1. INNOVATION IN FINANCIAL INSTITUTIONS AND
SERVICES
INTRODUCTION:-
The concept of Financial Institutions is nothing but offering financial services to the
customer, society , industry, entrepreneurs etc. in a very simple word we can say that these
institutes collects funds (money) from the different investors. The Investor’s get pre-determined
rate of interest on their investment. As well as the Financial Institutions also take help of
Government; and make available loan, advances, and subsidy to the customer or their clients. As
per the above title that is ―INNOVATIONS IN FINANCIAL INSTITUTIONS AND
SERVICES‖ there are various concepts considered in this research study. Firstly we discuss the
concept of Innovation in Financial Institutions. The concept of ―FINANCIAL INNOVATION‖
can be defined as making and promoting new financial products and services, developing new
processes to facilitate financial activities, to interact with customers and to design new structures
for financial institutions.[1]
Now we turn to the concept of ―Innovation‖ The word innovation
derives from the Latin word innovatus, which is the noun form of innovare "to renew or change,"
stemming from in—"into" + novus—"new"[2]
.Actually Services are in intangible in nature as
they vary from person to person & situation to situation according to customers’ needs. The
attitude of staff of F.I. is also matters a lot while giving services to customers and vice versa.
The attitude of staff if not good, customer is likely to set irritated & the services may failed.
Financial institutions provide service as intermediaries of financial markets. They are responsible
for transferring funds from investors to companies in need of those funds. Financial institutions
facilitate the flow of money through the economy. But there are some difficulties & problems
faced by F.I. such problems listed in following manner.
 Increased competition
 Rapidly changing marketplace
 New technology
 New and pending legislative changes, and etc.[3]

2. OBJECTIVES
I. To understand the present circumstances of ―Financial Institution and existing Services‖
(F.I. & S.).
II. To understand the role of F.I. & S. in the economy development of India.
III. To understand the current market shares and probable future scope of F.I. & S.
IV. To understand the strategy adopted by F.I. to attract customers.
REVIEW OF LITERATURE:
Rohit Sarkar in his paper on ―The Planning Commission Vision 2020 for India
The Financial Sector‖ stated that the quantum of resources required to be mobilized, as
the economy grows in complexity and generates new demands, places the financial sector
in a vital position for promoting efficiency and momentum. It intermediates in the flow of
funds from those who want to save a part of their income to those who want to invest in
productive assets. The efficiency of intermediation depends on the width, depth and
diversity of the financial system.[4]
The report by Admin (March 2011) on ―Overview of
Indian Financial System‖ stated that in the India the Financial System is concerned with
the Finance is the science of money management. We can say that finance is something
related to management of money and other assets. Finance represents the resources by
way funds needed for a particular activity. Finance is also referred to as ―Funds‖ or
―Capital‖, when referring to the financial needs of a corporate body. Now you can
finance anything that you want for example you can have home loans, business loans,
education economic development of a nation is reflected by the progress of the various
economic units, broadly classified into corporate sector, government and household
sector. While performing their activities these units will be placed in a
surplus/deficit/balanced budgetary situations.[4]
As a generally when we focus on financial
institutions firstly we took into consideration that “BANKS” or “Commercial Banks”. Therefore
banks are plays vital role in the Indian economy as well as in the common man’s life. Every

3. individual is directly or indirectly related to the banks. The strategic decision is taken to attract
the customers, to overcome on competitions, to increase market share, etc. therefore; there are
following importance stages for F.I. to develop strategies as :-
 Focus on growth:- There are tremendous opportunities for growth! For
many, access to Financial advice is still too hard and complicated – that’s
why it’s a great time to innovate, in order to build market share.
 Structure for fast paced change: There are several certainties in the
financial sector:
o more business model change
o more sophisticated competition
o continuous business model disruption with new, young upstarts
o continual shifts in consumer behavior
o technology-driven fast change, such as with the impact of mobile
technologies.
 Reshape brand messages faster: Clearly there’s a lot of fast-paced change in
financial services with the rapid economic pullback, and it’s critical that
Financial institutions continue to reshape their brand at the pace of rapidly
changing consumer perception.[5]

4. ANALYSIS AND DISCUSSION
ROLE OF BANKS AND FINANCIAL INSTITUTIONS IN ECONOMY
1. HISTORY
 In the ancient time Sahukars and Zamindars involved in the business of
money lending by mortgaging the landed property of the borrowers.
 Towards the beginning of the twentieth century, with the onset of modern
industry in the country, the need for government regulated banking system
was felt.
 The British government began to pay attention towards the need for an
organized banking sector in the country and Reserve Bank of India was set up
to regulate the formal banking sector in the country.
 In 1969, Indian government took a historic decision to nationalize 14 biggest
private commercial banks.
 Due to lack of surplus capital, Non-performing assets, etc. such problems
faced by Banks so that the profitability & standardize service were decline.
 To overcome this problem Government introduce structural and economic
reforms in the financial sector.
 In that period setting up of new banks in the private sector, etc.
2. MODERN DAY ROLE
 Banking system and the Financial Institutions play very significant role in
the economy.
 The new generation private banks have now established themselves in the
system and have set new standards of service and efficiency.

5.  The modern economies in the world have developed primarily by making
best use of the credit availability in their systems.
 The medium and small ventures must also have credit available to them
for new investment and expansion of the existing units.
 The success of any financial system can be fathomed by finding out the
availability of reliable and adequate credit for infrastructure projects.
 In the modern days Banks and Financial Institutions provides various
services such as
Sr.
No
TRADITIONAL BANKING MODERN SERVICES
1 ACCOUNT DEPOSITE INTERNET BANKING
2 FIXED DEPOSITE ATM DEBIT/CREDIT CARD
3 MOBILE BANKING
4 MUTUAL FUND INVESTMENT
5 ONLINE PAYMENTS
 In the modern day economy, where people have no time to make these
payments by standing in queue, the service provided by the banks is
commendable.
3. FUTURE
 Banks and financial intuitions have played major role in the economic
development of the country as well as the credit- related schemes of the
government will implemented by financial sector.
 High rate of interest.
 Investment guidelines and the investment option for Mutual fund and
Stock investment.
 The option for direct foreign investment.
 The income tax rebate and incentives will also in plenty.[6]

6. REFERENCES:
[1] (Article Published in September 2011 by Anne-Lature Mention)
[2] Tarde, G. (1903). The laws of imitation (E. Clews Parsons, Trans.). New York: H. Holt &
Co.
[3] The article by Scott J. Edgett.
[4]The Planning Commission Vision 2020 for India The Financial Sector By Rohit Sarkar
[4]Overview of Indian Financial System March 2011, By Admin.
[5] Source: - http://www.jimcarroll.com/2010/01/14-key-innovation-strategies-for-financial-advisors-
financial-organizations/
[6]Role of banks and F I in economy
(http://www.competitionmaster.com/ArticleDetail.aspx?ID=41e9ef66-3271-418d-b344-
09f76d6f59a1)