. In terms of the provisions of the Repeal Act, a new company under the name of Industrial Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the Companies Act, 1956 on September 27, 2004. Thereafter, the undertaking of IDBI was transferred to and vested in IDBI Ltd. with effect from the effective date of October 01, 2004. In terms of the provisions of the Repeal Act, IDBI Ltd. has been functioning as a Bank in addition to its earlier role of a Financial Institution. Merger of IDBI bank Ltd. with IDBI Ltd. Towards achieving the faster inorganic growth of the Bank, IDBI Bank Ltd., a wholly owned subsidiary of IDBI Ltd. was amalgamated with IDBI Ltd. in terms of the provisions of Section 44A of the Banking Regulation Act, 1949 providing for voluntary amalgamation of two banking companies. The merger became effective from April 02, 2005. Merger of United Western bank with IDBI Ltd. The United Western bank Ltd. (UWB), a Satara based private sector bank was placed under moratorium by RBI. Upon IDBI Ltd. showing interest to take over the said bank towards its further inorganic growth, RBI and Govt. of India amalgamated UWB with IDBI Ltd. in terms of the provisions of Section 45 of the Banking Regulation Act, 1949. The merger came into effect on October 03, 2006. Change of name of IDBI Ltd. to IDBI Bank Ltd. In order that the name of the Bank truly reflects the functions it is carrying on, the name of the Bank was changed to IDBI Bank Limited and the new name became effective from May 07, 2008 upon issue of the Fresh Certificate of Incorporation by Registrar of Companies, Maharashtra. The Bank has been accordingly functioning in its present name of IDBI Bank Limited. Retail Banking business in Bihar with special reference to IDBI Bank
  • 24. 13 3.2 IDBI Bank Ltd. – A Profile IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004, the erstwhile IDBI converted into a Banking company (as Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile The United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agri products and services. Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state-of-the-art information technology platform, to structure and deliver personalized and innovative Banking services and customized financial solutions to its clients across delivery channels. As an Universal Bank, IDBI Bank, besides its core Banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market and Investment Banking, Home Finance, Primary Dealership area and more recently, the Life Insurance Business. Recently, IDBI Bank reorganized its business and structure commensurate with its aspiration to become a 'Top 5' Bank by asset size & market capitalization by the year 2012. As a first step, to give the organization the focus necessary for accelerated growth, the Bank has reorganized its businesses around nine verticals, six customer verticals, each focusing on distinct customer segments and three business verticals. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders. Retail Banking business in Bihar with special reference to IDBI Bank
  • 25. 14 Vision of IDBI The vision for the Bank is for it to be the trusted partner in progress, by leveraging quality human capital and setting global standards of excellence, to build the most valued financial conglomerate. Our experience of financial markets helps us to effectively cope with challenges and capitalize on the emerging opportunities by participating effectively in our country’s growth process. Management and Organization IDBI Bank is a Board-managed organization. The responsibility for the day-to-day management of operations of the Bank is vested with the Chairman & Managing Director and two Deputy Managing Directors, who draw upon the support and expertise of a cross- disciplinary Top Management Team. IDBI Bank Ltd employee base includes professionals from the fields of accountancy, management, engineering, law, computer technology, banking and economics. R M Malla- Chairman and Managing director B P Singh- Deputy Managing Director K Narasimha Murthy- Director SubhashTuli-Director R P Singh- Director Lila Firoz Poonawalla- Director H L Zutshi- Director B S Bisht- Director Rakesh Singh- Director Retail Banking business in Bihar with special reference to IDBI Bank
  • 26. 15 Fig. No. 3- Number of Branches And ATM’s Branches/ATM No. of Branches Metro 241 Urban 310 Semiurban 188 Rural 87 Overseas 1 Retail Banking business in Bihar with special reference to IDBI Bank
  • 27. 16 3.3 IDBI Groups IDBI is a pioneer Institute in Nation building. To cater to its ever-expanding needs, IDBI formed subsidiaries & joint ventures across diverse areas of Banking & Financial System. IDBI Capital Market Services A wholly owned subsidiary, offers a full suite of financial products. Its business includes stock broking, distribution of financial products, Portfolio management of Pension / PF funds & Research services, etc. IDBI Gilts Ltd A wholly owned subsidiary commenced its operations as Primary Dealer. The company presently focuses on Bond trading, underwriting in auctions of G-sec and T-bills. IDBI Intech Ltd A wholly owned subsidiary, deals in the Information Technology Services, Information Security Practice, Knowledge Management Services, national contact centre and outbound contact centre. IDBI Home Finance A wholly owned subsidiary, deals in the Home finance arena. It was acquired in September 2003 from Tata Home Finance Ltd IDBI Fortis Life Insurance Company Ltd A joint venture with Federal Bank and Fortis Insurance International. It primarily deals in Life insurance space. Retail Banking business in Bihar with special reference to IDBI Bank
  • 28. 17 3.4 IDBI- Its Products And Services IDBI Bank offers a wide array of products and services to its customers. For different customer groups and needs, there are different types of products and services including Personal Banking, Corporate Banking, SME Finance and Agriculture Business etc. Personal Banking Following products and services are offered under Personal Banking: Deposits Savings Account Current Account Fixed Deposits Suvidha Tax Saving Fixed Deposit Pension Accounts Sabka Account Super Shakti Account for Women Jubilee Plus Account Loans Home Loans Loans Against Property Education Loans Personal Loan Loan Against Securities Reverse Mortgage Loan Auto Loan Payments Tax Payments Stamp Duty payments Easy Fill Retail Banking business in Bihar with special reference to IDBI Bank
  • 29. 18 Bill Payment Card to Card Money Transfer Online Payments Pay Mate Investments Advisory Smart Financial Planning Mutual Fund Insurance Fixed Income Securities Cards Gold Debit Card International Debit cum ATM Card Gift Card World Currency Card Cash Card KIDS Debit Card Foundation Day Cash Back Scheme 2009 Platinum Card Institutional Banking Institutional Savings Account Corporate Payroll Account 24 Hours Banking Phone Banking SMS Banking Account Alerts Internet Banking Other products Lockers India Post Retail Banking business in Bihar with special reference to IDBI Bank
  • 30. 19 Preferred Banking NRI Services Capital Market IPO Demat Corporate Banking Following products and services are offered by IDBI Bank for the corporates: Project Finance Infrastructure Finance Syndication, Underwriting & Advisory Services Carbon Credits Business Working Capital Cash Management Services Trade Finance Tax Payments Derivatives Technology Upgradation Fund Scheme (TUFS) Film Financing Scheme Direct Discounting Bills Rehabilitation Finance SME Finance Following SME Finance products are offered by the IDBI Bank: Sulabh Vyapar Loan Dealer Finance Funding under CGFMSE Direct Credit Scheme - SIDBI Retail Banking business in Bihar with special reference to IDBI Bank
  • 31. 20 Preferred customer scheme - IDBI Bank / SIDBI Vendor financing (Pre - Sale) Vendor financing (Post - Sale) Lending Against the Security of Future Credit Card Receivables Finance to Medical Practitioners Loan to SRWTO SME Hosiery Special Current Account Fig. No.4-IDBI Bank Business Chart IDBI BANK RETAIL BANKING DEVELOPMENT BANK. SAVING ACCOUNT CURRENT ACCOUNT INVESTMENT PERSONAL SAVING CORPORATE SAVING Retail Banking business in Bihar with special reference to IDBI Bank
  • 32. 21 4) Retail Banking 4.1 WHAT IS RETAIL BANKING? Retail banking is however; quite broad in nature it refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed current/savings accounts on the liabilities side; and mortgages, loans (e.g. personal, housing, auto and educational) on the assets side are the more important of the products offered by banks. Related ancillary services include credit cards, or depository services. Today’s retail banking sector is characterized by three basic characteristics. Multiple products (deposits, credit card, insurance, investments and securities). Multiple channels of distribution (call center, branch, internet and kiosk); and Multiple customer groups (consumer, small business, and corporate) DEFINITION: Retail Banking Services:- Banking services provided to individual members of the public as opposed to those provided to businesses and institutions. Retail Banking business in Bihar with special reference to IDBI Bank
  • 33. 22 4.2 SWOT Analysis Of Retail Banking STRENGTH:- 1) Emerging as a new growth driver: For several years banks viewed consumer loan with skepticism. Commercial loans denominated the loan portfolio as they generated high net yield with low credit risk. Consumer loans on the other hand involved smaller amount, large staff to handle account and high default rates. Even regulators across the globe have not encouraged retail banking until now till very recently. However, over past few years, fierce competition among the banks lowered the spread and profitability a commercial loan with deregulation and increase in consumer loan rate, the risk adjusted return in retail sector have exceed the return on consumer loan. 2) Provides diversified asset portfolio: Retail banking includes comprehensive range of financial product and services i.e. deposit product, auto loan, car loan, home loan, loan against equity shares, mortgage loan, payment of bills, debit card, credit card, etc. These products provide an opportunity for banks to diversify the asset portfolio with higher profit and relatively lower NPA. 3) Improves standard of living: Due to major economic reforms in Indian economy there has been an increase in per capita income which has led to change in life style and growing urbanization have made the Indian population rise from oblivion and resurge in modern era on this front role of retail banking arises. Retail banking provide all such product and services(home loan, car loan, personal loan, etc) to its customer which are required by them to maintain change in their life style in short it helps in fulfilling aspiration of people through affordable credit. 4) CRM tool: The individual customer is deity of bank in retail banking segment. All product and services are designed to satisfy need and wants of its customer. As Retail Banking business in Bihar with special reference to IDBI Bank
  • 34. 23 customer in retail banking belong to different economic, cultural, educational, and social background there demand is also varied. It is acceptance of the banking product and satisfaction of customer that yield profit in this segment. Hence customer Service and Quality implementation through use of CRM tools will help banks Success in this competitive world of retail banking. 5) Innovative product development : The scope for development in financial services is unlimited. In retail banking ball is in the court of bankers where they approach the customer finds out there financial need and problem, designs the product and services, market them and finally sells them to satisfy its customer. 6) Economies of scale: Retail banking enables banks to utilize existing capacities and reaching wider population of customer. Banks can get the benefits of information and transaction. In process of extending variety of services, banks are acquiring enormous amount of customer information .if this information is systematically recorded , banks can efficiently utilize this information in order to explore new segment and to cross sell new services. WEAKNESS:- 1) Avoids corporate sector : Retail banking avoids corporate sector totally which is the backbone of Indian economy. Main reason put forth or this is decline in corporate borrowing. However bank can take certain step to manage there corporate clients such as lower arte credit, higher amount of loan etc. Managing corporate client is more easier as they have well defined financial policy and project and they concentrate on product and services offered rather than on CRM of bank unlike individual clients. 2) Marketing (Internal and External): Retail Banking business in Bihar with special reference to IDBI Bank
  • 35. 24 Retail banking requires strong marketing strategies to be adopted by bank both internal and external. under retail banking segment top level management need employees to introduce product properly to its employees because if the employees are not aware regarding the product they are offering that product will fail however effective the product is also bank require to spend lot on its marketing of product to general public because if public is not aware regarding the product and service how will they opt for it. All this increases the cost and time required to introduce the product in the market which can reduce or make the product out dated immediately on its arrival. 3) Changes in technology: Future of retail banking lies in the hand of IT. Various It solution used by banks such as E-banking, phone banking, ATM leverage the retail banking product and service offered by banks. But this has weekend the segment some how. If banks are not able to adopt the latest technology it may pull back the growth of bank also this technology requires lot of capital investment and if at all the technology fails then it may shake the customer’s confidence on bank and bank may land up in loosing its customer. 4) Reduces the profitability: It is claimed that retail banking increases overall profitability of the bank but in reality this is not the case because managing wide range of product and service requires high quality technology , large number of staff and all this requires high capital investment which reduces banks profitability. 5) Co-ordination among various department: Success of retail banking is not the result of one department but is result of various departments together. If there is lack of co-ordination among various department of the bank then however strong and effective the may be the product it will fail. Suppose if the front office is successful in attracting the customer but back office is not able to execute the delivery of product or service on time then bank may land up loosing the customer although its CRM was effective. Retail Banking business in Bihar with special reference to IDBI Bank
  • 36. 25 OPPORTUNITIES:- 1) Scope for innovation: Under retail banking as banks try to provide all those product and services which are desired by its customer this segment has more scope for innovation banks can keep on modifying its products as per the market demand which helps them from not being out dated . 2) Rise in per capita income: The rise of the Indian middle class is an important contributory factor in this segment. The percentage of middle to high-income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes toward personal debt, is contributing to India's retail banking segment. 3) Economic growth: Retail banking has immense opportunities in a growing economy like India. In the BRIC Report India is stated as an economic superpower. According to A. T. Kearney, a global management-consulting firm, recently identified India as the 'second most attractive retail destination' of 30 emergent markets. Hence retail banking has high opportunities in India. THREATS: 1) Large disbursement of loans: The boom in the field of retail banking and the intense composition among the to increases the customer base has resulted in the large disbursement of customer loans, loans on credit cards, auto loans, educational loans etc. on easy terms without much scrutiny this has brought with in an increase in the number of cases of default in loan repayment thus increasing the bank’s NPAs. Retail Banking business in Bihar with special reference to IDBI Bank
  • 37. 26 2) Issue of customers dignity: Banks have been adopting carrot and stick policy by renegotiating loan terms where the default is genuine and handing over recovery to third parties where default is willful. Most of the time, the third parties or external agents are not trained to handle the loan repayment process. Hence, they restore to strong arms tactics with defaulting customers. Many cases of harassment and invasion of privacy have been reported by the affected parties. Such instances may hamper the image and corporate vision of the bank in near future. 3) Issue of customer privacy: Customer privacy is also affected in another way wherein customer service representatives of the banks ring up customers at any times at their places of work, informing them about new products and services. This may cause inconvenience to busy customers. It is also obligation on part of the banks not to share the private information from the records of the customers with outside agencies like market research groups and other advertisers. 4) IT: The growth of IT has brought with it a number of frauds perpetrated with the help of technology and which come under the domain of cyber crimes. Banks are the victims of unscrupulous elements who have in many instance hacked banks website and stolen credit card number, pass word and other confidential information relating to customer. Retail Banking business in Bihar with special reference to IDBI Bank
  • 38. 27 4.3 Need For Retail Banking- (The Ultimate Service Provider) Until now banks were relying on financing, production based activities. Retail finance was not favored by Indian banks, But they have to tune to it now with the demand for loans from industrial sector is coming downing the past because of the economic slowdown. As a result banks have become selective in their lending activities. Further changing demographics, a rapidly growing ,middle-class, rise in disposable income changing life style and increasing ability of people to take credit risk are providing banks with an opportunity to shift their lending operation to retail finance. Hence bankers have been increasingly shifting to retail to increase profitability and reduce delinquency rates. Customer shifting, cost pressure and increasing competition are some of the other reasons. Retailing is now favored because of the better returns lesser asset quality problem and low NPA. Further it provides many opportunities for credit expansion. It helps banks in risk diversification and is important for low-cost resources mobilization by banks. For Banks, retail segment is the principal growth driver as they are slowly gaining market share in the retail space. Foreign banks are securitizing vehicle loans to raise off- balance sheet resources and to reduce overall cost of funding. For example, Bank of Muscat is taking over auto loans and personal loans from other banks signaling a softer interest rate regime for consumer finance and giving indication to the intensifying competition in business. The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to the customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking. . Retail Banking business in Bihar with special reference to IDBI Bank
  • 39. 28 4.4 Retail Banking In India The Indian players are bullish on the Retail business and this is not totally unfounded. There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1% was through plastic, the corresponding US figure standing at 18%. Retail banking in India is not a new phenomenon. It has always been prevalent in India in various forms. For the last few years it has become synonymous with mainstream banking for many banks. The typical products offered in the Indian retail banking segment are housing loans, consumption loans for purchase of durables, auto loans, credit cards and educational loans. The loans are marketed under attractive brand names to differentiate the products offered by different banks. As shown that the loan values of these retail lending typically range between Rs.20, 000 to Rs.100 lakh. The loans are generally for duration of five to seven years with housing loans granted for a longer duration of 15 years. Credit card is another rapidly growing sub-segment of this product group. In recent past retail lending has turned out to be a key profit driver for banks with retail portfolio constituting 21.5 per cent of total outstanding advances as on March 2004. The overall impairment of the retail loan portfolio worked out much less then the Gross NPA ratio for the entire loan portfolio. Within the retail segment, the housing loans had the least gross asset impairment. In fact, retailing make ample business sense in the banking sector. Retail Banking business in Bihar with special reference to IDBI Bank
  • 40. 29 While new generation private sector banks have been able to create a niche in this regard, the public sector banks have not lagged behind. Leveraging their vast branch network and outreach, public sector banks have aggressively forayed to garner a larger slice of the retail pie. By international standards, however, there is still much scope for retail banking in India. After all, retail loans constitute less than seven per cent of GDP in India vis-à-vis about 35 per cent for other Asian economies — South Korea (55 per cent), Taiwan (52 per cent), Malaysia (33 per cent) and Thailand (18 per cent). As retail banking in India is still growing from modest base, there is a likelihood that the growth numbers seem to get somewhat exaggerated. One, thus, has to exercise caution is interpreting the growth of retail banking in India. The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Master debit card as well. The Bank launched its credit card business in late 2001. By March 2005, the bank had a total card base (debit and credit cards) of 4.2 million cards. The Bank is also one of the leading players in the “merchant acquiring” business with over 42,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc. 4.5 Advantages Of Retail Banking Retail Banking has inherent advantages outweighing certain disadvantages. Retail Banking business in Bihar with special reference to IDBI Bank
  • 41. 30 RESOURCES SIDE: Retail deposit are stable and constitute core deposit They are interest insensitive and less bargaining for additional interest They constitute the low cost for banks Effective CRM with the retail customer builds a strong customer base. Retail banking increases the subsidiary business of a bank. ASSETS SIDE: Retail banking results in better yield and improve bottom line of a bank. Retail segment is a good avenue for funds deployment. The consumer loan is presumed to be of lower risk and NPA perception. Help economic revival of the nation through increased production activities. Improves lifestyle and fulfills aspiration of people through affordable credit. Innovative product development. Retail segment involves minimum marketing efforts in a demand driven economy. 4.6 DISADVANTAGES v Designing own and new financial products is very costly and time Consuming for the bank. v Customers now-a-days prefer net banking to branch banking. The banks that are slow in introducing technology-based products, are finding it difficult to retain the customers who wish to opt for net banking. v Customers are attracted towards other financial products like Mutual funds etc. v Though banks are investing heavily in technology, they are not able to exploit the same to the full extent. v A major disadvantage is monitoring and follows up of huge volume of loan accounts inducing banks to spend heavily in human resource department. Retail Banking business in Bihar with special reference to IDBI Bank
  • 42. 31 v Long term loans like housing loan due to its long repayment term in the absence of proper follow-up, can become NPAs. v The volume of amount borrowed by a single customer is very low as compared to wholesale banking. This does not allow banks to exploit the advantage of earning huge profits from single customer as in case of wholesale banking. 4.7 Scope For Retail Banking In India All round increase in economic activity. Increase in the purchasing power. The rural areas have the large purchasing power at their disposal and this is an opportunity to market Retail Banking. India has 200 million households and 400 million middleclass population more than 90% of the savings come from the house hold sector. Falling interest rates have resulted in a shift. “Now People Want To Save Less And Spend More.” Nuclear family concept is gaining much importance which may lead to large savings, large number of banking services to be provided are day-by-day increasing. Tax benefits are available for example in case of housing loans the borrower can avail tax benefits for the loan repayment and the interest charged for the loan. 4.8 Present Senario There has been a considerable growth in the retail-banking sector in India, which makes up for about 1/5th of the overall bank credit. Typically, the retail banking industry encompasses the services such as credit cards, Housing loans, Education loans, Auto loan, etc Retail banking has brought in a drastic makeover in the overall banking scenario in India. The exceptional improvement in the banking system in India is a result of strong initiatives taken up by both the government and private companies. A recent market research report named, “Indian Retail Banking Sector Analysis (2006)” published by RNCOS provides an exclusive tour to the entire retail-banking industry of India. As per the report, “Mainstream Retail Banking business in Bihar with special reference to IDBI Bank
  • 43. 32 banking and retail banking has become one and the same thing for the past several years now. Approximately, 22% of the total outstanding advances were derived from the retail portfolios of the banks in India till March 2004”. “The contribution of retail banking to the overall banking sector has been outstanding. Growing at a rate of 122%, the retail-banking sector of India managed to reach a worth of $67 billion in the year 2005”, as per experts at RNCOS. “The retail banking sector in India should reach a worth of $310 billion by the year 2010”, anticipate the experts. Profiles of key players along with the strategies and plans adopted by them for the growth of the industry are also talked about in it. Besides discussing the present scenario of the financial system in India the report offers a reliable prediction of the market in the years to come. The ratio of retail credit to net credit at the global level is around 5%. In India, it is interesting to note that this ratio is over 10% as on March31, 2002 (Source: RBI, Annual Report). With the economy reforms set in motion, the country is already rated as a major hub for economic development. Increase in per capita income, change in life style and growing urbanization has made the Indian population rise from oblivion and resurge in modern era. The po licy of and spent is gradually giving way to spend and save concept. 4.9 What Are Various Retail Banking Services? Retail banking includes comprehensive range of financial product and services i.e. deposit product, auto loan, car loan, home loan, loan against equity shares, mortgage loan, payment of bills, debit card, credit card, etc. These products provide an opportunity for banks to diversify the asset portfolio with higher profit and relatively lower NPA. Today the most proactive banks have entered the retail banking segment and have identified it as a principal growth driver. Retail Banking business in Bihar with special reference to IDBI Bank
  • 44. 33 Table No. 1-Categorization of Retail Bank services Core services Facilitating services Supporting services Payment services Cash Making payment at door step Foreign currency Internet banking requirements Telephone banking Traveller cheque DD/bankers cheque IT EFT Current account and ATM card Credit card saving account Standing instruction from Debit card customer for making Service to senior citizen payments Telephone banking Inter branch transfer of Internet banking fund Conversion of excess balance Safety vault to time deposit Loan product: Current account Delivery of loan at promised Saving account time Consumer loan Time deposit account Interest loan option Housing loan Flexibility in paying loan Personal loan Counseling on Real estate Education loan market Legal services for documentation ECS for payment of loan Retail Banking business in Bihar with special reference to IDBI Bank
  • 45. 34 installment Insurance product: Current account Additional insurance facility Saving account for family members. Life insurance Time deposit Counseling on post Pension scheme account retirement saving Safety vaults 4.10 Retail Lending Everyone dreams of living a comfortable life and does all one can to make this dream come true. Today this has become much easier, as with higher levels of income and multiple earning members in the family, it is easy to avail loans to fulfill aspirations. Buying a home, car or any small household item such as TV or a refrigerator using money borrowed from a bank or a finance company has become the way of life today. This has created a big business opportunity for finance companies. They are offering loans to all types of customers for all types of assets. Retail lending has thus become one of the key business verticals for finance companies. This necessitates banks to follow processes for conducting business profitably. There are two main areas in lending. Loan Origination and Loan Servicing. The process of validating customers, convincing them that the finance company is the right source for their loan requirement and finally offering the loan with terms and conditions that make business sense to the finance company is Loan Origination and once the loan is disbursed, the process of managing the repayments from Retail Banking business in Bihar with special reference to IDBI Bank
  • 46. 35 customers and responding to the customer requests for pre payments, early settlement, rescheduling, etc. is Loan Servicing. Lending has become very competitive as customers are in the mode of shopping for loans. Finance companies have to continuously offer new financial products to customers and thus two of the important aspects of the business are time-to-market and flexibility. But as number of customers increase, the risk of increase in the number of defaulters prevails. Thus finance companies have to do the balancing act. On one hand they have to acquire more business by lending to more customers and on the other hand they have to lend to select customers so that the rate of delinquency is under control. 4.11 Role Of It In Retail Banking The growth in retail banking has been facilities by the growth in banking technology and automation in banking process that enables in extension of reach and rationalization of cost. ATM has emerged as an alternative channel which has facilitated low cost transaction. It also has the advantage of reducing the branch traffic and enable bank with small network to offset traditional disadvantage by increasing their reach and spread. Indian retail banks have been extensively using Information and Communication technologies for their operations like central accounting, customer information management, transaction-processing and importantly, for numerous customer-facing solutions. Besides there are supporting or ancillary solutions such as security and compliance in addition to the "middleware" that banks uses to link their customer-facing applications to their core systems. The major business focus of the IT savvy retail banks is in providing products and services to the customers through a diversified base of channels - bank branches, ATMs, e-banking, e- branch, mobile-banking, SMS-banking, etc. In India, the business growth is driving technology spending in the retail banking segment. Indian retail banks are looking to move beyond their branch-centric distribution models. Extending ATMs networks, advancing online and phone banking, and rationalizing branch infrastructure are all on the cards. Retail Banking business in Bihar with special reference to IDBI Bank
  • 47. 36 Technology provides Retail Banks with various delivery channels:- 1) Automated Teller Machines(ATM): The trend in banking has evolved from a cash economy to cheque economy and thereon to the plastic card economy. One of the channels of banking services delivery is vide the ATM or the Automated Teller Machines, whose traditional and primary use is to dispense cash upon insertion of a plastic card and its unique PIN or Personal Identification Number. Current and savings account holders of a bank who hold a certain minimum balance in their accounts (determined by each bank as per their policy) are issued an ATM card. The card is a plastic card with a magnetic strip with the account number of the individual. When the card is inserted into the ATM, the machines sensing equipment identifies the account holder and asks for his/her identification code number. This is referred to, usually, as the PIN and is issued by the banks computers. This number is unknown to the banks staff and is secret and unique to that individual. When the person uses the ATM and it asks for the PIN, the cardholder identifies himself/herself by pressing the relevant number buttons on the machine. The machine then verifies the account number on the ATM card along with the secret code number stored in the ATM. When the matches found, the ATM pops a menu screen, which allows the user to transact almost all types of bank transactions. 1) Tele banking: - Tele banking or phone banking service offered by banks to enable customers to access their accounts for information or transactions. Similar to the ATM PIN, a telephone PIN (T-PIN) is provided to each account holder. The customer can call the exclusive tele- banking numbers and provide the details to identify himself/herself to the automated voice. Typically, the bank account number and the T-PIN are asked for. Upon the respective numbers matching the computerized systems the customer is given access to his account to query or transact on his account. Though cash withdrawal and deposit are Retail Banking business in Bihar with special reference to IDBI Bank
  • 48. 37 not enabled through this service many banks offer cash delivery or collection service to certain classes of customers. 2) Internet Banking: One of the channels of service delivery to a banking customer is through the Internet. The access to account information as well as transaction is offered through the worldwide network of computers on the Internet. Every bank has special firewalls & its own security measures to protect the accounts from non-authentic use from unauthorized users. Data are encoded using algorithms with a 128-bit key or, in some cases, with a 1,024-bit encryption. Each account holder is provided a PIN similar to that of the ATM or Phone banking PIN. The access to the account is allowed upon a match of the account details & PIN entered on the computer system. A higher level of security may be reached by an electronic finger-print. The finger print is taken before & after the transaction. Then both versions are compared. In case of any difference, the transaction is aborted. Account querying as well as transaction is possible on the Internet banking platform. The accounting is instantaneous & funds transfers can be affected immediately. Though cash transactions are not possible at present, the next phase of evolution in Internet banking will allow those as well. Retail Banking business in Bihar with special reference to IDBI Bank
  • 49. 38 5) RETAIL BANKING OF IDBI BANK 5.1 An Overview Of The Product 1. Preferred Banking PowerPlus Account We bring to you a product that reflects and matches your financial needs and requirements at every step. Power Plus account allows you to access a complete suite of product and services and enjoy world class banking experience, complimenting your professional and personal goals. This account helps you take complete charge of your banking by providing multiple channel and products and a wide range of benefits to help your time and money. Features 25% discount on locker rates. Higher ATM Cash withdrawal and Point-of-sale limit on International debit cum ATM card. Free Demat AMC for first year. Free Personalized PAP Cheque Book. Free Demand Draft and Pay order Preferred banking program is designed to offer services to a select group of discerning and deserving individual like you. Preferred banking special features help you to save your time, and help you build wealth through efficient deployment of assets. Your Lifestyle reflects your personality. Every element of the preferred banking attempts to complement your status and style. Preferred banking investment advisory, offers you a one stop solution with all products range from fixed deposits to Govt.of2 India Bonds and Mutual funds to Unit Linked Insurance Plans. Royale Account The IDBI Bank Royale Account has been designed to make banking services more convenient for esteemed customers. This new service guarantees you as our privileged customer elaborate and personalized service of the highest order. For all the banking requirements a dedicated relationship manager would be attached to the account. Retail Banking business in Bihar with special reference to IDBI Bank
  • 50. 39 With the Royale Account comes the Platinum Debit Card that provides enhanced daily cash withdrawal limit. This lifetime free debit card provides you privileges, which span lifestyle pursuits like shopping, dining and travel. Features of IDBI Royale Account: Zero balance Power Plus account for the one family member Free Locker (5x6x19) or 50% discount in other locker rentals. Higher limit of cash withdrawal from any bank ATM. (with Platinum/Gold debit card). Higher Limit for Point of sale. Discount on Demat transaction charges Doorstep banking. Free Personalized PAP Cheque Book. Free Demand Draft and Pay order Deposits Savings Bank accounts commonly referred to as Savings accounts, have huge potential for mobilizing low cost deposit and stable deposits. In our Bank, savings accounts are offered to prospective customers as value added retail liability product. Regular Savings Account At IDBI Bank, we believe that different people have different needs. Thus, we offer various different types of Savings Account to cater to our diverse customer base. Be it individuals, kids, women, corporate, senior citizens, we have an account tailor-made for each one of them. The various types of Savings Account offered By IDBI Bank are as follows: Choose from various range of Personal Banking services like: SuperSavings Account SuperShakti (Womens') Account Jubilee Plus (Senior Citizens) Account Power Kidz Account Sabka Account -No Frill account Pension Savings Account (Central Government Employees) At IDBI Bank, it is our constant endeavor to provide you products and services that will enhance your banking experience. From time to time we identify your needs and produce quality products that will simplify banking for you. Our extensive branch and ATM network, technology initiatives, and correspondent banking arrangement with banks across the globe Retail Banking business in Bihar with special reference to IDBI Bank
  • 51. 40 have leveraged us to provide superior services. Savings Account Interest Rate - 4.00% p.a. (w.e.f. May 03,2011) Current Accounts Current accounts are meant for customers who have to carry out business and/ or large number of transactions in the account every day. There are no restrictions on the number of transactions in current accounts. Core Current Account No two businesses are the same, which is why at IDBI Bank; we offer different types of Current Accounts to choose from, to our customers. The types of Current Accounts that we offer are as follows: Our Core Current Account is a straightforward and easy to use Current Account designed to make even the smallest of business experience hassle free. The Core Current Account comes loaded with a number of features, which include: Free PAP (payable at par) chequebook Free PAP utilisation Free Electronic Funds Transfer Free Pay Orders and Demand Drafts Free Demand Drafts on non-branch locations Free home / non-home branch cash deposit Free any branch cash withdrawal Free Internet/ mobile/ Phone Banking and ATM services Free other bank ATM transactions Fixed Deposits Fixed Deposits, also known as Term Deposits or Time Deposits, are deposits accepted by the bank for fixed period and are repayable on expiry of the fixed period. Interest is paid at quarterly rests to the depositor. At the specific request of the depositor, interest could be paid at monthly rests also, but at a discounted rate. The Bank decides the rates of interest on fixed deposits of various maturities from time to time by taking into account the market conditions and directives of the Reserve Bank of India in this regard. IDBI Bank revises fixed deposit rates at an attractive interest rate of 9.50% p.a. for 500 days for normal deposits and 10.25% p.a. for senior citizens w.e.f May 5,2011. Retail Banking business in Bihar with special reference to IDBI Bank
  • 52. 41 Recurring deposit Ideal for those who want to save a fixed sum every month This type of deposit helps you add to your savings at your complete convenience. You can start saving any amount from Rs. 100 to Rs. 1 lakh every month. The amount as decided by you, will be deducted every month from your savings account. Further, there is no Tax deducted at source on these deposits and also no charges for executing your standing instructions. Loans We, at IDBI Bank offer a wide range of loan products to suit all your needs ranging from home to education, a holiday to buying a laptop. Select from our loan offerings and we shall be glad to service you on the same. The various loan offerings by IDBI Bank are as follows: Choose from various range of Personal Banking services like: Home Loans Loan Against Property Education Loan Personal Loan Loans Against Securities Reverse Mortgage Loan Auto loans Table No. 2- Interest Rates Home Loans (Fixed) Below Rs 75 lacs ROI(%) p.a Rs. 75 lacs and above Options ROI(%) p.a • Fixed for 3 years • 12.25% • 12.50% • Fixed for 5 years • 12.75% • 13.00% Loan for commercial property purchase (Floating) 15.25% p.a (Linked to BR) Retail Banking business in Bihar with special reference to IDBI Bank
  • 53. 42 Reverse Mortgage Loan (Fixed) Fixed (Re-Phasement after every 5 years )- 12.25% Educational Loan (Floating) Type ROI(%) p.a Up to Rs 4 lakhs 12.75% p.a (Linked to BR) Above Rs 4 lakhs 12.75% p.a (Linked to BR) For the students of IIT,IIM and ISB 12.00% p.a (up to Rs 20 lakhs ) (Linked to BR) Auto Loan(Fixed) Vehicle Segment ROI(%) p.a Tenor up to 36 months Tenor up to 60 months Segment A: Small/Mid-size/ 11.50% p.a 12.00% p.a Utility & Premium MUVs 12.00% p.a 13.00% p.a Segment B: Premium 11.50% p.a 12.00% p.a Segment C: Luxury & SUV 11.50% p.a 11.75% p.a Segment D: Classic 11.50% p.a 11.75% p.a IDBI Bank Debit Cards International Debit-cum-ATM Card Gold Debit-cum-ATM Card IDBI Bank Cash Card IDBI Bank Gift Card World Currency Card Kids Debit Card Platinum Card Debit Card Offers Retail Banking business in Bihar with special reference to IDBI Bank
  • 54. 43 24Hrs Banking Phone Banking IDBI Bank Phone Banking service enables you to access authentic, instantaneous information on your account balances and transactions. The service is available totally free of cost round the clock, 365 days a year. Mobile Banking Our SMS banking initiatives permit you to access your Bank account and carry out various banking transactions and inquires. No need of visiting the bank time and again! Account Alerts IDBI Bank's new Account Alert service gives you all this and more. With Account Alert, your bank account transaction information will be delivered to you automatically, wherever you are. No more visiting the bank branch or ATM to check routine things like account balances, cheque clearance, verification of ATM transactions, bill payment verifications, etc. Account Alerts allows you to monitor finely any type of activity on your accounts, and be notified by e- mail or cell phone SMS as and when they are executed. Internet Banking With IDBI's Internet Banking, your Bank travels with you around the world and you have on- line, real-time access to your accounts. Admittedly, such a service requires security of the highest nature and complete privacy protection. We provide a completely secure environment, using 128-bit encryption SSL (Secure Sockets Layer), digitally certified by Verisign. 128-bit SSL guarantees world-class security for Internet and e-commerce applications. Pay Mate IDBI Bank Pay Mate Service presenting a simple, convenient and secure way to make payments The Pay Mate service has a tie up with various merchants across India (click here for the list of merchants). You can now shop with any of these merchants and can pay simply through your Mobile Phone. IDBI Bank offers this service to its customers absolutely free of charge. . Money Transfer Sending money within India has never been this simple, convenient, fast and safe. IDBI’s Card to Card Money Transfer facility; a first of its kind money transfer service in India is the absolute Retail Banking business in Bihar with special reference to IDBI Bank
  • 55. 44 way to send money anywhere, anytime to any Visa Debit or Credit cardholder in India. Bank’s customers can now transfer money from their Bank account or Visa card to any other Visa debit or Credit card across the country through this service. Transfer Funds We can use Internet Banking; ATM’s or branches for transferring money across the country. The only information we need to know is the 16-digit card number of the transferee. To carry out a transfer, simply log on to IDBI’s Internet Banking at www.idbibank.com, or visit the nearest IDBI ATM or branch and transfer the required amount. The money is directly credited into the recipient’s card, no matter where he is. Investment We believe that all the investors share a common goal, regardless of their objectives: superior and sustained returns with a tight control over risk. Meeting your long-term investment goal is dependent on a number of factors: your investment capital, your expected rate of return, inflation, taxes and your investment time horizon. To meet your requirements, we offer you investment options based on your risk tolerance and return expectations. Relationship Managers are equipped to advise you on various investment profiles. They then help you with your investments and subsequently support you by tracking your investments on a regular basis. Mutual Funds Mutual funds offer a simple and effective way to diversify your investment without the hassles of tracking individual stocks on a daily basis. Click here for more details on the options we offer GoI 8.0% Savings (Taxable) Bonds. 8% GoI Savings Bonds is a good option for investors looking for high yielding risk free instruments. Capital Gain Bonds Invest your long-term capital gains on sale of your asset in the specified assets. Retail Banking business in Bihar with special reference to IDBI Bank
  • 56. 45 Insurance Services IDBI brings to you Birla Sun Life Insurance, one of the leading providers of life insurance products. NRI a/c Being an NRI (non-resident Indian) and privy to special benefits and privileges in India, its only but natural to expect world class levels- be it banking or any other service. Welcome to IDBI, where you are treated as special and your needs exclusive. While we offer basic NRI banking products like Non Resident Rupee Checking Account, Non Resident Rupee Term Deposits and Foreign Currency Non Resident Deposit, we realize that the requirements of the customers are manifold. Non-Resident External (NRE) Repatriable account for your investment needs your account anytime, anywhere with Internet Banking, shop at more than 8.3 million locations and withdraw funds in 140 countries. Non-Resident Ordinary (NRO) An account for your income and expenses, access your account at more than 250 ATM’s across the country, pay your bills in India from anywhere in the world. FCNR Retain your funds in foreign currency, no exchange risk; earn attractive returns on your fund. ATM Automated Teller Machine (ATM) is a sophisticated computer terminal which makes it possible for a customer holding Debit cum ATM Card to avail specified banking services through ATMs at any time (24 hours) without any personal interaction with the bank personnel. Our Bank has ATMs with ‘On-Line’ connectivity across all its branches. The Bankhas also installed many off- site ATMs. IDBI Bank is a member of VISA, MASTERCARD, CASHNET, NFS, BANCS & AMERICAN EXPRESS ATM networks. With this, Debit cum ATM Card holder of any of the net worked banks / institutions can transact specified banking transaction at any ATM of the networked banks / institutions. Retail Banking business in Bihar with special reference to IDBI Bank
  • 57. 46 At present, Debit cum ATM Card customers can undertake following transactions on our Banks ATMs: i) Withdraw cash up to the daily cash withdrawal limits stipulated for the type of the card. These limits can be enhanced on request of customer. ii) Deposit cash / cheque (not more than 20 notes / cheques at a time). This facility is not available on cash dispenser. iii) Carry out certain functions like balance enquiry, print mini statement recording last 10 transactions and/or inform balance in the account. iv) Register request for cheque book and statement of account. v) Change Personal Identification Number (PIN). vi) Avail other value added services like Bill Payments, mobile recharge, VISA money transfer etc. Debit card customers can also withdraw cash and make balance inquiry from ATMs of other Banks which are members of CASHNET, NFS, BANCS, VISA & MasterCard networks. The amount of cash withdrawals through these ATMs is maximum of Rs.10,000/- per transaction. 5.2 The IDBI Bank Advantage Maximum Funding Services at doorstep Simple documentation Personalized services Free legal and technical assistance Attractive rate of interest Applying for a Reverse Mortgage Loan against Home is absolutely simple. Just call our Phone Banking numbers and our representative will contact you at the earliest Retail Banking business in Bihar with special reference to IDBI Bank
  • 58. 47 6) Methodology 6.1 Research Type My research is based on the primary data. Primary data has been used to understand the scope of retail banking business in Bihar and then to make suggestions useful for the bank under study i.e. IDBI Bank ltd. 6.2 Data Type Primary data has been used for the purpose of study of ' Retail banking business in Bihar with special reference to IDBI Bank '. 6.3 Sample Selection: To collect primary data regarding the scope of retail banking business of IDBI Bank in Bihar, I selected a list of peer banks and compared it with the bank under study. The list of peer banks was selected on the basis of their visibility in Bihar, scale of operation in Bihar and the products they offer. If all these factors were similar to IDBI, the banks were finalized as peer banks. To collect their details the branches in the main area were selected. 6.4 Data Collection Method In order to collect the primary data, the method used was personal interview of branch managers peer banks of IDBI bank’s in the area. A questionnaire was prepared in order to collect the data a sample of which is attached in the report. Apart from talking to the branch managers, an interaction with the staff members and the customers at the branch gave an overview of the performance of the Bank on the individual level. This helped to look at the retail business from different perspectives and better suggestion could be given to the bank under study to improve upon the same. Retail Banking business in Bihar with special reference to IDBI Bank
  • 59. 48 6.5 Tools Used for Data Analysis As no study could be successfully completed without proper tools and techniques, same with my project. For the better presentation and right explanation I used tools of statistics and computer very frequently. And I am very thankful to all those tools for helping me a lot. Basic tools which I used for project from statistics are- Bar Charts Tables Bar charts proved really useful tools to show the result in a well clear, ease and simple way. Because I used bar charts in project for showing data in a systematic way, so it need not necessary for any observer to read all the theoretical detail, simple on seeing the charts any body could know that what is being said. Retail Banking business in Bihar with special reference to IDBI Bank
  • 60. 49 7) The Study To carry on the survey work, six banks were considered including the IDBI Bank. A comparative study has been done between the banks. The banks taken were on the basis of their size and their integration in Bihar. The banks selected on this basis were as under. The above branches have been compared on various parameters. Factors taken for comparison were the visibility of the banks, factors which they consider before opening a branch, their profitability and few more. The comparison helped me to come to a conclusion of the scope of retail business in Bihar and what IDBI Bank should do in order to improve on its already flourishing business. Retail Banking business in Bihar with special reference to IDBI Bank