Balaji Murugan Gowri shankar SARAVANAN.P SARAVANAN.S Sesha raja
The four pillars of the Financial System are -
Banks are one of the financial intermediaries operating in the financial system.
Banks mobilize deposits from the savers and lend to the users.
Banks provide various types of financial services to customers in return for payments.
The public views the banks as safe and convenient outlet for its savings.
The oldest, biggest and the fastest growing financial intermediaries.
The main goal is enriching the investors.
Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.
Banks target huge investment.
Lend huge fund.
Long term relationship.
Maintenance of different types of deposit accounts e.g: savings, fixed and current accounts
Collection of checks, bill of exchange and other instruments ( inland and foreign)
Providing financial guarantees
Remittance facilities by issue of drafts, mail transfers, and telegraphic transfers
Providing safe deposit and safe custody(locker) facilities
Purchase and sale of securities
Market driven competitive system
Technological incorporation as a new drive.
Out of the 27 PSBs, nearly 15 banks have fully computerised their branches. (2010- IBA magazine)
Core banking solution
Local service through global standards.
Schemes for deposit mobilization
a. Certificate of Deposit(CD)
b. Savings Scheme
c. Minor Savings Scheme
d. Monthly Interest Income Schemes
e. Annuity or Retirement Schemes
f. Farmers Deposit Schemes
g. Insurance linked savings bank accounts
h. Innovative Deposit Schemes
Wide range of new services like credit cards, international debit cards, etc.
Automatic Extension Deposit Scheme
Para-banking activities like insurance, mutual funds, sale of gold coins, etc.
Personal relationship was there between the banker and the customer
Knowledgeable employees who can handle all the banking operations
Liquidity problems at times.
In traditional banking the customer has to visit the branch of the bank in person to perform the basic operations.
Pace of operations was time consuming
Fixed timing operations- eg. 9am -2pm
Document management was a challenging process.
Rural population welcomes traditional banking than modern banking due to personal relationship
Growing nature of our economy.
Small traders opt for traditional banking.
Fear of acceptance of online banking due to spammers, hackers etc.
Emergence of new technologies
Increased traffic and pollution in urban areas making the customers to go for E-banking
NBFC as competitors
Providing consultancy in matters like taxes and choosing the right investment.
Minimal transaction costs through adoption of technology.
Anywhere and anytime banking
Fast response times
Improved management and accountability
Banker charging high rates of interest at the time of granting loans
Not enough balance in the customer’s accounts leading to insufficient funds
Customer relationship management is poor, since there is less physical presence of bankers.
Prone to technological breakdowns – eg. Debit cards getting stuck in ATM.
Scope of expansion in rural areas.
Opportunities in credit cards, consumer finance and wealth management on the retail banking.
Consumers will increasingly demand enhanced institutional capabilities and service levels from banks
Trading opportunities in commodity and commodity derivatives.
Hybrid capital- perpetual bonds, FII and NRI investments
Online banking prone to hackers.
Loans becoming Non performing assets.
Defaults in retail banking- eg. Credit Card fraud
Majority of Rural populace are not fully ready to embrace technology.
Both systems has their own pros and cons.
Traditional banking is preferred over modern banking.
Already it’s a proven success.
78% of customers in India prefer traditional banking.
Source: study by accenture, http://www.business-standard.com/india/news/traditional-banking-stillpreferred-way-accenture/409657/
RBI Acknowledges Risks Of Modern E-Banking In India
No effective Internet banking laws in India or online banking laws in India
In the absence of proper encryption norms in India, e-banking in India is really insecure.
Recommendations to appoint CIOs arenot implemented