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  • 1. Contents List of Tables/ Charts/Diagrams i Chapters 1. Introduction 1-33 2. Functional Areas 34-60 3. SWOT Analysis 61-83 4. Financial Performance 84-92 5. Conclusion 93-98 Annexure Annexure I - Abbreviations 99 Annexure – II – Bibliography 99 Annexure – III – Financial Statements 100-101
  • 2. List of Tables and Chart Tables/Charts /Diagram Page. No. Table No. 1.1. 6 Table No. 3.1. 67 Table No. 4.1. 90 Table No. 4.2. 91 Chart No.1.1. 33 Diagram 4.1. 87 Diagram 4.2. 88 Diagram 4.3. 88 Diagram 4.4. 89 Diagram 4.5. 89 Diagram 4.6. 90 Diagram 4.7. 91 Diagram 4.8. 92
  • 4. Index 1.1. Introduction 1.2. History of Banks 1.3. Nature of Banking in India 1.4. Types of Banks 1.5. Functions of a Bank 1.6. Profile 1.7. History of South Indian bank 1.8. Milestones 1.9. A New Visual Identity for New Competencies] 1.10. Business Strategy 1.11. Vision and Mission 1.12. Objectives 1.13. Design 1.14. Organizational Chart
  • 5. 1.1. Introduction Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dials a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:  Early phase from 1786 to 1969 of Indian Banks;  Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms;  New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. 1.2. History of Banks Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and the Bank of Hindustan,
  • 6. both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1925 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center.
  • 7. The Bank of Bengal, which later became the State Bank of India. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
  • 8. The fervor of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalized banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". From World War I to Independence The period during the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table: Table No.1.1. Years Number of banks that failed Authorized capital (Rs. Lakhs) Paid-up Capital (Rs. Lakhs) 1913 12 274 35 1914 42 710 109 1915 11 56 5 1916 13 231 4 1917 9 76 25 1918 7 209 1 Post-independence The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end
  • 9. of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included: In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors. However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalization of major banks in India on 19 July, 1969. Nationalization By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalized the 14 largest commercial banks with effect from the
  • 10. midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August, 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. The nationalized banks were credited by some; including Home minister P. Chidambaram, to have helped the Indian economy withstand the global financial crisis of 2007-2009. Liberalization and the Reform Process Impact of Liberalization on the Banking Sector Until 1991, the financial sector in India was heavily controlled, and commercial banks and term lending institutions, the two dominant financial intermediaries, had mutually exclusive roles and objectives and operated in a largely stable environment, with little or no competition. Term lending institutions were focused on the achievement of the Indian government‟s various socio-economic objectives, including balanced industrial growth and employment creation, especially in areas requiring development. These lending institutions provided access to long-term funds at subsidized rates through loans and equity from the Government of India and from funds guaranteed by the Government of India originating from commercial banks in India and foreign currency
  • 11. resources originating from multilateral and bilateral agencies. The focus of the commercial banks was primarily to mobilize household savings through demand and time deposits and to use these deposits to meet the short-term financial needs of borrowers in industry, trade and agriculture. In addition, the commercial banks provided a range of banking services to individuals and businesses. However, since 1991, there have been comprehensive changes in the Indian financial system. Various financial sector reforms, implemented since 1991, have transformed the operating environment of the banks and long-term lending institutions. In particular, the deregulation of interest rates, the emergence of a liberalized domestic capital market, and entry of new private sector banks, along with the broadening of term lending institutions‟ product portfolios, have progressively intensified the competition among banks and term lending institutions. RBI has permitted the transformation of term lending institutions into banks subject to compliance with the applicable law. Banking Sector Reforms In the wake of the last decade of financial reforms, the banking industry in India has undergone a significant transformation, which has covered almost all important facets of the industry. Most large banks in India were nationalized by 1980 and thereafter were subject to a high degree of control until reform began in 1991. In addition to controlling interest rates and entry into the banking sector, the regulations also channeled lending into priority sectors. Banks were required to fund the public sector through the mandatory acquisition of low interest- bearing government securities or statutory liquidity ratio bonds to fulfill statutory liquidity requirements. As a result, bank profitability was low, non-performing assets were comparatively high, capital adequacy was diminished, and operational flexibility was hindered. Recent Structural Reforms Proposed Amendments to the Banking Regulation Act
  • 12. Legislation seeking to amend the Banking Regulation Act has been introduced in the Indian Parliament. As presently drafted, the main amendments propose: to permit banking companies to issue preference shares that will not carry any voting rights, make prior approval of the Reserve Bank of India mandatory for the acquisition of more than 5.0% of a banking company‟s paid up capital or voting rights by any individual or firm or group, remove the minimum statutory liquidity ratio requirement of 25.0%, giving the Reserve Bank of India discretion to reduce the statutory liquidity ratio to less than 25.0%; and remove the limit of 10.0% on the maximum voting power exercisable by a shareholder in a banking company. Universal Banking Guidelines Universal banking in the Indian context means the transformation of long-term lending institutions into banks. Pursuant to the recommendations of the Narasimham Committee II and the Khan Working Group, the Reserve Bank of India, in its midterm review of monetary and credit policy for fiscal 2000, announced that long-term lending institutions would have the option of transforming themselves into banks subject to compliance with the prudential norms as applicable to banks. If a long-term lending institution chose to exercise the option available to it and formally decided to convert itself into a universal bank, it could formulate a plan for the transition path and a strategy for smooth conversion into a universal bank over a specified time frame. In April 2001, the Reserve Bank of India issued guidelines on several operational and regulatory issues which were required to be addressed in evolving the path for transition of a long-term lending institution into a universal bank. Pension Reforms Currently, there are three categories of pension schemes in India: pension schemes for government employees, pension schemes for employees in the organized sector and voluntary pension schemes. In case of pension schemes for government employees, the government pays its employees a defined periodic benefit upon their retirement. Further, the contribution towards the pension scheme is funded solely by the
  • 13. government and not matched by a contribution from the employees. The Employees Provident Fund, established in 1952, is a mandatory programme for employees of certain establishments. It is a contributory programme that provides for periodic contributions of 10% to 12% of the basic salary by both the employer and the employees. The contribution is invested in prescribed securities and the accumulated balance in the fund (including the accretion thereto) is paid to the employee as a lump sum on retirement. Besides these, there are voluntary pension schemes administered by the government (the Public Provident Fund, to which contribution may be made up to a maximum of Rs. 70,000) or offered by insurance companies, where the contribution may be made on a voluntary basis. Such voluntary contributions are often driven by tax benefits offered under the scheme. In 1998, the government commissioned the Old Age Social and Income Security (OASIS) project and nominated an expert committee to suggest changes to the existing policy framework. The committee submitted its report in January 2000, recommending a system for private sector management of pension funds to provide market-linked returns. It also recommended the establishment of a separate pension‟s regulatory authority to regulate the pensions system. Subsequently, in the budget for fiscal 2001, the government announced that a high level committee would be formulated to design a contribution-based pension scheme for new government recruits. The government also requested the Insurance Regulatory and Development. Authority has to draw up a road-map for implementing the OASIS report. The Insurance Regulatory and Development Authority submitted its report in October 2001. The report suggested that pension fund managers should constitute a separate legal entity to conduct their pension business. In August 2003, the government announced that it would be mandatory for its new employees (excluding defense personnel) to join a new defined contribution pension scheme where both the government and the employee would make monthly contributions of 10% of the employee‟s salary. The government also announced that a Pension Fund Development
  • 14. and Regulatory Authority would be set up to regulate the pension industry. The government constituted the interim Pension Fund Development and Regulatory Authority on October 11, 2003. In December 2003, the government announced that the new pension scheme would be applicable to all new recruits to Indian Government service (excluding defense personnel) from January 1, 2004. Further, on December 30, 2004, the government promulgated an ordinance establishing the statutory regulatory body, Pension Fund Regulatory and Development Authority to undertake promotional, developmental and regulatory functions with respect to the pension sector. In March 2005, the Government tabled the Pension Fund and Development Authority Bill in Parliament. The Union Budget for fiscal 2006 has recognized the opportunities for foreign direct investment in the pension sector and it has also announced that the government would issue guidelines for such investment. Technology Technology is emerging as a key-driver of business in the banking and financial services industry. Banks are developing alternative channels of delivery like ATMs, tele-banking, remote access and Internet banking etc. Indian banks have been making significant investments in technology. Besides computerization of front-office operations, the banks have moved towards back-office centralization. Banks are also implementing “Core Banking” or “Centralized Banking”, which provides connectivity between branches and helps offer a large number of value-added products, benefiting a larger number of customers. RBI Annual Report for the fiscal 2005 states that the use of ATMs has been growing rapidly and this has helped in optimizing the investments made by banks in infrastructure. Banks have joined together in small clusters to share their ATM networks during the year. There are five such ATM network clusters functioning in India. The payment and settlement system is also being modernized. RBI is actively pursuing the objective of establishing a Real Time Gross Settlement (RTGS) system, on par with other developed economies.
  • 15. Corporate Governance Adoption of good corporate governance practices has been getting the attention of banks as well as the regulators and owners in India. Banks in India now invariably have an Audit Committee of the Board of directors which is entrusted with the task of overseeing the organization, operationalisation and quality control of the internal audit function, reviewing financial accounts and follow-up with the statutory and external auditors of the bank as well as examinations by regulators. Disclosure levels in bank balance sheets have been enhanced, while measures have also been initiated to strengthen corporate governance in banks. 1.3. Nature of Banking in India A banking company in India has been defined in the banking companies act, one “which transacts the business of banking which means the accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.” Most of the activities a Bank performs are derived from the above definition. In addition, Banks are allowed to perform certain activities which are ancillary to this business of accepting deposits and lending. A bank's relationship with the public, therefore, revolves around accepting deposits and lending money. Another activity which is assuming increasing importance is transfer of money - both domestic and foreign from one place to another. This activity is generally known as "remittance business" in banking parlance. The so called FOREX (foreign exchange) business is largely a part of remittance albeit it involves buying and selling of foreign currencies. 1.4. Types of Banks Central Bank or Reserve Bank of India The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 cores on the basis of the recommendations
  • 16. of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the beginning. The Government held shares of nominal value of Rs. 2, 20,000. 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. 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 Commercial Banks Commercial banks in India have traditionally focused on meeting the short-term financial needs of industry, trade and agriculture. At the end of March 2005 there were 284 scheduled commercial banks and four non-scheduled commercial banks in the country, with a network of 68,116 branches. Scheduled commercial banks are banks that are listed in the second schedule to the RBI Act, and may further be classified as public sector banks, private sector banks and foreign banks. Scheduled commercial banks have a presence throughout India, with nearly 69.49% of bank branches located in rural or semi-urban areas of the country. A large number of these branches belong to the public sector banks.
  • 17. Public Sector Banks Public sector banks make up the largest category of banks in the Indian banking system. There are 28 public sector banks in India. They include the SBI and its associate banks and 19 nationalized banks. Nationalized banks are governed by the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 and 1980. The banks nationalized under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 and 1980 are referred to as „corresponding new banks‟. At the end of March 2005, public sector banks had 47,320 branches and accounted for 74% of the aggregate deposits and 70.47% of the outstanding gross bank credit of the scheduled commercial banks. Regional Rural Banks Regional rural banks were established from 1976 to 1987 jointly by the Central Government, State Governments and sponsoring public sector commercial banks with a view to develop the rural economy. Regional rural banks provide credit to small farmers, artisans, small entrepreneurs and agricultural laborers. There were 196 regional rural banks at the end of March 2005 with 14,433 branches, accounting for 3.50% of aggregate deposits and 2.81% of gross bank credit outstanding of scheduled commercial banks. Private Sector Banks After bank nationalization was completed in 1969 and 1980, the majority of Indian banks were public sector banks. Some of the existing private sector banks, which showed signs of an eventual default, were merged with state-owned banks. In July 1993, as part of the banking reform process and as a measure to induce competition in the banking sector, RBI permitted entry by the private sector into the banking system. This resulted in the introduction of nine private sector banks. These banks are collectively known as the new private sector banks. At year-end fiscal 2005, private
  • 18. sector banks accounted for approximately 18.1% of aggregate deposits and 20.0% of gross bank credit outstanding of the scheduled commercial banks. Their network of 6,143 branches accounted for 9.0% of the total branch network of scheduled commercial banks in the country. Foreign Banks At the end of March 2005, there were 31 foreign banks with 220 branches operating in India, accounting for 4.40% of aggregate deposits and 6.60% of outstanding gross bank credit of scheduled commercial banks. The Government of India permits foreign banks to operate through (i) branches; (ii) a wholly owned subsidiary; or (iii) a subsidiary with aggregate foreign investment of up to 74% in a private bank. The primary activity of most foreign banks in India has been in the corporate segment. However, some of the larger foreign banks have made consumer financing a significant part of their portfolios. These banks offer products such as automobile finance, home loans, credit cards and household consumer finance. The Government of India in 2003 announced that wholly-owned subsidiaries of foreign banks would be permitted to incorporate wholly-owned subsidiaries in India. Subsidiaries of foreign banks will have to adhere to all banking regulations, including priority sector lending norms, applicable to domestic banks. In March 2004, the Ministry of Commerce and Industry, Government of India announced that the foreign direct investment limit in private sector banks has been raised to 74% from the existing 49% under the automatic route including investment by FIIs. The announcement also stated that the aggregate of foreign investment in a private bank from all sources would be allowed up to a maximum of 74% of the paid up capital of the bank. Co-operative Banks Cooperative banks cater to the financing needs of agriculture, small industry and self- employed businessmen in urban and semi-urban areas of India. The state land development banks and the primary land development banks provide long-term credit
  • 19. for agriculture. In the light of the liquidity and insolvency problems experienced by some cooperative banks in fiscal 2001, RBI undertook several interim measures to address the issues, pending formal legislative changes, including measures related to lending against shares, borrowings in the call market and term deposits placed with other urban cooperative banks. RBI is currently responsible for the supervision and regulation of urban co-operative societies, the National Bank for Agriculture and Rural Development, state co-operative banks and district central co-operative banks. The Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (which came into effect as of September 24, 2004), specifies that all co-operative banks are under the supervision and regulation of RBI. Until the early 1990s, the Indian financial system was strictly controlled. Interest rates were administered, formal and informal parameters governed asset allocation, and strict controls limited entry into and expansion within the financial sector. The Government of India‟s economic reform program, which began in 1991, encompassed the financial sector. The first phase of the reform process began with the implementation of the recommendations of the Committee on the Financial System, the Narasimham Committee I. The second phase of the reform process began in 1999. The discussion below presents an overview of the role and activities of RBI and of each of the major participants in the Indian financial system, with a focus on the commercial banks. This is followed by a brief summary of the banking reform process along with the recommendations of various committees that have played a key role in the reform process. A brief discussion on the impact of the liberalization process on commercial banks and financial sector is then presented. Also, reforms in the non- banking financial sector are briefly reviewed. 1.5. Functions of a Bank Functioning of a Bank is among the more complicated of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate
  • 20. this sector rather stringently. In India, the regulation traditionally has been very strict and in the opinion of certain quarters, responsible for the present condition of banks, where NPAs are of a very high order. The process of financial reforms, which started in 1991, has cleared the cobwebs somewhat but a lot remains to be done. The multiplicity of policy and regulations that a Bank has to work with makes its operations even more complicated, sometimes bordering on illogical. This section, which is also intended for banking professional, attempts to give an overview of the functions in as simple manner as possible. Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheques, draft, and order or otherwise." The various functions of a bank are as follows: 1. Accepting deposits from the public The bank accepts three types of deposits from all types of income earners. They are:  Fixed deposit  Current deposit  Savings deposit. 2. Loans and Advances 3. Agency services 4. General Utility Services 1.6. Profile The South Indian Bank Limited (SIB) is an India-based schedule bank. SIB provides retail and corporate banking, Para banking activities, such as debit card, third party product distribution, in addition to treasury and foreign exchange business. SIB operates in four segments: Treasury, Corporate/ Whole sale Banking, Retail Banking and Other Banking Operations. The treasury services segment primarily consists of
  • 21. interest earnings on investments portfolio of the bank, gains or losses on investment operations and earnings from foreign exchange business. The Corporate / Whole sale Banking segment provides loans and other banking services to corporate segment. The Retail Banking segment provides loans and other banking services to non corporate customers. This segment includes income from Para banking activities, such as debit cards, third party product distribution and associated costs. The South Indian Bank was incorporated on January 25, 1929 in Thrissur, Kerala, by a band of enterprising men at a time when Swadeshi movement was gathering momentum to provide for the people a safe, efficient and service oriented repository of savings of the community on one hand and to reduce the dependence of the business community on moneylenders by providing need based credit at reasonable rate of interest. It became a scheduled bank in 1946. It has been in the forefront of upgrading the technology by introducing core banking solution. It has implemented, Sibertech, which runs on Finacle platform provided by Infosys Technologies Limited. All the branches in the major cities are covered under this project and as on date 87% of the total business is networked under core banking solution. ICICI Bank Ltd is the biggest shareholder of the South Indian Bank holding 11.25% of the bank‟s enquiry. South Indian Bank has several firsts to its credit:  First among the private sector banks in Kerala to become a scheduled bank in 1946 under the RBI Act.  First bank in the private sector in India to open a Currency Chest on behalf of the RBI in April 1992.  First private sector bank to open a NRI branch in November 1992.  First among the Kerala based banks to offer a Credit Card to customers in November 1992.
  • 22.  First bank in the private sector to start an Industrial Finance Branch in March 1993.  First among the private sector banks in Kerala to open an "Overseas Branch" to cater exclusively to the export and import business in June 1993.  First bank in Kerala to develop in-house, fully integrated branch automation software in addition to the in-house partial automation solution operational since 1992.  As on 31-Mar-2009, it has a network of 530 branches, 13 extension counters and 280 ATMs. 1.7. History of South Indian Bank South Indian Bank is now one of the leading scheduled commercial banks in India with a strong focus on technology and customer service. SIB has a pan India presence with 580 Branches, 3 Extension Counters and 377 ATMs spread across 23 States/Union Territories. The total number of Employees of the Bank as on 31-12- 2008 is 4826. South Indian Bank was registered as a private Limited Company under the companies Act of 1913 and commenced business on 29-01-1929 at Round South, Thrissur. The South Indian Bank Ltd., was formed by a group of 44 enterprising men of Thrissur who contributed Rs.500/- each to the initial paid up capital of Rs.22, 000/-. Their main objective was to serve the merchant community of Thrissur by freeing them from the clutches of the money lenders who charged exorbitant rates of interest. The bank received very good support from the public at large. Initially the growth was slow but steady. The number of branches opened each year testified its stability and popularity. It was included in the second schedule of the Reserve Bank of India and became a scheduled Bank on 07-08-1946. SIB was the first scheduled Bank in the private sector in Kerala to get the license under section 22 of the Banking Regulation Act 1949 from RBI on 17-06-1957. In the 80 years of its service the Bank had
  • 23. survived many crises. It could survive the Kerala Banking crisis of 1960 when the Pala Central Bank was closed down. A turbulent environment was experienced by banks in Kerala. It was a period of merger, amalgamations and takes over. South Indian Bank ventured to extend its helping hand to take over the assets and liabilities of 15 small banks in Kerala in 1964. It was based on the general policy of consolidation formulated by RBI. Branch Expansion As a result of this, the number of bank branches of the bank rose to 64 in 1964. This gave the bank a new vigour and vitality. Thereafter it began to branch out and spread over the states of Kerala, Tamil Nadu, Karnataka, Pondicherry, Andhra Pradesh, Maharashtra, West Bengal, Gujarat and Delhi. When the 14 major banks in India were nationalized by Govt. of India in 1969, SIB was having 78 branches. The liberal branch licensing policy adopted by RBI helped the bank to expand fast thereafter. At the time of Golden Jubilee Celebration in 1979, SIB was having a total of 235 Branches. Growth in the number of branches and growth in business are shown in the table. Foreign Exchange Business The Bank got license from RBI to deal in Foreign Exchange on 01-08-1975. It is an authorized dealer in Foreign Exchange now and operates all types of foreign exchange business. It has correspondent banking arrangements in all commercial centers of the world. NRI‟s can remit funds to an account in the bank either online or through draft drawing arrangements. The bank is entrusted with the management of remittance business of a prominent exchange house in the UAE, M/s. Hadi Express Exchange, and has deputed officers to the two offices of the Exchange house in Dubai and Sharjah. Specialized Branches
  • 24. To provide specialized service to various segments of business, Bank decided to open specialized NRI, Industrial finance, and overseas branches at various parts of our nation. The first NRI branch was opened in November 1992 at Ernakulam and the first Industrial Finance Branch in March 1993 at Coimbatore. The first overseas branch to cater exclusively to export-import business was opened in June, 1993 at Ernakulam. Later on, an exclusive SSI Branch was opened at Chennai. Core Banking Solution SIB is the first Kerala based bank to implement the core banking system. The bank had embarked upon a massive technology up-gradation project; by the SIB is the first Kerala based bank to implement the core banking system. The bank had embarked upon a massive technology up-gradation project, by the name Sibertech, for introduction of Core Banking Solution. The Sibertech Project was formally launched on January 17, 2001 by Sri. N.R. Narayana Murthy, Chief Mentor (Infosys Technologies Ltd.) in a colorful function at Kochi. For this, a modern Data Center has been set up at Kochi, connecting all the branches, the Departments at Head Office, Regional Offices, and the Treasury Department at Mumbai and the International Banking Division at Kochi. This robust network facilitates anywhere banking, Networked ATMs, Internet Banking, Mobile Banking, Global ATM cum debit card operations etc. The Sibertech project was launched with a target of connecting the 200 odd branches in two phases by March, 2004. Towards this endeavor, the bank concluded a technology partnership with M/s. Infosys Technologies Ltd. for Finacle, the Core Banking Solution, M/s.HCL Info systems Ltd. for Network Integration and M/s. WIPRO for Data Centre set up and maintenance. The bank has achieved 100 per cent connectivity by implementing Core Banking Solution by 24th March, 2007. Further to strengthen the ATM reach and global
  • 25. acceptability, Bank has introduced Global ATM-cum-Debit card, which can be used at ATMs and merchant establishments all over the world. The Bank has also introduced value added services such as mobile banking and internet banking. The aim of the Bank is to offer the latest technology driven value added services to the customers towards the realization of our motto – Experience Next Generation Banking. Board of Directors and Corporate Governance The composition of the Board of Directors is governed by the provisions of the Banking Regulation Act, 1949. The Board consists of eminent persons with considerable professional expertise and experience in Banking, accounting, finance and other fields as specified in the said Act. Corporate governance of the Bank ensures high standards of transparency, accountability, ethical operating practices and professional management. Under the able leadership of MD and CEO, Dr.V. A. Joseph, Chairman Sri. G.A. Shenai and other directors and top executives, the Bank is now performing extremely well. Human Resources The bank attaches top priority to impart adequate training to its employees. It considers that training is necessary for both individual and organizational effectiveness. The training should help to develop the skills and knowledge and also the competencies desired from them. Training interventions are effectively made use of by the bank to improve the performance of the organization since 1965. SIB-Staff Training College (SIB-STC) commenced its operations on 28th October, 1965. The first training batch of SIB-STC was inaugurated by Sri. Samuel Mathai, Vice- Chancellor of Kerala University. Bank Chairman Sri.Joseph Chakola, General Manager MCP Nambiar and STC Principal Sri.C.K.Menon were present on the occasion. Since then SIBSTC has made substantial improvements and played a key
  • 26. role in the progress of the organization. It could meet the qualitative and quantitative training needs of the organization. In addition to the Central Staff Training College at Trichur, Regional training centers were set up at Delhi, Mumbai, Bangalore, Chennai and Coimbatore in 2005. Later, Regional training centers were set up at Calcutta and Hyderabad also. To facilitate the transition of the Bank from a regional to national platform, and to bring in more professionalism the bank has recruited specialist officers. The bank has also recruited a good number of probationary officers and clerks through campus recruitment. This is in addition to the national and regional level recruitments through entrance test. The bank also introduced a Staff Welfare Scheme by which the children of the Staff members were offered employment after proper selection process in lieu of their parents opting out of the job. The newly recruited officers/clerks are posted to branches or offices after proper induction training. SIB has innovated a number of Staff-welfare measures which are unheard of in the banking sector in India. It has introduced an innovative and attractive incentive scheme encompassing all staff members from ED to part-time sweepers. This helped the Bank achieve business targets with focus on CASA products. The bank has also introduced an employee stock option plan. The latest welfare measure is the facility to avail long leave for purposes such as maternity and child care, higher studies and medical treatment. 1.8. Milestones South Indian Bank commenced operations on 29-01-1929 as a private limited company in a rented room at the western end of Bishop Menachery Building (now Municipal building), Round South, and Thrissur. The bank opened the first branch in Wadakkancherry on 12-02-1932. The bank was converted as a public limited company on 11-08-1939. The bank purchased a building at Round South, Thrissur on 25-05- 1940. The FIRST among the private sector banks in Kerala to become a scheduled
  • 27. bank on 07-08-1946 under the RBI Act. The English version of the Memorandum and the Articles of Association adopted on 08-02-1947 South Indian Bank Employees Association (SIBEA) was registered on 03-03-1952. The first balance sheet in English was published in 1953. The bank obtained banking license from the RBI on 17- 06- 1957 under the Banking regulation Act, 1949, becoming the first bank in the private sector from Kerala The Silver Jubilee of the bank was celebrated on 09-02- 1958 and Sri. K. Kamaraj, the Chief Minister of Madras and Sri. C. Achutha Menon, the Chief Minister of Kerala graced the public function. The bank took over assets and liabilities of 15 small banks in Kerala in 1964 as per the policy of consolidation of banks by the RBI. The bank started staff training college on 15-10-1965. South Indian Bank Officers‟ Association was formed on 27-02-1966. A joint training college was started with Catholic Syrian Bank and Dhanalakshmi Bank as co-partners on 01-09- 1970. The bank got license from the RBI to deal in foreign exchange on 01-08-1975. The Golden Jubilee of the bank was celebrated on 17-10- 1980 and 18-10-1980. Many dignitaries including, Central Ministers Sri. R. Venkitaraman, the Finance Minister, Sri. C.M. Stephen, the Communications Minister and State Ministers and Chairman, SBI graced the occasion. The Head Office of the bank was shifted from the Silver Jubilee building at Round South, Thrissur to the new building at Mission Quarters, Thrissur in 1984. A Co- operative Society was formed in 1984 under the name South Indian bank Staff Co- operative Credit Society. The bank ventured the publication of Students‟ Economic Forum in December 1991. The first bank in the private sector in India to open a Currency Chest on behalf of the RBI in April 1992 is this. The first bank in Kerala to develop in-house, fully integrated branch automation software in addition to the in- house partial automation solution operational since 1992. The first private sector bank to open a NRI branch in November, 1992 is this. This is the first bank in the private sector to start an Industrial Finance Branch in March 1993. The first among the private sector banks in Kerala to open an “Overseas Branch” to cater exclusively to the export
  • 28. and import business in June, 1993. The first Public Issue of Shares of the bank (IPO) was completed in October 1998. It Listed the Shares in BSE, NSE and CSE in December 1998. The Sibertech Project for implementation of Core Banking Solution commenced in 2001 The Platinum Jubilee of the bank was celebrated on 22- 03-2004. The Chief Minister of Kerala, Sri. A.K. Antony and other dignitaries graced the occasion by their presence. The Follow-on Public Offer (FPO) of bank‟s shares was done in February, 2006. Bharath Mammootty identified as South Indian Bank‟s Global Brand Ambassador in October 2006 The bank achieved 100 per cent Core Banking Solution in March 2007. The bank could raise substantial capital funds to the extent of Rs.326 crores by way of Qualified Institutional Placement (QIP) in September, 2007 and thus the total capital resources exceeded Rs.1000 crores Opened 500th branch on 31-03-2008 in New Delhi. Came out with Bonus Issue of Shares in 2008. 1.9. A New Visual Identity for New Competencies South Indian Bank unveiled the new corporate logo that demonstrates the major transformation the bank has undergone since its inception. Padmashree Mammootty, the three-time Bharath award winning megastar, who is also the global Brand Ambassador of the Bank, unveiled the new corporate brand logo on 16th October 2006. Bank‟s new logo will project the significance of transformation to the public around the world. It is a positive sign of change that has re-energized the staff members and caught the attention of the customers who understand that South Indian Bank is dedicated to relationship built on trust. This warm relationship of the customers and the staff alike with the Bank is beautifully portrayed in the new logo by way of two hands strongly clasping on to the pillar- that is “SIB”, which represent bank‟s loyal customers on the top and the employees below. The new visual identity of the bank consists of „cardinal red‟ and „white‟ colours. „Red‟ usually represents energy, creativity and also joy. Red colour also symbolizes warmth. By embracing this colour for its new logo, SIB is giving its customers the connotation of the continuing growth of ideas and concepts and warm relationship.
  • 29. It also conveys that the Bank is on the cutting edge of new technology. The new logo is a combination of forms that suggest a stylized „S‟. „S‟ here represents service, strength, smartness, support and safety. For the bank which emphasizes on personalized customer service which has been the Bank‟s core strength all these 80 years of its existence, „S‟ symbolizes, as mentioned earlier, service. It may be pointed out that “Outlook Money – Cfore Survey” selected South Indian Bank as the best private sector bank in India in the service quality segment. „S‟ also represents strength derived from superior banking technology. For the Bank which could bag an award for excellence in banking technology from IDRBT- which is the technical arm of the Reserve Bank of India, this is all the more meaningful. The bank has bagged this award for the excellent contributions made in the area of information systems, security policies and practices, by tightly competing with all categories of banks in India. During the global financial crisis when there is public concern about the asset quality of banks, SIB is the only bank from the private sector –including the new generation and traditional banks to emerge as the „best bank in the asset quality‟ in the “BT- KPMG Survey of Best Banks in India” published on 12th December 2008. “Experience next generation banking” is the new corporate slogan of the bank. Besides the technological capability which the bank is having, the bank recruits specialist officers as team members to provide professional customer services. 1.10. Business Strategy The Bank is committed to become a technology- driven, customer-oriented bank (the new corporate slogan being -“Experience Next Generation Banking”) where passion for excellence is a way of life, innovation is a tradition, commitment to values unshaken and customer loyalty is abiding. The long-term corporate objective is to emerge as the most preferred Bank in India, with core competence in fostering relationship banking, garnering core deposit with
  • 30. accent on cost, creating high yielding quality assets through focused marketing, qualitative appraisal and effective monitoring. We are dedicated to provide quality service to our customers and maintain high standards in corporate responsibility. SIB-A Customer Oriented Bank Despite acquiring the latest technological capabilities available to the banking industry in the country, the Bank will continue the emphasis on personalized customer service, which has been the Bank‟s core strength for all these 78 years. Incidentally, the Bank had also been selected, in the Outlook Money – C- Fore Survey, as the best private sector Bank in India in the „Service Quality‟ segment. 1.11. Vision and Mission Vision To emerge as the most preferred bank in the country in terms of brand, values, principles with core competence in fostering customer aspirations, to build high quality assets leveraging on the strong and vibrant technology platform in pursuit of excellence, customer delight and to become a major contributor to the stable economic growth of the nation. Mission To provide a secure, agile, dynamic and conducive banking environment to customers with commitment to values and unshaken confidence, deploying the best technology, standards, processes and procedures where customer convenience is of significant importance and to increase the stakeholders‟ value. 1.12. Objectives  To provide a secure, agile, dynamic and conducive banking environment to customers;
  • 31.  To provide the best technology;  To provide standards, processes and procedures where customer convenience is of significant importance and to increase the stakeholders‟ value. 1.13. Design Ever since major commercial banks were nationalized in two phases in 1969 and 1980, there has been a sea change in their functions, outlook and perception. One of the main objectives of nationalization of banks has been to help achieve balanced, regional, sectoral and sectional development of the economy by way of making the banks reach out to the small man and to the remote areas of the country. An organization consists of people who carry out differentiated tasks which are coordinated so as to contribute and achieves planned goals. Organizations are created mainly for producing goods and services to the society for which they have to incorporate a formal structure. Indian banking is now operating in a more competitive setting with the induction of new banks. Both Indian and foreign, who will be bringing in new work technology and specialist expertise and a variety of new financing instruments. The structure of South Indian a bank is Head Office, Regional Office, Branch Office, Extension Counters and ATM Counters. 1.13.1. Head Office: South Indian Bank‟s functions are controlled and co-ordinated by the Head office. The Head Office of South Indian Bank is in Trichur, Kerala. It controls the activities of regional offices and branch offices. All most all the departments are there in the Head Office. Every decision is taken here. Since all the departments are there in the Head Office, every function is done here. The main functions of Head office are given below.
  • 32. It controls all the activities of bank: The managing Director‟s Secretariat is there in the head office. So all most all the decisions pertaining to the smooth administration of the bank is taken here. It checks all the accounts of different Regional Offices and Branch Offices through its accounts departments. Strong and sound DICT is there to make proper communication. It deals with all the legal issues of the bank through the legal departments. It checks the NRI account portfolio through its NRI division. It checks and reviews the customer relationship management. 1.13.2. Regional Office: To make the administration and functions easier, Regional Offices are set up for each region. It acts as a link between branches and head office. In each region, certain number of branches and extension counters are there. Administration is very difficult according to the increase of the branches. Regional office makes the function of head office lesser through its co responsibility. The Regional Offices of South Indian Bank is given below: Bangalore, Chennai, Coimbatore, Delhi, Ernakulum, Hyderabad, Kolkata, Kottayam, Kozhikode, Mumbai, Pathanamthitta, Palakad, Trivandrum, Trichur, and Madurai. 1.13.3. Branch Office: There are 580 branches for South Indian Bank. They come under specific Regional office. To make personal contact with the customers, branches are very useful. In branch offices, we can‟t see all the departments. But every function of the bank such as accepting deposits, issuing loan and clearing is there. Job rotation is there in branch offices. 1.13.4. Extension Counter: It is same as branch. It also has the similar functions of branches except issuing of loans. As of now, there are only three extension counters are there. It is the preceding stage to make a branch.
  • 33. 1.13.5. ATM Counters: The main purpose of the bank is to reduce the burden of the customer. So the banks have opened ATM Counters at different places to avoid the wastage of time and different formalities. South Indian Bank has set up 375 ATM Counters all over India. South Indian Bank‟s Global ATM-Cum-Debit Cards are now acceptable in the Master Card International Network System as well as in the domestic National Financial Switch (NFS) Network System owned by IDRBT, the technical arm of RBI. Provide on-line access to Savings Bank or Current accounts of South Indian Bank. Tied up with the world-renowned service provider, MasterCard International; can be used in 8, 30,000 ATMs & 7 million Point of Sale (POS) terminals worldwide. South Indian Bank being a member of NFS network, South Indian Bank cards are acceptable in other member banks ATMs. It can be used in 31000+ ATMs in India. The Maestro Debit card is a PIN based card and operates similar to ATM making it 100% secure, even in POS terminals. Global Cards are issued free of cost to the customers of South Indian Bank. Nominal fee is charged to the users at other Bank‟s ATMs. Cash withdrawal limits through ATMs is up to Rs.20, 000/- per day.
  • 36. Index 2.1. Departments 2.2. Accounts and Deposits 2.3. Loans 2.4. Mutual Funds 2.5. Insurance 2.6. Money Transfers 2.7. Technology; Promotion Drive of South Indian Bank
  • 37. 2.1. Departments There are various departments in South Indian Bank for the smooth functioning of the bank. It is a decentralized system. Each department is having their own authority, which is not contrary but complimentary to the rules and regulations of the bank. The functions of the bank will depend on the functions of the departments as explained below: 2.1.1. Managing Director’s Secretariat: It lies in the head office which is in Trichur. The members of this Secretariat are Managing Director, Executive Director, Chief General Manager, and General Manager who are the administrative body of the bank. They formulate the policies and strategies with the help the board. 2.1.2. Accounts Department: Accounts Department can be seen in almost all the bank offices. The Chief Manager, official staffs and clerical staffs are the members of this department. It maintains and provides the accounts and financial reports of the bank as and when needed.
  • 38. 2.1.3. DICT: It is the department for information and communication technology. The office of DICT is in Ernakulum. Deputy General Manager, Assistant General Manager, Staff members and Clerical staffs are the members of this department. It facilitates information and communication technology. It has a sub department namely Credit Data Management Centre which deals with the credit sanction and maintenance of loan data. 2.1.4. Corporate Financial Management: The office of Corporate Financial Management is situated in the head office in Trichur. Deputy General Manager, Officers in different scales and Clerical staffs are the members of this department. It collects, verifies, maintains, and provides the Profit and Loss Account and Balance Sheet of various branches and the head offices. 2.1.5. Inspection and Vigilance Department: The Inspection and Vigilance Department is there in the head office in Trichur. This department is functioning under the leadership of Deputy General Manager and together with the co operation of the staff members. It inspects the functions of the branches and evaluates the banking operations and it exercises the vigilance authority too. 2.1.6. Legal Department: This Department deals with all the legal matters of the bank. This department is very necessary to protect the bank from all the legal issues relating to the functions, finance and customer relationship. This department is in the head office in Trichur. This department is headed by Deputy General Manager with the co-operation of other officers and clerical staffs. 2.1.7. NRI Division: This department is ultimately for NRIs. It deals with the accounts, deposits, loans and customer related issues. This department is in the head office in Trichur which is headed by the Deputy General Manager .He co ordinates all
  • 39. the official staff members and clerical staff for the smooth functioning of the department and the bank too. 2.1.8. Personnel Department: It is in the head office in Trichur deals with the recruitment, selection, promotion, transfer, compensation and employee grievances. This department is headed by the Deputy General Manager to review the issues relating to the employees for the growth and progress of the bank. He co ordinates the staff by hearing their grievances and reports their demands to the higher authority. 2.1.9. Planning and Development Department: This department deals with the products of the bank, issues circulars and appoints brand ambassadors. It is in the head office in Trichur which is headed by Deputy General Manager. He utilizes the abilities and skills of his subordinates and motivates them to fulfill their mission effectively. 2.1.10. Secretariat: It is in head office in Trichur headed by Deputy General Manager. The main function of this department is to deal with the public issues especially the matters relating to the shareholders. Stationery cell is a sub department which provides the cheques and forms etc. 2.1.11. Marketing Department: This department is in the regional office in Ernakulum. This is headed by Deputy General Manager. It deals with the time, mode and place of advertisements. It has certain sub departments such as Internet banking and Mobile banking which deals with Cyber net, TM and SMS, Grievance Department which deals with the customer issues in relation to the marketing of the products. 2.1.12. IRMD: This department calculates the risk, mortgage, security quality, and collateral and deals with the management of risk. This department functions in the head office, Trichur.
  • 40. 2.1.13. Credit Department: In this department, there are various sub sections such as credit sanction, credit monitoring and credit recovery. Credit sanction reviews the proposals and sanctions. Similarly, Credit recovery deals with the NPA management, recovery of assets and settlement. Finally, Credit monitoring gives a follow up for the credit proposals and recovery. These three sections help the department for its smooth function. 2.1.14. Organization and Methods and Compliance: This department provides a code of conduct for the bank reviews the code of conduct and evaluates the observation of this code of conduct. 2.1.15. Treasury Department: This department deals with the equity. This department‟s function is same as the marketing department. It deals with the funds; the collection of funds and the proper allocation of funds. 2.1.16. International Banking: This department deals with the FOREX Rates. This is mainly related to the foreign transactions. These various Departments work together with co operation under the coordination of Board of Directors and CEO toward its mission and vision. These departments help the bank for its easiest operation and for the achievement of its organizational goals. 2.2. Accounts and Deposits The south Indian Bank has different but similar accounts and deposits for Residents, NRIs and corporate. They are given as Personal Banking, NRI Banking and Business Banking. They are explained separately below. At first Personal Banking deposits and Accounts are given below.
  • 41. 2.2.1. Personal Banking Deposits and Accounts Savings Account A Savings Account with South Indian Bank allows the customers to route all their personal financial transactions in a secure and convenient way. With the power of technology based value added services, the customers are never away from their Savings Account. South Indian Bank has different types of Savings Account to suit the customers‟ need. They are as follows:  Regular savings:  Privilege Savings Account  Group Salary Savings Account  Junior Savings  Saral Saving  Youth Plus Savings  Mahila Savings  SB invest Term Deposits Every customer can earn a higher income on your surplus funds by investing in a deposit scheme of their choice. The Bank provides security, trust and competitive rate of interest. South Indian Bank provides schemes which combine good returns with easy liquidity. Salient features are,  Nomination facility is available in respect of all deposit accounts  Interest up to Rs.10000/- per annum is exempted from TDS  Loans are available on deposit accounts up to 90% of deposit amount Some of the Term Deposits are given as follows:  Kalpakanidhi :  SIB Flexi Deposit
  • 42.  SIB Tax Gain 2006  Fast Cash Deposit  Fixed Deposits  Recurring Deposit  80 Plus Deposits 2.2.2. NRI Banking Deposits and Accounts To support NRIs, The South Indian Bank offers high return deposit schemes in Indian Rupees under the category of NRE/NRO and Foreign Currency in addition to Savings Bank Accounts.  NRE Rupee Account o Savings Account  SB NRE  SB NRE Privilege  NRE SB Privilege Diamond Account  Youth plus Savings  MAHILA Savings o Term Deposits  Kalpakanidhi  Flexi Deposit  Fixed Deposits  Recurring Deposits  NRO Rupee Account o Savings Account  SB NRO  SB NRO Privilege o Term Deposits  Kalpakanidhi  Foreign Currency Deposits
  • 43. o Term Deposits- FCNR  Kalpakanidhi  Platinum Kalpakanidhi  Fixed Deposits 2.2.3. Business Accounts The South Indian Bank offers different types of Business Accounts such as Current Account, Overdrafts (OD), Cash Credits (CC) and Mercantile Credits. These accounts allow you the convenience of conducting day-to-day banking operations, in addition to offering working capital credit requirements.  Normal Accounts  Premium Accounts 2.3. Loans 2.3.1. Residential Individuals As time changes, needs also change and so does the spending solutions available. As a result, mindset has also changed. Nowadays, loans are an integral part of personal finance. It makes sense in today‟s financial scenario. South Indian Bank foresees every kind of need and offers various special packages. These special packages are explained below. Personal Loan Scheme  Individual loans  Group Loans Vehicle loans  Mobiloan Personal  Mobiloan Commercial
  • 44.  Mobiloan Agricultural Home Loans  For Resident Indians  SIB-Shelter  For Non Resident Indians  For Senior Citizens  SIB-SHIELD Gold Loans  Gold Power  Gold Rush Educational Loans  Vitjnan Pradhan Scheme  SIB „Excellence‟  Vidyanidhi Scheme Agriculture Loans  Agriflex Flexi loan OTS scheme for Micro & Small Enterprises (MSE) 2.3.2. Loans for NRIs Loan schemes for NRIs include apart from the usual personal loans, home loans, loan against deposits, etc. to help you meet your financial goals. We have different schemes for different purposes.  Personal Loans  Home Loans  Pravasi Swagat
  • 45.  SIB Flexi loan 2.3.3. Financing the Business Domestic Finance  Working Capital finance  Long Term Finance  Non Fund Based finance International Finance  Export Finance  Import Finance 2.4. Mutual Funds South Indian Bank has tied-up with the leading Mutual Funds, so that the customer may pick and choose, as per his investment goals. Some examples are:  LIC Mutual Fund  ICICI Prudential AMC  Franklin Templeton 2.5. Insurance Coverage for life and property are always advisable to ensure protection. South Indian Bank brings the most beneficial policies from insurance majors. Whether for households or for businesses, South Indian Bank brings all kinds of policies. They are as follows.  Life Insurance  Health Insurance  General Insurance
  • 46.  Export Credit Guarantee Corporation (ECGC)  Online Insurance o Health Insurance  Health Guard  Personal Guard  Critical Illness  Hospital Cash  Silver Health Policy o Home Insurance  Householders Insurance Policy o Motor Insurance  Motor Insurance Policy o Travel Insurance  Travel Companion 2.6. Money Transfers Fast, reliable and with minimal charges, money transfers with South Indian Bank is a no-hassle affair. Be it within the country or abroad, South Indian Bank‟s online money transfer services make the business of transferring money look one of the easiest jobs. With all branches networked under the Core Banking system, customer can send and receive money in an instant and meet his urgent needs.  Domestic Transfers o SIB Fast Money o Real Time Gross Settlement System (RTGSS) o National Electronic Funds Transfer (NEFT) o Demand Draft  International Transfers o Online money Transfer
  • 47.  SIB Express  TT Remittance  Express Remittance  Cash on-line  Xpress Money  Wall Street Instant Cash  Moneygram o Correspondent Banks o Swift Centre o Draft Drawing Arrangements 2.7. Technology; Promotion Drive of South Indian Bank South Indian Bank had embarked upon a massive technology up gradation drive by introduction of a Centralized Core banking solution. For this, a modern Data Center has been set up at Kochi, connecting all branches with all the Departments at Head Office, all Regional Offices, the Treasury Dept at Mumbai and the IBD at Kochi. This robust network facilitates anywhere banking, Networked ATMs, Internet Banking, Mobile Banking, Global debit cum ATM card operations, Online trading, online shopping etc. The Sibertech project was launched with a target of connecting the 200 odd branches in two phases by March 2004. Towards this endeavor, the bank has concluded a technology partnership with M/s Infosys Technologies Ltd for Finacle, the Core Banking Solution, M/s HCL Info systems Ltd. for Network Integration and M/s WIPRO for Data Centre set up and Maintenance. The Sibertech Project was formally launched on January 17, 2001 by Sri.N.R.Narayana Murthy, Chief Mentor, Infosys Technologies Ltd in a colorful function at Kochi. The state of the art Data Center of international standards at Kochi is the only one of its kind in the banking industry in Kerala. A number of dignitaries have visited this
  • 48. Data Center, including Sri. Asim H. Premji, Chairman & Managing Director, Wipro Ltd. Per se bank has achieved 100% Core Banking Solutions by 24th March, 2007.Further to strengthen the ATM reach and global acceptability Bank has introduced Master Card Global Debit- cum- ATM card, which can be used at ATMs and merchandise all over the world. We have launched internet banking primarily focusing the individual as well as corporate clients. The Bank has also introduced Mobile banking for customers as a value addition. The aim of the Bank is to offer the latest technology driven value added services to the customers without compromising the motto - Blending Tradition with Technology. 2.7.1. New Pension System Pension Fund Regulatory and Development Authority (PFRDA), established by the Government of India on 23rd August 2003, and launched the New Pension System (NPS) across the country with effect from 1st May 2009. PFRDA is mandated to act as a regulator for the pension sector. South Indian Bank (SIB), upon willingness and technical preparedness, has been allowed by the PFRDA to act as one of the Point of Presence (POP) Banks in the country. In fact, SIB is the single old generation private sector bank that has been permitted by PFRDA among the names of 22 POPs. SIB has identified 312 selected branches across the nation, to act as the Point Of Presence – Service Provider (POP-SP). (1) Initial Customer Interaction for NPS, (2) Subscriber Registration, (3) Maintenance of hard copies and record of transactions, (4) Regular subscriber contribution file upload onto the Central Recordkeeping Agency (CRA) System, (5) Subscriber servicing, (6) Grievance handling is some of the key functions of the POP.
  • 49. Activities for providing all POP/POP-SP services to fully meet the requirements of PFRDA in serving the citizens of India are already implemented in SIB. 2.7.2. Online Trading - SIBer Trade Customers of South Indian Bank are availing capital market services presently through multiple channels. ‘SIBer Trade’ attempts to offer three-in-one (Online trading) model for the benefit of our customers through our Bank. Benefits to SIB customers 1. Convenience – SIBer Trade helps our customers to easy management of their equity investment portfolio. It offers the convenience of a Financial Supermarket. Customers can open their Savings account, Demat Account and trading account by approaching any of our Branches. 2. No more cheques. The system envisaged is fully online seamless one and customers need not issue cheques for every share purchase, as done usually. Debits/Credits for the purchase/sale of equities will happen automatically to customers Savings accounts. 3. No need to submit Delivery Instruction Slips (DIS) or track the settlement cycles. There is no requirement of submission of DIS by the customers and the chances of auction of shares on forgetting to submit delivery instructions to the DP are now ruled out. 4. Dynamic display of live stock exchange quotes gives the client immense advantages while trading in stocks. 5. Best Price: Decisions can be made on the latest quotes and orders will reach the stock exchange almost instantaneously, thereby assuring the best price in every transaction.
  • 50. 6. Comfort – Client can place the order from anywhere in the world, any time of his choice. Off line orders can also be placed after trade timings 7. Security - Funds/ shares lie with the bank till the trade is confirmed. Transfer of funds/shares to the broker takes place only after the days trading is over. 8. Delivery Trading – When the Customer purchases or sells shares in cash trading the shares/funds will normally be credited to the demat/bank account on the settlement day of the stock exchange which is normally two working days after the trading day(T +2) 9. Margin Trading – Intra Day trades. Customer can trade up to a multiple of the funds allocated keeping margin. The transactions will have to be squared off, before 3 p m on the same day 10. Buy Today Sell Tomorrow – What is bought today can be sold tomorrow, even before they are credited to the demat account in select Shares 11. Trade over phone – Customers can call a toll free number and sell or buy or place orders with Geojit. 12. IPO – Client can also invest in Initial Public Offers also through SIBer Trade. It can be made online also. 13. Customers are not losing interest for the unutilized funds 14. Customers will be getting contract notes on the same day, by evening through mail. 2.7.3. PAN Service Agency (PSA) South Indian Bank is authorized to service the PAN applications and for this purpose, South Indian Bank has made an arrangement with UTI Technology Services Ltd. PAN application forms can be downloaded from South Indian Bank Website. Customer can get his PAN card by simply filling up the application form and lodging the same at our branches along with the following documents: Duly filled up application form along
  • 51. with Xerox copy of Proof of Address (POA), Proof of Identity (POI) and a recent photograph (of 3.5 cms x 2.5 cms in size) can be lodged at our designated branches. Also bring the originals of the documents for verification. In case of minors, the POA & POI of the parent / guardian (who should also be an IT assesses) who applies on behalf of the minor should be enclosed along with the application. Photograph of the minor, if available, may be pasted on the application form. A processing fee of Rs.94/- is payable to UTITSL. For getting the PAN card mailed to a foreign address, customers have to pay an additional postal charge of Rs.650/- in the form of a demand draft favoring UTITSL, Chennai. In case resident address is given by an NRI, this additional expense can be avoided. If the application is in order, customer will receive the PAN card by „speed post‟ to the mailing address given in the application form within three weeks. A new provision relating to tax deduction at source (TDS) under the Income Tax Act 1961 will become applicable with effect from 1st April 2010. If the PAN is not furnished to the bank, tax at the prescribed rate or 20%, whichever is higher will be deducted, while paying / crediting interest on deposits. However, there is no TDS on interest earned on NRE Deposits in Rupee / Foreign currency and also on interest earned in domestic SB & RD A/cs. For domestic term deposits, TDS will be deducted, only if the aggregate interest exceeds Rs.10, 000/- in a financial year. As per the revised rules, Form 15 G / 15 H for non deduction of tax in domestic term deposits will be valid / accepted, only if the customer furnishes his PAN to the bank. Once the tax is deducted by the bank and paid to the Govt. of India, (where PAN is not submitted) Bank cannot refund the amount. Hence we advise you to obtain PAN at the earliest and communicate the same to your bank branch before tax is actually deducted on interest payments.
  • 52. Non deduction of tax will not be accepted in NRO A/cs. TDS at the applicable rate will be deducted while paying / crediting the interest for all types of NRO A/cs, irrespective of the amount of interest. The prescribed rate of tax deducted for NRO A/cs depends upon the country of residence of the depositor and the Double Taxation Avoidance Agreement (DTAA), if any, entered into between the respective Govts. PAN card has multifarious uses in our day to day life: It is a major identification document. It is For investments in primary and secondary markets, For opening Demat accounts and Trading accounts; For Mutual Fund investments, and mandatory for any depositor (including Non- Residents) whose receipts are subject to deduction of tax at source. 2.7.4. Demat Services The South Indian Bank is offering Depository services for the benefit of its customers. Through this facility, the customers can hold their securities in electronic form with Central Depository Services (India) Ltd (CDSL).Thus the customers of the bank can now open Demat accounts with South Indian Bank through our designated branches. A Demat Account is an account which holds the Beneficial Owner's (BO's) securities in electronic form. There are many advantages in opening a Demat account and keeping the securities in dematerialized form. Major advantages are:-  It is a safe and convenient way to hold securities compared to holding securities in physical form.
  • 53.  It eliminates damage, loss, theft and misusage of physical certificate  No stamp duty is levied on transfer of securities held in Demat form.  Change of address, registration of Power of Attorney etc can be effected across companies by one single instruction to DP.  Shares can be traded and transferred even in single number which was not possible earlier  Facilities in a Demat Account  Dematerialization, i.e. getting physical securities converted into electronic form.  Rematerialisation i.e. getting electronic securities available in BO Account converted back to physical form.  Maintain record of holdings in the electronic form.  Settlement of trades by delivering/receiving securities from /in BO Accounts.  Settlement of Off-market trades i.e. transactions between BOs entered outside the Stock Exchange.  Receiving electronic credit in respect of securities allotted by issuers under IPO, bonus and rights shares etc. For opening a Demat account, the customer is requested to collect the prescribed opening form from any of our designated branches. Filled up application forms may be submitted with any of the notified branches convenient to the customer. An agreement is to be executed on requisite stamp paper. Applicant & joint holder/s has to submit in person, self attested copies of the PAN card, Address and Identity proof along with originals for verification, Bank account particulars and cancelled cheque leaf and passport size photograph along with the application. On opening the Account a unique BO ID (Beneficial Owner Identification) Number is allotted. 2.7.5. Any Branch Banking
  • 54. On introduction of the prestigious centralized core banking solution in technology partnership with the Infosys Technologies Ltd., South Indian Bank is now providing absolutely on-line anywhere banking facilities at all its branches, covering all the major centres in the country. Two anywhere banking products are now offered by the Bank to its privileged customers. SIB Privilege for Savings A/c holders This is a unique savings account introduced for the benefit of the business class for providing anywhere banking facility. SIB Premium for Current /Overdraft A/c Customers This is a unique current/overdraft account introduced for the benefit of the business class for providing anywhere banking facility. 2.7.6. Global ATM cum Debit Card South Indian Bank‟s Global ATM-Cum-Debit Cards are now acceptable in the Master Card International Network System as well as in the domestic National Financial Switch (NFS) Network System owned by IDRBT, the technical arm of RBI. Provide on-line access to Savings Bank or Current accounts of South Indian Bank; tied up with the world-renowned service provider, MasterCard International. Can be used in 8, 30,000 ATMs & 7 million Point of Sale (POS) terminals worldwide. South Indian Bank being a member of NFS network, South Indian Bank cards is acceptable in other member banks ATMs; can be used in 31000+ ATMs in India. The Maestro Debit card is a PIN based card and operates similar to ATM making it 100% secure, even in POS terminals. Global Cards are issued free of cost to the customers of South Indian Bank. Nominal fee is charged to the users at other Bank‟s ATMs. Cash withdrawal limits through ATMs is up to Rs.20, 000/- per day.
  • 55. Privilege Card This is a multi-purpose debit card issued to an SIB-Privilege account holder. All features of Global ATM-cum-Debit card available. The SIB-Privilege Card can be linked to any five SB accounts of the customer on-line fund transfer up to Rs.1, 00,000/- is allowed between these five accounts through ATMs. The privilege card holders can withdraw money (free up to Rs.20, 000/- per day) at the networked branches, by using the especially designed/personalized privilege cheques, provided in the account. For maintaining an SIB-Privilege account, an average monthly credit balance of Rs.1, 000/- is stipulated 6.2.7. Internet Banking Sibernet” is the Internet Banking Service of South Indian Bank Ltd, which allows its customers to avail the bank‟s services through Internet. Advantages of Sibernet  Online Payments  Conduct Banking Operations from House/Office/Cyber-cafe  Service available for 24 hours & 365 days a year  Accessible from any where in the world using Internet Services Offered: Online Bill Payments / Shopping Mall: This facility enables the customers to make payment for goods/services through Internet Banking on-line real time in a secured way. 2.7.8. M-Commerce SIB M-Commerce (Mobile Banking Service) The customer was enjoying the benefits of South Indian Bank‟s SMS banking service, through which the customer was able to get the „push‟ & „pull‟ alerts right at his mobile phones. Through this service, the transaction details of customer‟s A/c, with balance outstanding, status of cheque issued by you, the location of nearest SIB ATM
  • 56. centre etc., were made available at customer‟s mobile screen. With the advancement of technology, South Indian Bank is now equipped to provide you the convenience of M-Commerce. With this service, customer can now make various services including payments through your mobile phones. From 1st of August 2009 onwards, SIB offers M-Commerce service (payment on purchase of goods and services through mobile phone) to its customers in association with M/s. Pay Mate, the country‟s leading Mobile Banking Service provider. Since M-commerce is an entirely new breed of payment channel and involves payments by debit to your bank account with SIB, separate registration is required for availing this facility. With the convenience of M-Commerce customer can now shop with merchants tied up with M/s Pay Mate make inline payments through you registered through your registered mobile phone. In M-Commerce, the Bank account of the customer is linked to his / her mobile phone registered in India, which facilitates M-payments anytime, anywhere on a 24x7 basis. This is the most convenient and hassle free payment service, which can be initiated through his mobile phone. These payments are authenticated by the system with the secret MPIN (Mobile Personal Identification Number provided for this purpose by Pay Mate through mobile phone) of the customer. As an introductory offer, the service is offered free of cost to the customer. The service is „SMS‟ based and works on both GSM and CDMA networks and across all handset models. As per RBI guidelines, no cross border transactions are permitted. Hence these payment transactions can take place in India and only in Indian rupees. For this reason, only domestic mobile phone number can be registered for availing M-Commerce service. The service is offered to the bank‟s customers who are fully complied with the AML/KYC norms. Registration for the M-Commerce service requires physical presence of the customer at the SIB branch along with the signed Registration Form. However, customers
  • 57. having Internet banking facility (Sibernet-Retail) can register themselves through Internet banking. Such Net banking customers may login to Sibernet - Retail portal and get them registered by visiting Requests, Register M-Commerce service provider. A write up on registration process is also provided below along with the Application cum terms & conditions of the service, User guide, merchant list etc. 2.7.9. Mobile Banking As a registered user of SIB Mobile Service, customer can send Pull Requests and/or receive Push Alerts. Pull Requests- Send simple, standard SMS messages to a published number of the Bank, to get online information on his /her account/s. Customer will immediately receive an automatic SMS reply from the Bank. Push Alerts-Receive automatic SMS message from the Bank when certain events occur in customer‟s account/s. Customers can set the preconditions for such events (Alerts) in the first page of the Registration form. Any subsequent change in these preconditions can be informed to the Branch Manager. A unique feature in our product allows the customer to stop receiving any Push Alert messages during odd hours. Customer may enter his odd hour range in 24 hour format, as "From hh:mm; To hh:mm ", in the Registration Form. The NRE customers have to convert the same to Indian Standard Time. However, he can send a Pull Request even during this time period. Any customer (resident/non-resident) who has a SB/CA/CC/OD account (in his individual capacity) in any of South Indian Bank‟s branches is eligible for this service. Customer can include his joint account also if the mode of operation is "Either or
  • 58. Survivor" or "Former or Survivor". In such cases, all the joint account holders have to sign in the registration form. As an introductory offer, SIB Mobile Service is being offered free of charge for the first 6 months .i.e. the customer will not be charged for any SMS message that the Bank sends to him/her for the first 6 months. However Rs.75/- per year (domestic customers) and Rs. 150/- per year (NRI customers) will be charged as AMC after 6 months. For registering change of mobile number, Rs.50/- will be charged. As of now, customer can make any change in his SIB Mobile Service (SMS) pre- conditions (events) by sending a simple request to the Branch Manager. 2.7.10. Credit Card South Indian Bank always tries to offer the best available products available in the market to South Indian Bank‟s customers. South Indian Bank had been offering a Domestic credit card which the bank wants to enhance to an International credit card. Therefore, South Indian Bank has made a tie up with Citibank for an International VISA affiliated co-branded credit card and started sourcing from 12th February, 2007 onwards. The application forms are available at selected branches across India. The card is issued free of cost as a gesture of bank‟s relationship with the customer. There are certain set of PIN codes approved by Citibank. Only those customers who reside in that PIN codes can apply. Citibank has a very relaxed credit policy formulated exclusively for our SB customers. The customers should go through the important guidelines, rules and regulations given in the application form and get satisfied themselves before applying. Savings bank customers should submit the following documents along with the application form. Identity Proof (Passport, Ration card with photo, Driving license, Voters id etc),
  • 59. Address Proof (should match with the address given in the application form), PAN Card or Form 60. Auto debit instruction signed by the customer to debit his monthly credit card bills with three options (Select appropriate option) the completed application form may be handed over to the SIB branch for processing. Citibank will send the credit card directly to the customer in case the card is approved by them. South Indian Bank is sourcing credit card applications from the customers to facilitate card issue by Citibank, under special & liberalized credit policies formulated exclusively for South Indian Bank SB customers. However, Citibank may issue card solely at their discretion and based on their guidelines and credit policies. Their decisions will be final. 2.7.11. SIB Collect The Bank has introduced an attractive product, SIB collect, for fast collection of outstation instruments. The customers of any particular town can deposit their collection instruments and other request in the drop boxes available at all branches at that centre. All the instruments are pooled at a central office via fast courier services and collected very fast. The bank also makes use of its anywhere banking facility for the fast collection of the instruments. This facility is now available at Ernakulam, Thrissur, Chennai, Bangalore and Mumbai. It is a centralized cheque collection system. It is based on the drop box concept. It gives freedom to the customer to deposit instruments at convenient centers. It gives freedom to the customer to transact at convenient time. It saves time to the customer by just dropping the instruments instead of waiting at the counters for acknowledgement. It makes use of any where banking facility concept of finnacle for fast collection. It saves the time of the branches in doing outstation collection and dispatch. It is a system based on trust on the banking officials.
  • 60. 2.7.12. KYC Certification of Mutual Fund Investors South Indian Bank has entered into an agreement with M/s. CDSL Ventures Ltd (CVL) to become a Point of Service (POS) on their behalf, for KYC Certification of Mutual Fund Investors. Prevention of Money laundering Act (PMLA) 2002 has made it mandatory for all Mutual Funds to verify the credentials of the applicants desirous of subscribing to their 'units‟, in order to comply with the 'Know Your Customer (KYC)' norms. As a result, all applicants have to submit their Proof of Identity (POI) and Proof of Address (POA) on each occasion when they purchase units of any mutual fund. In this regard/s. CDSL Ventures Ltd (CVL), a wholly owned subsidiary of CDSL has been mandated by the Association of Mutual Funds in India (AMFI), to create the necessary infrastructure in order to handle the KYC on behalf of the Mutual Fund Industry. For the convenience of the investors, CVL proposed to utilize the services of South Indian Bank branches, which are familiar with the KYC norms and we have agreed to become a Point of Service (POS) for CVL. In the KYC certification process, the investors have to submit the KYC Certification application form to the Bank, along with the KYC documents. The Bank will enter the particulars in the KYC system provided at the website of M/s.CVL and issue a system generated acknowledgement letter to the Investor, a copy of which the Investor can attach to the Mutual Fund application, thereby avoiding submission of the KYC documents along with each application for Mutual Fund units. Initially, this service is provided only at 16 branches, which will be spread out to other branches soon. This service is offered totally free of cost. 2.7.13. Cash Management Services (CMS)
  • 61. South Indian Bank provides the opportunity for the customers of ICICI Prudential Life Insurance Co. Ltd., TATA AIG Life Insurance Co. Ltd. and ING Vysya Life Insurance remit their life insurance premium at any of the South Indian Bank branches, free of cost. Under this arrangement, a life insurance premium up to Rs. 49,999 per policy can be paid in cash (Cash only) by the customers of these companies at any of South Indian Bank branches. Cheques / Drafts are not accepted at present under this arrangement. The documents required to be submitted by the customer while remitting the premium are  The Premium Renewal Notice received from the respective company.  Premium payment challan duly filled by the customer.
  • 62. CHAPTER 3 SWOT ANALYSIS Index 3.1. Statutory Liquidity Ratio (SLR) 3.2. Repo Rate and Bank Rate
  • 63. 3.3. Reverse Repo Rate 3.4. NPA 3.5. SWOT Analysis 3.1. Statutory Liquidity Ratio (SLR) In terms of Section 24 (2-A) of the B.R. Act, 1949 all Scheduled Commercial Banks, in addition to the average daily balance which they are required to maintain under Section 42 of the RBI Act, 1934, are required to maintain in India, a) In cash, or b) In gold valued at a price not exceeding the current market price, or
  • 64. c) In unencumbered approved securities valued at a price as specified by the RBI from time to time. An amount of which shall not, at the close of the business on any day, be less than 25 per cent or such other percentage not exceeding 40 per cent as the RBI may from time to time, by notification in gazette of India, specify, of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight, At present, all Scheduled Commercial Banks are required to maintain a uniform SLR of 25 per cent of the total of their demand and time liabilities in India as on the last Friday of the second preceding fortnight which is stipulated under section 24 of the B.R. Act, 1949. Procedure for computation of demand and time liabilities for SLR The procedure to compute total net demand and time liabilities for the purpose of SLR under Section 24 (2) (B) of B.R. Act 1949 is similar to the procedure followed for CRR purpose. However, it is clarified that Scheduled Commercial Banks are required to include inter-bank term deposits / term borrowing liabilities of original maturities of 15 days and above and up to one year in 'Liabilities to the Banking System'. Similarly banks should include their inter-bank assets of term deposits and term lending of original maturity of 15 days and above and up to one year in 'Assets with the Banking System' for the purpose of maintenance of SLR. However, both the above liabilities and assets are not to be included in liabilities/assets to the banking system for computation of DTL/NDTL for the purpose of CRR. Valuation of approved securities for SLR The entire investment portfolio of the banks (including SLR Securities) will be classified under three categories viz.' Held to Maturity', 'Available for sale' and 'Held for Trading'. Investment classified under Held to Maturity category need not be marked to market and will be carried at acquisition cost unless it is more than the face
  • 65. value. In such a case, the premium should be amortized over a period remaining to maturity. Individual scrip in the Available for Sale category will be marked to market at the year-end or at more frequent intervals. The net depreciation under each classification should be recognized and fully provided for and any appreciation should be ignored. The book value of the individual securities would not undergo any change after the revaluation. The individual scrip in the Held for Trading category will be revalued at monthly or at more frequent intervals and net appreciation/depreciation under each classification will be recognized in income account. The book value of the individual scrip will be changed with revaluation. Penalties If a banking company fails to maintain the required amount of SLR, it shall be liable to pay to RBI in respect of that default, the penal interest for that day at the rate of 3 per cent per annum above the bank rate on the shortfall and if the default continues on the next succeeding working day, the penal interest may be increased to a rate of 5 percent per annum above the Bank Rate for the concerned days of default on the shortfall. Return in Form VIII (SLR) to be submitted to RBI (i) Banks should submit to the RBI before 20th day of every month, a return in form VIII showing the amounts of SLR held on alternate Fridays during immediate preceding month with particulars of their DTL in India held on such Fridays or if any such Friday is a public holiday under the Negotiable Instruments Act, 1881, at the close of business on the preceding working day. (ii) Banks should also submit a statement as annexure to form VIII giving daily position of (a) value of securities held for the purpose of compliance with SLR and (b) the excess cash balances maintained by them with RBI in the prescribed format.
  • 66. Correctness of computation of demand and time liabilities to be certified by Statutory Auditors; the Statutory Auditors should verify and certify that all items of outside liabilities, as per the bank's books had been duly compiled by the bank and correctly reflected under DTL/NDTL in the fortnightly/monthly statutory returns submitted to RBI for the financial year. Example If you deposit Rs. 100/- in bank, CRR being 6% and SLR being 8%, then bank can use 100-6-8= Rs. 84/- for giving loan or for investment purpose. Current SLR: Current SLR is 25% 3.2. Repo Rate and Bank Rate People often get confused between these two terms. Though they appear similar there is a basic difference between them. Repo rate or repurchase rate is the rate at which banks borrow money from the central bank (read RBI for India) for short period by selling their securities (financial assets) to the central bank with an agreement to repurchase it at a future date at predetermined price. It is similar to borrowing money from a money-lender by selling him something, and later buying it back at a pre-fixed price. Current Repo Rate is 5.25%. Bank rate is the rate at which banks borrow money from the central bank without any sale of securities. It is generally for a longer period of time. This is similar to borrowing money from someone and paying interest on that amount. Current Bank Rate is 6%. Both these rates are determined by the central bank of the country based on the demand and supply of money in the economy.
  • 67. 3.3. Reverse Repo Rate Reverse repo rate is the rate of interest at which the central bank borrows funds from other banks for a short duration. The banks deposit their short term excess funds with the central bank and earn interest on it. Reverse Repo Rate is used by the central bank to absorb liquidity from the economy. When it feels that there is too much money floating in the market, it increases the reverse repo rate, meaning that the central bank will pay a higher rate of interest to the banks for depositing money with it. Current Reverse Repo Rate is 3.75%. Table No.3.1. DIFFERENT RATES Bank Rate 6.00% (w.e.f. 29/04/2010) Cash Reserve Ratio (CRR) 6.00% (w.e.f. 24/04/2010) Increased from 5.00% to 5.50% wef 13/02/2010; and then again to 5.75% wef 27/02/2010; and now to 6.00% wef 24/04/2010 Statutory Liquidity Ratio (SLR) 25%(w.e.f. 07/11/2009) Increased from 24% which was continuing since. 08/11/2008 Reverse Repo Rate 3.75% (w.e.f. (20/04/2010) Increased from 3.25% wef 19/03/2010(which was continuing since 21/04/2009). Now
  • 68. increased to 3.75% wef 20/04/2010 Repo Rate under LAF 5.25% (w.e.f. 20/04/2010) Increased from 4.75% to 5% wef 19/03/2010 (which was continuing since 21/04/2009); Now increased to 5.25% wef 20/04/2010 3.4. NPA The banking industry has undergone a sea change after the first phase of economic liberalization in 1991 and hence credit management. While the primary function of banks is to lend funds as loans to various sectors such as agriculture, industry, personal loans, housing loans etc., in recent times the banks have become very cautious in extending loans. This is the reason being mounting non-performing assets (NPAs). An asset is classified as Non-performing Asset (NPA) if due in the form of principal and interest are not paid by the borrower for a period of 180 days. However, with effect from March 2004, default status would be given to a borrower if dues are not paid for 90 days. If any advance or credit facilities granted by banks to a borrower become non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any regard to the fact that there may still exist certain advances / credit facilities having performing status. Though the term NPA connotes a financial asset of a commercial bank, which has stopped earning an expected reasonable return, it is also a reflection of the
  • 69. productivity of the unit, firm, concern, industry and nation where that asset is idling. Viewed with this perspective, the NPA is a result of an environment that prevents it from performing up to expected levels. The definition of NPAs in Indian context is certainly more liberal with two quarters norm being applied for classification of such assets. The RBI is moving over to one- quarter norm from 2004 onwards. Definition A NPA was defined as credit in respect of which interest and/or installment of principal has remained “past due” for a specific period of time. Advantages: Once a loan is considered non-performing, this amount can directly be written off against any profits to claim tax relief. It can become good on a later date but will be coming under the category of windfall recoveries and such recoveries do not attract any tax as they are classified as burden rather than actually an asset. Disadvantages: Once an investment goes bad, it directly affects the profits of the organization. It can encourage willful defaulters to exploit the conditions for their personnel gains. Why Such Huge NPA Exist? The origin of the problem of burgeoning NPAs lie in the quality of managing credit risk by the institutions concerned. What is needed is having adequate preventive measures in the place namely, fixing pre-sanctioning appraisal responsibility and having an effective post –disbursement supervision. Financial institutions should continuously monitor loans to identify accounts that have potential to become non- performing.
  • 70. Reasons for an account becoming NPA Internal factors: 1. Funds borrowed for a particular purpose but not use for the said purpose. 2. Project not completed in time. 3. Poor recovery of receivables. 4. Excess capacities created on non-economic costs. 5. In-ability of the corporate to raise capital through the issue of equity or other debt instrument from capital markets. 6. Business failures. 7. Diversion of funds for expansionmodernizationsetting up new projects helping or promoting sister concerns. 8. Willful defaults, siphoning of funds, fraud, disputes, management disputes, mis- appropriation etc., 9. Deficiencies on the part of the banks viz. in credit appraisal, monitoring and follow- ups, delay in settlement of payments subsidiaries by government bodies etc., External factors: 1. Sluggish legal system – Long legal tangles Changes that had taken place in labor laws Lack of sincere effort. 2. Scarcity of raw material, power and other resources. 3. Industrial recession. 4. Shortage of raw material, raw materialinput price escalation, power shortage, industrial recession, excess capacity, natural calamities like floods, accidents. 5. Failures, non-payment over dues in other countries, recession in other countries, externalization problems, adverse exchange rates etc. 6. Government policies like excise duty changes, Import duty changes etc
  • 71. Recovery of NPA Importance of Recovery: 1. Increase in the income of bank. 2. Increase in the trust of shareholder in bank. 3. Level of NPA reduces as the recovery done. 4. Decrease in provisioning requirements. Existing Systems/ Procedures for NPA Identification and Resolution since high level of NPAs dampens the performance of the banks identification of potential problem accounts and their close monitoring assumes importance. Though most banks have Early Warning Systems (EWS) for identification potential NPAs, the actual processes followed however, differ from bank to bank, the EWS enable a bank to identify the borrower accounts which show signs of credit deterioration and initiate remedial action. Many banks have evolved and adopted an elaborate EWS, which allows them to identify potential distress signals and their options beforehand, accordingly. The early warning signals, indicative of potential problems in the accounts, viz. persistent irregularity in accounts, delays in servicing of interest, frequent development of L/Cs, unit‟s financial problems, market related problems, etc. are captured by the system. In addition, some of these banks are reviewing their exposure to borrower accounts every quarter based on published data, which also serves as an important additional warning system. These early warning signals used by banks are generally independent of risk rating systems and asset classification norms prescribed by RBI. The major components/processes of a EWS followed by banks in India as brought out by a study conducted by Reserve Bank of India.
  • 72. At the instance of the board of financial supervision are as follows: 1. Designating relationship manager/credit officer for monitoring accounts 2. Preparation of „know your client‟ profile 3. Credit rating system 4. Identification of watch-list/special mention category accounts 5. Monitoring of early warning systems. Relationship Manager/Credit Officer: The Relationship Manager/Credit Officer is an official who is expected to have complete knowledge of borrower, his business, his future plans, etc. The Relationship Manager has to keep in constant touch with the borrower and report all developments impacting the borrower account. As a part of this contact he is also expected to conduct scrutiny and activity inspections. In the credit monitoring process, the responsibility of monitoring a corporate account is vested with Relationship Manager/Credit officer. ‘Know your client’ profile (KYC) Most banks in India have a system of preparing „know your client‟ profile. As a part of KYC system visits are made on clients and their places of business/units. The frequency of such visits depends on the nature and needs of relationship. Credit Rating System The credit rating system is essentially one point indicator of an individual credit exposure and is used to identify measure and monitor the credit risk of individual proposal. At the whole bank level, credit rating system enables tracking the health of banks entire credit portfolio.
  • 73. Most banks in India have put in place the system of internal credit rating. While most of the banks have developed their own models, a few banks have adopted credit rating models designed by rating agencies. Credit rating models take into account various types of risks viz. financial, industry and management, etc associated with a borrowal unit. The exercise is generally done at the time of sanction of new borrowal account and at the time of review/renewal of exercising credit facilities. Watch-list/ Special Mention Category The grading of the banks risk assets is an important internal control too. It serves the need of the management to identify and monitor potential risks of a loan asset. The purpose of identification of potential NPAs is to ensure that the bank to protect against the loan asset becoming non-performing could initiate appropriate preventive/corrective steps. Most of the banks have a system to put certain borrowal accounts under watch list or special mention category if performing advances operating under adverse business or economic conditions or exhibiting certain distress signals. These accounts generally exhibit weakness, which are correctable but warrant banks‟ closer attention. The categorization of such accounts in watch-list are special mention category provides early warning signals enabling relationship manager or credit officer to anticipate credit deterioration and take necessary preventive steps to avoid their slippage into non-performing advances. Different Systems It is important in any early warning system, to be sensitive to signals of credit deterioration. A host early warning different banks for identification of potential NPAs uses signals. Most banks in India have laid down a series of operational, financial, transactional, indicators that could serve to identify emerging problems in credit exposures at an early stage. Further, it is revealed that the indicators which may
  • 74. trigger early warning system depend not only on default in payment of installment and interest but also other factors such as deterioration in operating and financial performance of the borrower, weakening industry characteristics, regulatory changes, general economic conditions, etc. a) Debt Recovery Tribunals Debt Recovery Tribunals were set up under the Recovery of Debts due to Banks and Financial Institutions Act, 1993. Under the Act, two types of Tribunals were set up i.e. Debt Recovery Tribunal (DRT). The DRTs are vested with competence to entertain cases referred to them, by the banks and FIs for recovery of debts due to the same. The order passed by a DRT is appealable to the Appellate Tribunal but no appeal shall be entertained by the DRAT unless the amount due form him as determined by it. However, the Affiliate Tribunal may, for reasons to be received in writing, waive or reduce the amount of such deposit. Advances of Rs.1 million and above can be settled through DRT process. An important power conferred on the Tribunal is that of making an interim order (whether by way of injunction or stay) against the defending to debar him from transferring, alienating or otherwise dealing with or disposing of any property and the assets belonging to him within prior permission of the Tribunal. This order can be passed even while the claim is pending. DRTs are criticized in respect of recovery made considering the size of NPAs in the country. In general, it is observed that the defendants approach the High Country challenging the verdict of the Appellate Tribunal, which leads to further delays in recovery. Validity of the Act is often challenged in the court, which hinders the progress of the DRTs. Lastly, much need to be done for making the DRTs stronger in terms of infrastructure.
  • 75. b) Lokadalats The institution of Lokadalat constituted under the legal services authorities Act 1987 helps in resolving disputes between the parties by conciliation, mediation, compromise or amicable settlement. It is known for effecting mediation and counseling between the parties and to reduce burden on the court, especially for small loans .Cases involving suit claims up to Rest 1 million can be brought before the lokadalat and every Award of the lokadalat shall be deemed to be a decree of a civil court and no appeal can lie to any court against the award made by the lokadalat. Several people of particular localities / various social organizations are approaching Lokadalats , which are generally presided over by two or three senior persons including retired senior civil servants , defense personnel and judicial officers, They take up cases , which are suitable for settlement of debt for certain consideration. Parties are heard and they explain their legal position .They are advised to reach to some settlement due to social pressure of senior bureaucrats or judicial officers or social workers. If the compromise is arrived at, the parties to the litigation sign statement in presence of Lokadalats, which is expected to be filed in court to obtain a consent decree. Normally, if such settlement contains a clause that if the compromise is not adhered to by the parties, the suits pending in the court will proceed in accordance with the law and parties will process in accordance with the law and parties will have right to get the decree from the court. In general, it is observed that banks do not get the full advantage of the Lokadalts. It is difficult collect the concerned borrowers willing to go in for compromise on the day when the Lokadalat meets. In any case, we should continue our efforts to seek the help of the Lokadalat.
  • 76. C) Enactment of SRFAESI Act The „The Securitization and Reconstruction of Financial assets and Enforcement of Security Interest Act” provides the formal legal basis and regulatory framework for setting up asset reconstruction companies (ARCs) in India. In addition to asset reconstruction and ARCs, the act deals with the following largely aspects, via are also there.  Securitization and securitization companies  Enforcement of security interest Creating of a central registry in which all securitization and asset reconstruction transactions as well as any creation of security interest have to be filed. The Reserve Bank of India (RBI), the designated regulatory authority for ARCs has issued Directions, Guidance Notes, Application Forms and Guidelines to banks in April 2003 for regulating functioning of the proposed ARCs and these Directions/Guidance notes cover various aspects relating to registration, operations and funding of ARCs and resolution of NPAs by ARCs. The RBI has also issued guidelines to banks and financial institutions on issues relating to transfer of assets to ARCs, consideration for the same and valuation of instruments issued by ARCs. Additionally, the Central which lays down the procedure to be followed by a secured creditor while enforcing its security interest pursuant to the act has to act. The act permits the secured creditors (if 75% of the secured creditors agree) to enforce their security interest in relation to the underlying security without reference to the court after giving a 60 days notice to the defaulting borrower upon classification of corresponding financial assistance as non performing asset. The act permits the secured creditors to take any of the following measures:
  • 77.  Take over possession of the secured assets of the borrower including right transfer by way of lease, assignment or sale;  Take over the management of the secured assets including the right to transfer by way of lease, assignment or sale;  Appoint any person as manager of the secured asset (such person could be the ARCs if they do not accept any pecuniary liability); and  Recover receivables of the borrower in respect of any secured asset, which has been transferred. After taking over possession of the secured assets, the secured creditors are required to obtain valuation of the assets. These secured assets may be sold by using any of the following routes to obtain maximum value.  By obtaining quotations from persons dealing in such assets or otherwise interested in buying the assets.  By inviting tenders from the public  By holding public auctions or by private treaty. Lenders have seized collateral in some cases while it has not yet been possible to recover value from most such seizers due to certain legal hurdles, lenders are now clearly in a much better bargaining position with defaulting borrowers than they were before the enactment of SRFAESI Act. When the legal hurdles are removed, the bargaining power of the lenders is likely to improve further and would expect to see a large number of NPAs being resolved in quick time, either through security enforcement or through settlements. D) Asset Reconstruction Companies
  • 78. Under the SRFAESI Act ARCs can set up under the Companies Act, 1956. The act designates any person holding not less than 10% of the paid up capital of the ARC as sponsor and prohibits any sponsor from holding a controlling interest in, being the holding bank of or being in control of Assets. ARCs have been granted a maximum realization time frame of five years from the date of acquisition of the assets. The Act stipulates several measures that can be undertaken by ARCs for asset reconstruction. These include: Enforcement of security interest; Taking over or charging the management of the business of the borrower. The sale or lease of the business of the borrower Settlement of the borrowers‟ dues; and Restructuring or rescheduling of debt. ARCs are also permitted to act as a manager of collateral assets taken over by the Lenders under security enforcement rights available to them or as a recovery agent for bank or financial institution and to receive a fee for the discharge of these functions. They can also be appointed to act as receiver, if appointed by any court or DRT. E) Compromise Settlement Schemes One time Settlement Schemes RBI has issued guidelines under the one time settlement scheme, which will cover all NPAs in all sectors, which have become doubtful or loss as on 13st March 2000 it also covers NPAs classified as sub-standard as on 31st March 2000, which have subsequently become doubtful or loss. All cases on which the banks have initiated action under the SRFAESI Act and also cases pending before Courts/DRTs/BIFR, subject to consent decree being obtained
  • 79. from the Courts/DRTs/BIFR are covered. However cases of willful default, fraud and malfeasance are not covered. As per the OTS scheme, for NPAs up to Rs10 crores, the minimum amount that should be recovered should be 100% of the outstanding balance in the account. For NPAs above Rs10 crores the CMDs of the respective banks should personally supervise the settlement of NPAs on a case-to-case basis, and the Board of Directors may evolve policy guidelines regarding one time settlement of NPAs as a part of their loan recovery policy. The RBI/Government has been encouraging banks to design and implement policies for negotiated settlements, particularly for old and unresolved NPAs. The board framework for such settlements was put in place in July 1995. Specific guidelines were issued in May 1999 to public sector banks for one-time settlements of NPAs of small –scale sector. General Methods of Management of NPAS Compromise: The dictionary meaning of the term compromise is “settlement of dispute reached by mutual concessions. The following are the detailed guidelines for compromise/negotiated settlements of NPAs. The compromise should be a negotiated settlement under which the bank should ensure recovery of its dues to the maximum extent possible of minimum expenses. Proper distinction should be made between willful defaulters and borrowers defaulting in repayments due to circumstances beyond their control.
  • 80. Where security is available for assessing the realizable value, proper weight age should be given to the location, condition and marketable title and possession of sub security. An advantage in settlement cases is that banks can promptly recycle the funds instead of resorting to expensive recovery proceedings spread over a long period. All compromise proposals approved by any functionary should be promptly reported to the next higher authority for post facto scrutiny. Proposal for write off/ compromise should be first by a committee of senior executives of the bank. Special recovery cells should be set up at all regional levels. Legal remedies: The legal remedies are one of the methods of management of NPAs. The banks observed that the borrower is making willful default; no more time should be lost instituting appropriate recovery proceedings. The legal remedies are filling of civil suits. Regular Training Program: The all levels of executives are compelling to undergrowth the regular training program on credit and NPA management. It is very useful and helpful to the executives for dealing the NPAs properly. Recovery Camps: The banks should conduct the regular or periodical recovery camps in the bank premises or some other common places; such type of recovery camps reduces the level of NPAs in the Banks.
  • 81. Write offs: Write offs is also one of the common management techniques of NPAs. The assets are treated as loss assets, when the bank writes off the balances. The ultimate aim of the write off is to cleaning Spot Visit: The bank officials should visit to the borrowers‟ business place or borrowers field regularly or periodically. It is also help full to the bank to control or reduce the NPAs limit. Rehabilitation of potentially viable units: The unit is sick due to technical obsolescence‟s of inefficient management or financial irregularities. When the Bank settles the dues, of such, companies through the compromise or through the legal actions the better is to be followed. Other Methods: Persistent phone calls. Media announcement. 3.5. SWOT ANALYSIS The Analysis of the organization reveals the following aspects:- STRENGTHS  The bank has branches all over India and its clientele span across the world. It currently has 580 branches, 3extension counters and 375 ATM counters.  The bank is among the first in the private sector to open a NRI branch in 1992.
  • 82.  SIB Ltd is the first bank to have core banking in all its branches among the old generation banks  SIB ltd is still conservative in the felid of advance and the selection of advance is done by the norms set up by the RBI so in case the account becomes NPA the managers are having personnel information about the parties and there will be collateral securities for most of NPA‟S  The first private sector bank from India to provide managerial support to an  Exchange House in the Middle East.  The first Kerala-based bank to start extended banking hours (12 Hours  Banking)  The first Kerala-based bank to introduce a credit card.  The first in the private sector in India to open an NRI branch  The first private sector bank to start an Industrial Finance branch in India.  The first Kerala-based bank in private sector to become a scheduled bank.  The first private sector bank from Kerala to implement 100% CBS . WEAKNESS  The bank is not willing to go beyond the conservative concept of banking which in turn affects the growth and advances  Bank depends on its force for its recovery, which hamper the recovery and growth opportunities. OPPORTUINITES  SIB Ltd is the only old generation bank with a good loyal staff and customers and ample experience of 80 years, which can be leveraged for higher growth.  The average age of employees, which form the important asset of the bank, is young which will infuse in new ideas and growth opportunities for the bank.
  • 83. THREATS People are nowadays are thinking of the visibility of the bank. Therefore, the bank has to improve their networking and visibility otherwise, it cannot grow.
  • 85. Index 4.1. Introduction 4.2. Awards and Accolades 4.3. Financial Position 4.1. Introduction
  • 86. It is headed by Dr.V A Joseph, Managing Director & CEO of the bank. South Indian Bank has 580 branches and 3 extension counters spread across more than 26 states and union territories in India. It has set up 375 ATMs all over India. In the current year 2010-11, the bank is planning to add 60 more branches throughout India which aims in having presence in all the states of India. The current growth plan of the bank is to establish 750 branches, 750 ATMs and 75000 crores of business by the end of financial year 2013. The bank offers major services in various segments of accounts and deposits, loans, mutual funds, insurance, money transfers and other value added services. The Kerala Government had given permission to SIB to accept commercial taxes. The bank has been appointed as the largest service provider (point of sale) for the New Pension Scheme (India) launched by the Government of India. 4.2. Awards and Accolades  Best Bank in Asset Quality Award- Dun & Bradstreet.  No. 1 in Asset Quality- Business Today Ranking of Banks.  Best Performer in Asset Quality- Analyst 2008 Survey.  Top NPA Manager- ASSOCHAM- ECO Pulse Survey.  Best Old Private Sector Bank- Financial Express India's Best Banks 08-09.  Best Asian Banking Website- Asian Banking & Finance Magazine, Singapore.  Best private sector bank in India in the service quality segment-Outlook Money - CFore Survey  Special award for excellence in Banking Technology from IDRBT (Institute for Development and Research in Banking Technology) the technical arm of the Reserve Bank of India as a national level recognition to the excellent contribution made in the area of Information Systems Security Policies and Procedures. 4.3. Financial Position
  • 87. Short term financial position of the bank includes changes in current assets and liabilities and finally the working capital. Here current asset increased by 28.08% which includes the increase in cash with Reserve Bank by 28%, decrease in balance with bank by 23.97% and increase in advances by 33.55%.Current liability is increased by 23.7% which includes the increase in deposits by 27.18% and the decrease in borrowings by 19%.Long term financial position of the bank includes increase in the fixed asset by 11.9% and increase in other assets by 46.2% too. At the same time there is no increase or decrease in share capital. Whereas reserve has been increased by 15.22%. Increasing in reserve shows the profit of the bank. By analyzing the present financial analysis, it is very clear that the overall profitability of the bank is good. As we are going through the profit and loss account of South Indian Bank, we can see a gradual growth .In 2008 – 09, the bank registered a net profit of 194.75 crore which is higher than that of previous year. Despite recession, South Indian bank could achieve a profit of Rs.233. 76 Crore in the year 2009-10 registering a growth of 20.1% over the previous year. The Bank could achieve this improvement in net profit mainly on account of higher scale of operations and better management of assets and liabilities of the Bank. The Profit and Loss Account shows an Operating Profit of Rs. 427.33 crore, before depreciation, tax and provision. Diagram 4.1. RDE 7.94 13.62 13.06 14.93 15.74 0 10 20 05-06 06-07 07-08 08-09 09-10 Return on Equity (%) return
  • 88. From the above diagram, it is clear that the return on equity is increasing year by year. That means, the bank is able to pay its equity shareholders. In 2005-06 it was only 7.94% and now it has been increased to 15.74%.Thus, the financial position of the bank is very good. Then only it can pay dividend to its shareholders. Diagram 4.2. RDA 0.53 0.88 1.01 1.09 1.07 Above diagram shows the return on assets which explains the changes in the percentages of return on assets for the last five years. We can see a gradual growth in the percentage of return on assets from 2005 to 2008. But there is a slight decrease in the percentage of return in the last year. Diagram 4.3. Capital Adequacy (%) Base I 13.02 11.08 13.80 13.89 14.73 Base II 14.76 15.39 0 0.5 1 1.5 05-06 06-07 07-08 08-09 09-10 Return on Assets (%) Return 0 5 10 15 20 05-06 06-07 07-08 08-09 09-10 Base 1 Base 2
  • 89. It is a ratio of bank's capital to its risk .Capital adequacy is always dynamic. It has been increased from year to year. In 2006 it was 11.08 whereas it has reached to 14.73 now. Diagram 4.4. EPS 7.23 14.79 15.02 17.23 20.69 The shareholders of bank are having great enthusiasm because the bank could maintain a good earning per share. It had been increasing gradually till 2009. Within 4 years earning per share has been doubled from 7.23 to 20. 69. Diagram 4.5. NP 50.9 104.12 151.62 194.75 233.76 In 2008 – 09, the bank registered a net profit of 194.75 crore which is higher than that of previous year. Despite recession, South Indian bank could achieve a profit of 0 5 10 15 20 25 05-06 06-07 07-08 08-09 09-10 Earnings Per Share(in Rs) Ea 0 50 100 150 200 250 05-06 06-07 07-08 08-09 09-10 Net Profit (Rs. in Cr) Series 1
  • 90. Rs.233. 76 Crore in the year 2009-10 registering a growth of 20.1% over the previous year. Diagram 4.6. Net worth 641 765 1161 1304 1485 Bank‟s net worth has doubled as compared to 2005. In 2005 it was 641 crore whereas now it is 1485 crore. From this difference we can see the growth of the bank and the current financial position of the bank. Ratio Analysis Solvency Ratio It can be defined as the relationship between total liabilities and total assets. Total Liabilities Solvency Ratio = Total Assets 0 500 1000 1500 2000 05-06 06-07 07-08 08-09 09-10 Networth (Rs. in Cr) Series 1
  • 91. Generally, lower the solvency ratio, more satisfactory or stable is the long-term solvency position of a firm. Table No 4.1. YEAR TOTAL LIABILITIES (Rs. in crore) TOTAL ASSETS (Rs. in crore) RATIO IN PERCENTAGE 2005 8496.1 9477.52 .89 2006 9579.4 10827.43 .88 2007 12271.7 13652.57 .90 2008 15183.71 17089.92 .89 2009 24048.75 25534.04 .94 Diagram 4.7. Analysis 0.88 0.90.89 0.94 Sales 2006 2007 2008 2009
  • 92. In the year 2006, it was .88% and in the year 2007 it was.90%. In 2008, it was 89% and in the year 2009 it was 94%. We have noticed from the ratios calculated above that they have remained almost the same in the four consecutive years. Capital Adequacy Ratio Capital adequacy ratio = capital _____________________ Risk weighted assets Table No.4.2. YEAR RATIO IN PERCENTAGE 2005 9.89 2006 13.02 2007 11.80 2008 13.80 2009 14.90 Diagram 4.8.
  • 93. Analysis Capital adequacy ratio (CAR) refers to the ratio of capital to risk weighted assets computed in accordance with the risk-based capital adequacy framework (patterned after the 1988 Basel Capital Accord) that took into account credit risks, effective 1 July 2001 under BSP Circular No. 280 dated 29 March 2001. Under BSP Circular No. 360 dated 3 December 2002, which took effect 1 July 2003, applying only to universal/commercial banks, computation of CAR incorporates market risks in addition to credit risks. Column1 Column2 0 5 10 15 2005 2006 2007 2008 2009 Column1 Series 2 Column2
  • 94. CHAPTER 5 CONCLUSION Index 5.1. Suggestions and Recommendations
  • 95. From my experience and study I understood that the South Indian Bank is performing well and I found certain things which should be improved. That is explained under the title recommendations and suggestions. 5.1. Suggestions and Recommendations During the time of internship, it is clear that NPA have visible impact on the loan portfolio of any financial institution and banks, affecting their balance sheets, which ultimately affects their profits. But it is also seen that banks and financial institutions are trying their best to reduce the percentage of NPAs in their institutions and are taking effective measures towards this cause. The effort has been made to provide a few suggestions to SOUTH INDIAN BANK LTD in the following ways. 1. Sib ltd NPA level is decreasing year by year which good for bank but bank should follow the recovery policy strictly. 2. Bank should motivate the staff to do fast recovery NPA. 3. Bank have more NPA in Small Scale Industry so, they should try to reduce that level of NPA. 4. SIB should upgrade their system/technique of credit appraisal by imparting training to their staff. Conducting in house training programme to motivate and educate officers and also to make aware of various measures/policies/norms to be observed to face the difficult area like reducing the level of NPA. 5. The monitoring department should up again to make credit monitoring functions more effective. 6. Timely review/renewal of borrowed accounts should be given prominence so that these are undertaken before expiry of their accounts.
  • 96. 7. Introduction of client profile reports should be made to have proper monitoring system. This allows the recovery officer to know more on the performance of the industry. A close and prompt watching system helps to prevent accounts becoming irregular. 8. Prompt repayment of loans by borrowers should be recognized and rewarded by way of rebate for prompt payment, which would act as a motivating factor. 9. Government agencies should be used in recovering NPAs. There are various techniques for reducing NPAs. If one technique fails in dealing with a particular NPA, institutions can try with other techniques for that case. Various steps in reducing NPAs can be summarized as follows. 1. Study the problem of NPAs branch wise, amount wise 2. Prepare a loan recovery policy and strategies for reducing NPAs 3. Create special recovery cells at all offices 4. Identify critical branches for recovery 5. Fix targets of recovery and draw time bound action programme 6. Select proper techniques for solving the problem of each NPA 7. Monitor implementation of the time bound action plan 8. Take corrective steps wherever found necessary and make changes in the original plan, if necessary. 9. In personal loan schemes a differential maximum quantum of loan can be fixed instead of the fixed Rs. 3 lakhs at present. 10.In personal loan scheme a differential repayment period can be fixed instead of the present maximum of 4 years. 11.The upfront fee charged can be increased nominally and make half refundable on repayment. 12.The rate of interest charged in personal loans can be reduced nominally 13.Penal interest can be increased nominally
  • 97. 14.The documents required to avail the loan can be mentioned in the website 15.The bank can fix a minimum gross income to avail any loan 16.The approximate time required by the bank to sanction any loan 17.The website can have some information about the assessment criteria Conclusion The South Indian Bank with a new logo and image marches on. With branches all over India and a clientele across the world, the bank is considered one of the most pro active banks in India with a competent tech savvy team of professional at the core of services. In 2009-10 South Indian Bank could present an outstanding performance which was beyond market expectations despite the challenging economic scenario where the bank operates. South Indian Bank, the bank that focuses on technology and service delivery, has always come up with innovative banking products to meet the growing demands of the customers. Largely concentrated in the semi-urban areas of the Southern states of India, SIB's profitable, cost-efficient and technologically up-to-date network constitutes a reasonably attractive stand alone franchise. The Bank's Deposit franchise includes a niche NRI customer base that contributes a meaningful 17% of deposits and gives it a distinguishing cost advantage over several of its peers. At the same time, the Bank is trading at the cheapest valuations among peers. Even though, the banking sector all over the world has been affected by the recession due to the global meltdown in economy, especially the US banking system, South Indian Bank proved its competence not only in terms of increased profit but also in providing boundless customer service. Among so many players and competitive products, South Indian Bank could maintain its premier and prestigious position only
  • 98. with the support of the customers. This show how bank functions and how the bank fulfills its mission and mission. SIB's overall strategy and execution has been creditable over the past few years, with the Bank maintaining its market share even in CASA deposits. While bank expects a loss in market share for the peer group that the Bank belongs to, however, based on the Bank's track record, and keeping in mind the importance of customer loyalty in the Banking Industry, South Indian Bank expects the bank to deliver profitable growth above the average growth rate of its peer group Annexure – I
  • 99. ABBREVIATIONS SIB- South Indian Bank Ltd. NPA- Non Performing Assets. CASA- Current Accounts and Savings Account. Annexure – II BIBLIOGRAPHY Annual Report of South Indian Bank WEBSITES o www.southindian o o www.economic o o Annexure – III
  • 100. Financial Statements PROFIT AND LOSS A/C OF SOUTH INDIAN BANK LTD. Mar 2010 Rs. Cr Mar 2009 Rs. Cr Mar 2008 Rs. Cr Mar 2007 Rs. Cr INCOME : Interest Earned 1935.72 1686.92 1291.23 976.61 Other Income 255.61 167.62 147.73 121.54 Total 2191.33 1854.54 1438.96 1098.15 Total 1957.57 1659.79 1287.34 994.03 II. Expenditure Interest expended 1367.43 1164.04 915.10 609.09 Payments to/Provisions for Employees 226.32 214.18 146.35 133.23 Operating Expenses & Administrative Expenses 85.19 71.60 62.05 51.93 Depreciation 16.76 13.90 12.19 11.78 Other Expenses, Provisions & Contingencies 128.35 89.46 71.54 145.71 Provision for Tax 142.92 88.54 47.28 25.29 Fringe Benefit tax 0.00 0.75 0.40 0.75 Deferred Tax -9.40 17.32 32.43 16.25 Total 2191.33 1854.54 1438.96 1098.15 Total 1957.57 1659.79 1287.34 994.03 III. Profit & Loss Reported Net Profit 233.76 194.75 151.62 104.12 Extraordinary Items -0.03 0.50 -0.11 17.69 Adjusted Net Profit 233.79 194.25 151.73 86.43 Prior Year Adjustments 0.00 0.00 0.00 0.00 Profit brought forward 14.67 9.08 8.19 6.48 IV. Appropriations Transfer to Statutory Reserve 58.45 49.00 38.00 26.81 Transfer to Other Reserves 120.24 100.50 81.00 55.01 Trans. to Government /Proposed Dividend 52.71 39.66 31.73 20.59 Balance carried forward to Balance Sheet 17.03 14.67 9.08 8.19 Equity Dividend % 40.00 30.00 30.00 25.00 Earnings Per Share-Unit Curr 20.02 16.72 16.26 14.36 Earnings Per Share(Adj)-Unit Curr 20.02 16.72 13.01 11.49 Book Value-Unit Curr 129.83 113.76 126.34 100.10 BALANCE SHEET OF SOUTH INDIAN BANK LTD.
  • 101. Mar 2010 Rs. Cr Mar 2009 Rs. Cr Mar 2008 Rs. Cr Mar 2007 Rs. Cr SOURCES OF FUNDS : Capital 113.01 113.01 90.41 70.41 Reserves Total 1372.28 1191.00 1070.58 653.55 Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 0.00 0.00 Deposits 23011.52 18092.33 15156.12 12239.21 Borrowings 330.96 412.01 27.58 32.51 Other Liabilities & Provisions 706.27 571.06 745.24 656.90 TOTAL LIABILITIES 25534.04 20379.41 17089.93 13652.58 APPLICATION OF FUNDS : Cash & Balances with RBI 1390.94 997.74 973.65 699.67 Balances with Banks & money at Call 596.73 1038.13 729.00 1245.81 Investments 7155.61 6075.20 4572.23 3430.13 Advances 15822.92 11847.91 10453.75 7918.91 Fixed Assets 152.54 136.32 112.75 89.59 Other Assets 415.30 284.11 248.55 268.47 Miscellaneous Expenditure not written off 0.00 0.00 0.00 0.00 TOTAL ASSETS 25534.04 20379.41 17089.93 13652.58 Contingent Liability 2729.74 2194.05 2105.35 1640.58 Bills for collection 257.46 222.29 181.85 168.15