Roja project 2

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OBJECTIVE OF THE STUDY
 To understand the need of modern banking services
 To know the impact of technological banking services
 To aware the importance with respect to modern banking services
 To realize the benefits of modern banking services.
 To know about the activities being provided by Traditional Banking System.
 To know how Modern Baking concept defers from Traditional Banking concept.
 To know what is the role of modern in Banking Sector.
 To know what are the challenges of modern Baking.
 To know about the activities being provided by modern banking system.
 If the people are aware of modern Baking, then whether they are using it or not.
 To know why doesn’t using modern banking system.
Need for the study
The pace of development for the Indian banking industry has been tremendous over the past
decade and the future growth of India’s banking sector will remain high. India’s financial
services sector will enjoy generally strong growth during coming years, driven by rising personal
incomes, corporate restructuring, financial sector liberalization and the growth of a more
consumer-oriented, credit-oriented culture. The banks were finding it difficult to compete with
the international banks in terms of the customer service without the use of the information
technology and computers. The use of the modern innovation and computerization of the
banking sector of India has increased many folds after the economic liberalization of 1991 as the
country's banking sector has been exposed to the world's market.
LIMITATIONS OF THE STUDY
 Some respondents think to fill up my questionnaire was a wastage of time according to them.
 Time Constraints.
 Budgetary Constraints.
 The participants comprised a small sample, which can be generalized across the sector.

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RESEARCH METHODOLOGY
A questionnaire consists of a set of questions presented to respondents.
There are two types of questions:
Close end Questions:
Specify all the possible answers and provide answers that are easier to interpret and tabulate.
Open end Questions:
Allow respondents to answer in their often reveal more about how people think.
I prepared close ended questions for my research in which the respondents have to
answer in my selected criteria’s.
SAMPLING PLAN
 Sampling Unit:The sampling unit is the branch of THE LAKSHMI VILAS BANK
LTD – FORT BRANCH
 Sampling Size:50 Respondents. Below are the categories
NO. OF PERSON OCCUPATIONS
18 Businessmen
10 Government Servants
15 Student
7 Profession

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Contents Page No.
1 Banking Industry Profile
- History of Banking In India
- Indian Banking Sector – An Brief Introduction
- Theme of Banking
- Strategic analysis of Banking Industry
 Porters Five Forces Analysis
 SWOT Analysis
 PEST Analysis
- Challenges to Banking In India
1 - 20
2 Traditional Banking and Modern Banking
- Traditional Banking
 Introduction
 Advantages
 Disadvantages
 Benefits
- Modern Banking
 Introduction
 Advantages
 Disadvantages
 Functions
 Types & Uses
 Limitations
- Impact of Modern Banking on traditional Banking
- Differences Between Modern Banking and Traditional Banking
21 -33
3 Case Study on Traditional Banking and Modern Banking with
reference to THE LAKSHMI VILAS BANK LTD (LVB)
- Origin
- Mission and Vision
- Milestone of LVB
- Management
- Internal Performance
- Products and Services of LVB
- Balance Sheet of LVB
34 - 44
4 Data analysis and Interpretation 45 -56
5 Findings 57
6 Suggestions 58
7 Conclusion 59 – 60
8 Bibliography 61
9 Questionnaire 62

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THE BANKING INDUSTRY PROFILE
History of Banking in India:
The first bank in India, though conservative, was established in 1786. The journey of
Indian Banking System can be segregated into distinct phases.
 Foundation phase can be considered to cover 1950s and 1960s till the nationalization of
banks in 1969. The focus during this period was to lay the foundation for a sound
banking system in the country. As a result the phase witnessed the development of
necessary legislative framework for facilitating re-organization and consolidation of the
banking system, for meeting the requirement of Indian economy. A major development
was transformation of Imperial Bank of India into State Bank of India in 1955 and
nationalization of 14 major private banks during 1969. Reserve Bank of India came in
1935. Reserve Bank of India was vested with extensive powers for the supervision of
banking in India as the Central Banking Authority.
 Expansion phase had begun in mid-60s but gained momentum after nationalization of
banks and continued till 1984. A determined effort was made to make banking facilities
available to the masses. Branch network of the banks was widened at a very fast pace
covering the rural and semi-urban population, which had no access to banking hitherto.
Most importantly, credit flows were guided towards the priority sectors. However this
weakened the lines of supervision and affected the quality of assets of banks and
pressurized their profitability and brought competitive efficiency of the system at low
ebb.
 Consolidation phaseThe phase started in 1985 when a series of policy initiatives were
taken by RBI which saw marked slowdown in the branch expansion. Attention was paid
to improving house-keeping, customer service, credit management, staff productivity and
profitability of banks. Measures were also taken to reduce the structural constraints that
obstructed the growth of money market.

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 Reforms phaseThe macro-economic crisis faced by the country in 1991 paved the way
for extensive financial sector reforms which brought deregulation of interest rates, more
competition, technological changes, prudential guidelines on asset classification and
income recognition, capital adequacy, autonomy packages etc. In 1991, under the
chairmanship of M Narasimham, a committee was set up by his name which worked for
the liberalization of banking practices. The country is flooded with foreign banks and
their ATM stations. Efforts were being put to give a satisfactory service to customers.
Phone banking and net banking was introduced.. Time was given more importance than
money.

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Organizational Structure
The banking system, largely, comprises of scheduled banks (banks that are listed under the
second schedule of the RBI act, 1934). Unscheduled banks form a very small component
(function in the form of local are bank). Scheduled banks are further classified into commercial
and cooperative banks, with the basic difference in the holding pattern. Cooperative banks are
cooperative credit institutions that are registered under the Cooperative Societies Act and work
according to the cooperative principles of mutual assistance.
Scheduled commercial banks (SCBs) account for a major proportion of the business of the
scheduled banks. As at end-March, 2009, 80 SCBs were operational in India. SCBs in India are
categorized into the five groups based on their ownership and/or their nature of operations. State
Bank of India and its six associates (excluding State Bank of Saurashtra, which has been merged
with the SBI with effect from August 13, 2008) are recognized as a separate category of SCBs,
because of the distinct statutes (SBI Act, 1955 and SBI Subsidiary Banks Act, 1959) that govern
them.
Nationalised banks (10) and SBI and associates (7), together form the public sector banks
group and control around 70% of the total credit and deposits businesses in India. IDBI ltd. has
been included in the Nationalised banks group since December 2004. Private sector banks
include the old private sector banks and the new generation private sector banks- which were
incorporated according to the revised guidelines issued by the RBI regarding the entry of private
sector banks in 1993. As at end-March 2009, there were 15 old and 7 new generation private
sector banks operating in India.
Foreign banks are present in the country either through complete branch/subsidiary route
presence or through their representative offices. At end-June 2009, 32 foreign banks were
operating in India with 293 branches. Besides, 43 foreign banks were also operating in India
through representative offices.
Regional Rural Banks (RRBs) were set up in September 1975 in order to develop the rural
economy by providing banking services in such areas by combining the cooperative specialty of
local orientation and the sound resource base which is the characteristic of commercial banks.
RRBs have a unique structure, in the sense that their equity holding is jointly held by the central
government, the concerned state government and the sponsor bank (in the ratio 50:15:35), which

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is responsible for assisting the RRB by providing financial, managerial and training aid and also
subscribing to its share capital.
Between 1975 to 1987, 196 RRBs were established. RRBs have grown in geographical coverage,
reaching out to increasing number of rural client. At the end of June 2008, they covered 585 out
of the 622 districts of the country. Despite growing in geographical coverage, the number of
RRBs operational in the country has been declining over the past five years due to rapid
consolidation among them. As a result of state wise amalgamation of RRBs sponsored by the
same sponsor bank, the number of RRBs fell to 86 by end March 2009.
Indian financial industry underwent rapid transformation post liberalization in the early 90’s,
resulting in greater inflow of investments from FII's into the capital market. Despite the foray of
foreign banks in the country, nationalized banks continue to be the biggest lenders in the country,
primarily due to their size and penetration of networks. In fact, Industry estimates indicate that
over 80% of commercial banks in India are in the public sector and of the 50-odd private banks,
less than half are foreign banks.
The Indian banking sector has witnessed consolidation over the past couple of years. As per RBI
data there have around 25 mergers in the banking sector in the last two decades. Some of the key
mergers which have taken place in the last couple of years have been Global Trust Bank with
Oriental Bank of Commerce, Bank of Punjab with Centurion Bank, further Lord Krishna Bank
with Centurion Bank of Punjab and then eventually with HDFC Bank, The Sangli Bank with
ICICI Bank and Bank of Rajasthan with ICICI Bank. This would help banks in meeting capital
adequacy requirements and financing large transactions and investments made by the Indian
corporate sector.
Though the Indian finance and banking industry did suffer significantly during the past 2 years, it
was relatively sheltered from the triggers of the global meltdown, suffering instead due to
monies from FII’s drying up, falling interest rates, rapidly rising inflation and poor investor
confidence.
Technology has played a key role in the Indian banking sector. As per the FY10 RBI release,
around 90% of the public sector branches have been updated with core banking software, while

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around 97.8% of the public sector banks, ATM branches have been fully computerized. The
trend of transactions too can be seen to have shifted from paper based to electronic based. In
FY10, the share of electronic transactions to total transactions stood at around 89% in value
terms and around 40% in volume terms. Mobile technology is expected to widen the reach of the
banking network on one side along with providing for ease of transactions on the other.
Corroborated with the business correspondent model and UID, the same is expected to making
banking services accessible to very small habitations by utilizing mobile technology where
setting up a branch is unfeasible.
Indian Banking Sector: Brief Introduction
India’s banking sector is currently valued at Rs 81 trillion (US$ 1.31 trillion). It has the potential
to become the fifth largest banking industry in the world by 2020 and the third largest by 2025,
according to an industry report. The face of Indian banking has changed over the years. Banks
are now reaching out to the masses with technology to facilitate greater ease of communication,
and transactions are carried out through the Internet and mobile devices. With the Parliament
passing the Banking Laws (Amendment) Bill in 2012, the landscape of the sector will likely
change. The bill allows the Reserve Bank of India (RBI) to make final guidelines on issuing new
bank licenses. This could lead to a greater number of banks in the country; the style of operation
could also evolve with the integration of modern technology into the industry.
Modern Banking
IDBI Bank Ltd has started an online Public Provident Fund (PPF) subscription facility for its
customers. The bank had already received approval from the government to operationalise PPF
transactions through the Internet. The facility would help accomplish the government’s initiative
of electronic transactions in banking services, and also provide a strong platform to mobilize
funds through the Small Saving Schemes. PPF account holders of the bank will have the benefit
of accessing their PPF account online, view account details, print statements, and make
subscription to PPF by way of online transfer of funds.
Simple steps such as memorizing personal identification number (PIN), bringing down credit
limits on cards, using virtual cards for internet transactions and deactivating transactional

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services linked to a mobile number can limit bank frauds, according to experts. Changing the
password regularly can also save an account from fraud attacks.
Online money transfers and money credited directly to an account are the second preferred mode
of inward remittances in India, rising to 22 per cent in fiscal 2013 from 14 per cent in 2009,
according to an RBI report. "While electronic wires/SWIFT continue to be the dominant mode of
transferring remittances by overseas Indians, in the recent period, there has been a significant
increase in the share of remittances transmitted through direct transfer to bank accounts and
through online mode," the report stated.
Key Statistics
The revenue of Indian banks increased four-fold from US$ 11.8 billion to US$ 46.9 billion in the
period 2001–2010. In that phase, the profit after tax rose about nine-fold from US$ 1.4 billion to
US$ 12 billion.
Banking Index with the Sensex(Bankex) that tracks the performance of primary banking sector
stocks grew at a compounded annual growth rate (CAGR) of nearly 20 per cent over the period
2003–2012.
Total number of onsite and offsite ATMs of Indian Banks reached 100042 in July 2012.
Recent Developments
The central banks of Japan and India have agreed to a proposal that expands the maximum
amount of the Bilateral Swap Arrangement (BSA) between the two countries to US $50 billion.
The agreement is for a three-year period (2012–15); the previous size of the BSA was US $15
million. The new agreement will enable the two countries to swap their local currencies against
the US dollar for an amount up to US$50 billion.
Public sector banks will soon offer customers insurance products from different companies as
against products from one company. The finance ministry has asked public sector banks to
become insurance brokers instead of corporate agents. This move was one of the steps stated by
finance minister Mr P Chidambaram in early 2013, as a way to increase insurance penetration.
Citi has promoted MrAnandSelvakesari as the head of consumer banking for the Association of
Southeast Asian Nations (ASEAN) region. MrSelvakesari will continue his present role as Citi’s

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consumer banking business head in India – a post he has occupied since July 2013 – as well as
look after the consumer banking operations in Indonesia, Malaysia, Philippines, Singapore,
Thailand and Vietnam.
Indian Overseas Bank (IOB) has received approval from the RBI to open a second branch in
Bangkok, according to the bank’s chairman and managing director Mr M Narendra. The bank
will likely open the second branch before March 31, 2014. Also, the bank is looking to expand
its presence. "Our focus is on opening more rural branches and taking banking to villages. We
have covered 3,000 villages under the financial inclusion scheme,” said MrNarendra.
In an effort to expand its revenue streams, Bank of India (BOI) plans to enter the merchant
banking space through BOI Shareholding Ltd. BOI is looking to buy Bombay Stock Exchange’s
(BSE) entire shareholding in their joint venture BOI Shareholding Ltd (BOISL). Another reason
for BOI’s inclination to foray into merchant baking is to offer a greater range of financial
services to its customers.
Government Initiatives
The Cabinet Committee on Economic Affairs (CCEA) has given the go-ahead to a proposal to
increase foreign holding in Axis Bank to 62 per cent from the current 49 per cent. The move
could lead to overseas investment of nearly Rs 7,250 crore (US$ 1.17 billion) into the country.
The approval is subject to foreign institutional investors’ (FII) holding being capped at 49 per
cent.
To counter the liquidity pressure faced by micro and small enterprises, the RBI will provide
refinance aggregating up to Rs 5,000 crore (US$ 813.16 million) to the Small Industries
Development Bank of India (SIDBI). SIDBI can use the funds for direct and onward lending to
banks. Also, in an effort to encourage more lending to medium enterprises, the RBI will include
incremental credit given to these units by scheduled commercial banks (which do not include
regional rural banks) under the domain of priority sector lending.
HDFC Bank Ltd has started its rural financial literacy initiative in the village of Palakkad in
Kerala, with the support of the RBI. The private bank will conduct financial literacy camps in 39
rural and semi-urban branches across the South Indian state. These camps will allow adults and
school children from 234 Panchayat wards in 26 villages to gain theoretical knowledge on
financial products and services. This initiative endorses the RBI's recent circular which

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recommends that banks, through their branch networks, should put in more efforts in rural areas
to spread financial literacy.
Road Ahead
India is one of the top 10 economies in the world, where the banking sector has tremendous
potential to grow. The last decade saw customers embracing ATM, internet and mobile banking.
The number of ATMs has doubled over the past few years, with more than 100,000 in the
country at present (70 per cent in urban areas). They are estimated to further double by 2016,
with over 50 per cent expected to be set up in small towns. Also, the scope for mobile and
internet banking is big. At the start of 2013, only 2 per cent of banking payments went through
the electronic system in the country. Today, mobility and customer convenience are viewed as
the primary factors of growth and banks are continuously exploring new technology, with terms
such as mobile solutions and cloud computing being used with greater regularity.
CURRENT PERIOD
All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are
Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-
operative Banks. Scheduled Commercial Banks in India are categorised into five different groups
according to their ownership and/or nature of operation. These bank groups are:
 State Bank of India and its Associates
 Nationalized Banks
 Private Sector Banks
 Foreign Banks
 Regional Rural Banks.
In the bank group-wise classification, IDBI Bank Ltd. is included in Nationalized Banks.
Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled
Urban Cooperative Banks.
By 2010, banking in India was generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the private sector and foreign

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banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other banks in comparable economies in
its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the
government.
With the growth in the Indian economy expected to be strong for quite some time-especially in
its services sector-the demand for banking services, especially retail banking, mortgages and
investment services are expected to be strong. One may also expect M&A’s, takeovers, and asset
sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak
Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed
to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need to be vetted by them.
In recent years critics have charged that the non-government owned banks are too aggressive in
their loan recovery efforts in connexion with housing, vehicle and personal loans. There are press
reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.
ADOPTION OF TECHNOLOGY
The IT revolution has had a great impact on the Indian banking system. The use of computers
has led to the introduction of Modern banking in India. The use of computers in the banking
sector in India has increased many fold after the economic liberalization of 1991 as the country's
banking sector has been exposed to the world's market. Indian banks were finding it difficult to
compete with the international banks in terms of customer service, without the use of
information technology.
The RBI set up a number of committees to define and co-ordinate banking technology. These
have included:
 In 1984 was formed the Committee on Mechanization in the Banking Industry (1984) whose
chairman was Dr. C Rangarajan, Deputy Governor, Reserve Bank of India. The major
recommendations of this committee were introducing MICR technology in all the banks in the
metropolises in India. This provided for the use of standardized cheque forms and encoders.

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 In 1988, the RBI set up the Committee on Computerization in Banks (1988) headed by Dr. C
Rangarajan. It emphasized that settlement operation must be computerized in the clearing
houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna andThiruvananthapuram. It further
stated that there should be National Clearing of inter-
city cheques at Kolkata, Mumbai, Delhi, Chennaiand MICR should be made operational. It also
focused on computerisation of branches and increasing connectivity among branches through
computers. It also suggested modalities for implementing on-line banking. The committee
submitted its reports in 1989 and computerisation began from 1993 with the settlement
between IBA and bank employees' associations.
 In 1994, the Committee on Technology Issues relating to Payment systems, Cheque
Clearing and Securities Settlement in the Banking Industry (1994) was set up under Chairman
W S Saraf. It emphasized Electronic Funds Transfer (EFT) system, with the BANKNET
communications network as its carrier. It also said that MICR clearing should be set up in all
branches of all those banks with more than 100 branches.
 In 1995, the Committee for proposing Legislation on Electronic Funds Transfer and other
Electronic Payments (1995) again emphasized EFT system.
Total numbers of ATMs installed in India by various banks as on end June 2012 is 99,218.The
New Private Sector Banks in India are having the largest numbers of ATMs, which is followed
by off-site ATMs belonging to SBI and its subsidiaries and then by Nationalised banks and
Foreign banks. While on site is highest for the Nationalised banks of India.

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THEME OF BANKING OF INDIA
•Reserve Of Bank Of India(RBI)
Central Bank
•Allahabad Bank,andhra Bank ,Bank Of Baroda ,Bank Of India,bank Of
Maharashtra,canara Bank,central Bank Of India,corporation Bank,dena Bank,idbi
Bank,indian Bank,indian Overseas Bank,oriental Bank Of Commerce,punjab National
Bank,syndicate Bank,uco Bank,union Bank Of India,vijaya Bank,state Bank Of
India(SBI)state Bank Of Bikaner & Jaipur,state Bank Of Hyderbad,state Bank Of
Indore,state Bank Of Mysore,state Bank Of Patiala,state Bank Of Travancore,state Bank
Of Saurashtra.
Nationalised Bank
•Axis Bank,HDFC Bank,ICICI Bank,saraswat Bank,catholic Syrian Bank,dhanalaxmi
Banksouth Indian Bank,city Union Bank,federal Bank,induslnd Bank,ing Vysya Bank,kotak
Mahindra Bank,YES Bank,karur Vysya Bank.Lakshmi Vilas Bank,jammu & Kashmir
Bank,karnataka Bank,development Credit Bank
Private Bank
•ABN Ambro Bank,abu Dhabi Commercial Bank,antwerp Diamond Bank,bank International
Indonesia,bank Of America,bank Of Bahrian And Kuwait,bank Of Ceylon,bank Of Nova
Scotia,the Bank Of Tokyo-mitsubishi,barclays Bank,citibank India,hsbc,standard
Chartered,deutsche Bank,royal Bank Of Scotland.
Foreign Bank
• North Malabar Gramin Bank,south Malabar Gramin Bank,vananchal Gramin
Bank.
Regional Rural Banks
•Real Time Gross Settlement(RTGS),National Electronic Fund Transfer(NEFT),Structured
Financial Messaging System(SFMS),Cash Tree,cashnet,automated Teller
Machine(ATM),Dematerialisation(DEMAT),Foreign Exchange(FOREX).
Financial Services

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STRATEGIC ANALYSIS OF BANKING INDUSTRY
 PORTER’S FIVE FORCE ANALYSIS:
Prof. Michael Porter’s competitive forces Model applies to each and every company as well as
industry. This model with regards to the Banking Industry is presented below:
Bargaining Power of Buyers
is high as corporate can raise
funds easily due to high
competition.
PORTER’S
5
FORCE
ANALYSIS
Organizing Power of the
Supplier is high. With new
financial instruments they are
asking higher return on
investment.
Threat from Substitutes
high due to competition from
NBFCs & Insurance
companies as they offer a
higher rate of interest than
banks.
Potential Entrantsis high as
Development Financial
Institutions as well as Private
and foreign banks have entered
in a big way.
Rivalry among Existing
Firmshas increased with
liberalization. New products and
improved customer services is the
focus.

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 Rivalry among existing firms
With the process of liberalization, competition among the existing banks has increased.
Each bank is coming up with new products to attract the customers and tailor made loans are
provided. The quality of services provided by banks has improved drastically.
 Potential Entrants
Previously the Development Financial Institutions mainly provided project finance and
development activities. But they have now entered into retail banking which has resulted into
stiff competition among the existing players
 Threats from Substitutes
Banks face threats from Non-Banking Financial Companies. NBFCs offer a higher rate of
interest.
 Bargaining Power of Buyers
Corporate s can raise their funds through primary market or by issue of GDRs, FCCBs.
As a result they have a higher bargaining power. Even in the case of personal finance, the buyers
have a higher bargaining power. This is mainly because of competition.
 Bargaining power of Suppliers
With the advent of new financial instruments providing a higher rate of returns to the
investors, the investments in deposits is not growing in a phased manner. The suppliers demand a
higher return for the investments.
 Overall Analysis
The key issue is that how can banks leverage their strengths to have a better future. Since
the availability of funds is more and deployment of funds is less, banks should evolve new
products and services to the customers. There should be rational thinking in sanctioning loans,
which will bring down the NPAs. As there is expected revival in the Indian economy banks have
a major role to play. Funding corporate at a low cost of capital is a major requisite.

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 SWOT ANALYSIS:
The banking sector is often taken as a proxy for the economy as a whole. The
performance of bank should therefore, reflect “Trends in the Indian Economy”. Due to the
reforms in the financial sector, banking industry has changed drastically with the opportunities to
the work with, new accounting standards new entrants and information technology. The
deregulation of the interest rate, participation of banks in project financing has changed in the
environment of banks.
The performance of banking industry is done through SWOT Analysis. It mainly helps to
know the Strengths and Weakness of the industry and to improve will be known through
converting the opportunities into strengths. It also helps for the competitive environment among
the banks.
 STRENGTHS
 GreatersecuritiesofFunds
Compared to other investment options banks since its inception has been a better avenue
in terms of securities. Due to satisfactory implementation of RBI’s prudential norms banks have
won public confidence over several years.
 Banking network
After nationalization, banks have expanded their branches in the country, which has
helped banks build large networks in the rural and urban areas. Private Banks allowed operating
but they mainly concentrate in metropolis.
 Large Customer Base
This is mainly attributed to the large network of the banking system. Depositors in rural
areas prefer banks because of the failure of the NBFCs.
 Low Cost of Capital
Corporate prefers borrowing money from banks because of low cost of capital. Middle
income people who want money for personal financing can look to banks as they offer at very
low rates of interests. Consumer credit forms the major source of financing by banks.

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 WEAKNESSES
 Basel Committee
The banks need to comply with the norms of Basel committee but before that it is
challenge for banks to implement the Basel committee standard, which are of international
standard.
 Powerful Unions
Nationalization of Banks had a positive outcome in helping the Indian Economy as a
whole. But this has also proved detrimental in the form of strong unions, which have a major
influence in decision making. They are against automation.
 Priority Sector Lending
To uplift the society, priority sector lending was brought in during nationalization. This is
good for the economy but banks have failed to manage the asset quality and their intensions were
more towards fulfilling government norms. As a result lending was done for non-productive
purposes.
 High Non-Performing Assets
Non-Performing Assets (NPAs) have become a matter of concern in the banking
industry. This is because of change in the Accounting Standards (Prudential Norms). Net NPAs
increased to large extent of the total advances, which has to be reduced to meet the international
standards.
 OPPORTUNITIES
 Universal Banking
Banks have moved along the value chain to provide their customers more products and
services. For example: - SBI is into SBI home finance, SBI Capital Markets, SBI Bonds etc.
 Differential Interest Rates
As RBI control over bank reduces, they will have greater flexibility to fix their own
interest rates which depends on the profitability of the banks.

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 High Household Savings
Household savings have been increasing drastically. Investment in financial assets has
also increased. Banks should use this opportunity for raising funds.
 Overseas Markets
Banks should tap the overseas market, as the cost of capital is very low.
 Internet Banking
The advances in information technology have made banking easier. Business transactions
can effectively carry out through internet banking.
 THREATS
 NBFCs, Capital Markets and Mutual funds
There is a huge investment of household savings. The investments in NBFCs deposits,
Capital Market Instruments and Mutual Funds are increasing. Normally these instruments offer
better returns to investors.
 Change in the Government Policy
The change in the government policy has proved to be a threat to the banking sector.
 Inflation
The interest rates go down with a fall in inflation. Thus, the investors will shift his
investments to other profitable sectors.
 Recession
Due to the recession in the business cycle the economy functions poorly and this has
proved to be a threat to the banking sector. The market oriented economy and globalization has
resulted into competition for market share. The spread in the banking sector is very narrow. To
meet the competition the banks have to grow at a faster rate and reduce the overheads. They can
introduce new products and develop the existing services.

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 PEST ANALYSIS
 POLITICAL/ LEGAL ENVIROMENT
Government and RBI policies affect the banking sector. Sometimes looking into the
political advantage of a particular party, the Government declares some measures to their
benefits like waiver of short-term agricultural loans, to attract the farmer’s votes. By doing so the
profits of the bank get affected. Various banks in the cooperative sector are open and run by the
politicians. They exploit these banks for their benefits. Sometimes the government appoints
various chairmen of the banks.
Various policies are framed by the RBI looking at the present situation of the country for
better control over the banks
 ECONOMICAL ENVIROMENT
Banking is as old as authentic history and the modern commercial banking are traceable
to ancient times. In India, banking has existed in one form or the other from time to time. The
present era in banking may be taken to have commenced with establishment of bank of Bengal in
1809 under the government charter and with government participation in share capital.
Allahabad bank was started in the year 1865 and Punjab national bank in 1895, and thus, others
followed
Every year RBI declares its 6 monthly policy and accordingly the various measures and
rates are implemented which has an impact on the banking sector. Also the Union budget affects
the banking sector to boost the economy by giving certain concessions or facilities. If in the
Budget savings are encouraged, then more deposits will be attracted towards the banks and in
turn they can lend more money to the agricultural sector and industrial sector, therefore, booming
the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking
channels.

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 SOCIAL ENVIRONMENT
Before nationalization of the banks, their control was in the hands of the private parties
and only big business houses and the effluent sections of the society were getting benefits of
banking in India. In 1969 government nationalized 14 banks. To adopt the social development in
the banking sector it was necessary for speedy economic progress, consistent with social justice,
in democratic political system, which is free from domination of law, and in which opportunities
are open to all. Accordingly, keeping in mind both the national and social objectives, bankers
were given direction to help economically weaker section of the society and also provide need-
based finance to all the sectors of the economy with flexible and liberal attitude. Now the banks
provide various types of loans to farmers, working women, professionals, and traders. They also
provide education loan to the students and housing loans, consumer loans, etc.
Banks having big clients or big companies have to provide services like personalized
banking to their clients because these customers do not believe in running about and waiting in
queues for getting their work done. The bankers also have to provide these customers with
special provisions and at times with benefits like food and parties. But the banks do not mind
incurring these costs because of the kind of business these clients bring for the bank.
Banks have changed the culture of human life in India and have made life much easier for
the people.
 TECHNOLOGICAL ENVIRONMENT
Technology plays a very important role in bank’s internal control mechanisms as well as
services offered by them. It has in fact given new dimensions to the banks as well as services that
they cater to and the banks are enthusiastically adopting new technological innovations for
devising new products and services.
The latest developments in terms of technology in computer and telecommunication have
encouraged the bankers to change the concept of branch banking to anywhere banking. The use
of ATM and Internet banking has allowed ‘anytime, anywhere banking’ facilities. Automatic
voice recorders now answer simple queries, currency accounting machines makes the job easier

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and self-service counters are now encouraged. Credit card facility has encouraged an era of
cashless society. Today MasterCard and Visa card are the two most popular cards used world
over. The banks have now started issuing smartcards or debit cards to be used for making
payments. These are also called as electronic purse. Some of the banks have also started home
banking through telecommunication facilities and computer technology by using terminals
installed at customers home and they can make the balance inquiry, get the statement of
accounts, give instructions for fund transfers, etc. Through ECS we can receive the dividends and
interest directly to our account avoiding the delay or chance of loosing the post.
Today banks are also using SMS and Internet as major tool of promotions and giving
great utility to its customers. For example SMS functions through simple text messages sent
from your mobile. The messages are then recognized by the bank to provide you with the
required information.
All these technological changes have forced the bankers to adopt customer-based
approach instead of product-based approach.
CHALLENGES TO BANKING IN INDIA
 The issue of money laundering is very important in retail banking. This compels all the
banks to consider seriously all the documents which they accept while approving the
loans.
 The issue of outsourcing has become very important in recent past because various core
activities such as hardware and software maintenance, entire ATM set up and operation
(including cash, refilling) etc., are being outsourced by Indian banks.
 Banks are expected to take utmost care to retain the ongoing trust of the public.
 Customer service should be at the end all in retail banking. Someone has rightly said, “It
takes months to find a good customer but only seconds to lose one.” Thus, strategy of
Knowing Your Customer (KYC) is important. So the banks are required to adopt
innovative strategies to meet customer’s needs and requirements in terms of
services/products etc.

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 The dependency on technology has brought IT departments’ additional responsibilities
and challenges in managing, maintaining and optimizing the performance of retail
banking networks. It is equally important that banks should maintain security to the
advance level to keep the faith of the customer.
 The efficiency of operations would provide the competitive edge for the success in retail
banking in coming years.
 The customer retention is of paramount important for the profitability if retail banking
business, so banks need to retain their customer in order to increase the market share.
 One of the crucial impediments for the growth of this sector is the acute shortage of
manpower talent of this specific nature, a modern banking professional, for a modern
banking sector.
If all these challenges are faced by the banks with utmost care and deliberation, the retail
banking is expected to play a very important role in coming years, as in case of other nations.

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TRADITIONAL BANKING
AN INTRODUCTION
Traditional banking is a banking where the service are only pertains to accepting of deposits and
lending money. This banking system aimed at basic financial services to the economy without
many expectations of top and bottom line approach. This system of banking is a conservative
type of banking which contains below:
 Open an account
 Open or create fixed deposits
 Renew fixed deposits
 Inquire about tax deduction
 Inquire about cheque status
 Request for a cheque book
 Request for a demand draft
 Stop payment of a cheque
 Apply for Auto, Mortgage, Home, Equity, student, or personal loans
 Receive investment product and service information
 Order Travelers, cashiers, and regular cheques
 Transfer funds between accounts within the bank.

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ADVANTAGES OF TRADITIONAL BANKING SERVICE
 In traditional Banking transactions, you do not need any type of security. The only
matters that you have to keep your bank papers of bank book safe.
 If you are having any problem related to the bank, you can immediately go to the bank
and solve your doubts.
 You can get any information related to bank and still have any doubts,you can
immediately ask.
 You do not worry about your bank papers till you yourself give it to anybody else.
DISADVANTAGES OF TRADITIONAL BANKING SERVICES
 In Traditional banking, your work any remain uncompleted.
 If the papers of bank are lost, you also may lose the right of your bank properties.
 In Traditional Banking, sometimes your work may remain uncompleted which is wastage
of time.
 In Traditional Banking, if employees are busy with their bank, it any possible that they
may not give you the proper answer.
 Your bank papers are not secured through Traditional Banking.
 In case of having any problem, every time you have to rush to the bank.
BENEFITS OF TRADITIONAL BANKING
Trust your personal checking account with a brick-and-mortar bank like Citizens Bank
You enter your local branch, and you're immediately greeted by a banker who knows your
name and your story. In an age of smart phones and automated technologies, you may prefer the
simplicity of a traditional bank with a hometown feel. At Citizens Bank, we believe your
banking relationship should be three things: Simple, Clear and Personal. Whether you're retired,
an empty-nester or simply enjoy an in-person banking relationship, discover the benefits of

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traditional banking. Then, learn how our trusted representatives can provide personalized
guidance on new ways to manage your personal checking account with online bill pay.
Simple and easy to use
While the benefits of our traditional banking are available to all customers, they are particularly
valuable to those who have found themselves in an empty nest or who are nearing retirement.
Now is the time to enjoy a slower pace of life and take advantage of your newfound freedom.
The kids have moved out, you have more time for yourself and you're ready to experience life in
a whole new way. As your lifestyle changes, you deserve a banking solution that is simple and
easy to use. And while you may prefer the in-person banking experience, our online bill
pay provides the freedom you need to take that dream trip you've been waiting for. Not
comfortable setting it up on yourown? Citizens Bank is here to help. Our representatives can
walk you through the process step-by-step so that you never miss a payment.
If you're retired and living on a fixed income, your budget may not be as flexible as it was when
you were working full-time. Avoid the hassle of hidden bank fees by trusting your money with a
brick-and-mortar bank like Citizens Bank. We believe in being clear with our customers, and
we'll tell you upfront what you get with our products before you apply. Find answers
to frequently asked checking questions online, or visit a branch near you for more information -
we'd love for you to drop by.
Our trusted representatives care about your financial goals just as much as you do. From opening
a new savings account so you can set money aside for the holidays year-round to downsizing
your existing home, we're here to listen, and we understand your unique financial situation. As a
traditional bank, you'll find an exceptional and personalized customer experience where bankers
provide solutions that fit your circumstances. We believe we're in this together, and we're
invested in the success of our communities.
Open a personal checking account with Citizens Bank today
Whether you're cashing a check, transferring money or making the last payment on your
mortgage, we want to get to know you better so we can help you reach your financial goals. Stop
by a branch near you to open a personal checking account and experience the benefits of
traditional banking.

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MODERN BANKING
INTRODUCTION
Modern banking or Internet banking (or E-banking) means any user with a personal
computer and a browser can get connected to his bank’s website to perform any of the virtual
banking functions. In internet banking system the bank has a centralized database that is web-
enabled. All the services that the bank has permitted on the internet are displayed in menu. Once
the branch offices of bank are interconnected through terrestrial or satellite links, there would be
no physical identity for any branch. It would be a borderless entity permitting anytime, anywhere
and anyhow banking.
The network which connects the various locations and gives connectivity to the central office
within the organization is called intranet. These networks are limited to organizations for which
they are set up. SWIFT is a live example of intranet application. Below points gives the brief
idea of modern banking :
 View your account balance
 Print your account statement
 View transaction history
 Open or create Fixed Deposits
 Renew fixed Deposits or set/change maturity instructions
 Transfer funds between account within the bank
 Track / schedule funds transfer
 Inquire about cheque status
 Inquire about tax deduction
 Request for a cheque book

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 Request for a demand draft
 Stop payment of cheque
 Track recent account activity
 Authorize electronic bill payments
 Requests for copies of past statement and processed cheques
 Order travelers, cashiers, and regular cheque
 Apply for Auto, Mortgage, Home , Equity, Student or Personal loans
 Receive investment product and service information
 Transfer of funds between accounts;
 It brings efficiency in CRM (Customer relationship management)
 Make Payment of bills
 Send and receive secure messages to and from the bank
 Put in requests for account statement of account by E-mail registration
 Balance a cheque book
E-banking provides enormous benefits to consumers in terms of ease and cost of transactions,
either through Internet, telephone or other electronic delivery. Electronic finance (E-finance) has
become one of the most essential technological changes in the financial industry. E-finance as
the provision of financial services and markets using
electronic communication and computation. In practice, e-finance includes e-payment, e-trading,
and e-banking.

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ADVANTAGES OF MODERN BANKING
 Availability
 convenience:
 performance:
 Transactional speed:
 Effectiveness:
 Shop & Payment:
 No Waiting:
 Set Ups:
 Ubiquity:
 performance:
 banking from anywhere in the world:
 Inexpensive:
DISADVANTAGES OF ONLINE BANKING
 Hackers” accessing your bank accounts.
 one needs to count with an internet Service Provider.
 one need original set up for paying time is time-consuming but will ultimately be a time
saver.
 Switching banks can be more cumbersome Online than on person.
 one must have basic computer skills and Internet knowledge, must be comfortable using a
computer.

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FUNCTIONS OF MODERN BANKING
At present, the personal e-bank system provides the following services: -
A. INQUIRY ABOUT THE INFORMATION OF ACCOUNT
The client inquires about the details of his own account information such as the card‟s /
account‟s balance andthe detailed historical records of the account and downloads the report list.
B. CARD ACCOUNTS’ TRANSFER
The client can achieve the fund to another person‟s Credit Card in the same city.
C. BANK-SECURITIES ACCOUNTS TRANSFER
The client can achieve the fund transfer between his own bank savings accounts of his own
Credit Card account and his own capital account in the securities company. Moreover, the client
can inquire about the present balance at real time.
D. THE TRANSACTION OF FOREIGN EXCHANGE
The client can trade the foreign exchange, cancel orders and inquire about the information of
the transaction of foreign exchange according to the exchange rate given by our bank on net.
E. THE B2C DISBURSEMENT ON NET
The client can do the real-time transfer and get the feedback information about payment from
our bank when the client does shopping in the appointed web-site.

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F. CLIENT SERVICE
The client can modify the login password, information of the Credit Card and the client
information in e-bank on net.
G. ACCOUNT MANAGEMENT
The client can modify his own limits of right and state of the registered account in the
personal e-bank, such as modifying his own login password, freezing or deleting some cards and
so on.
H. REPORTING THE LOSS IF THE ACCOUNT
The client can report the loss in the local area (not nationwide) when the client‟s Credit Card
or passbook is missing or stolen.
TYPES OF MODERN BANKING
A. Deposits, withdrawals, inter-account transfer and payment of linked accounts at an ATM;
B. Buying and paying for goods and services using debit cards or smart cards without having to
carry cash or a cheque book;
C. Using a telephone to perform direct banking- make a balance enquiry, inter-account transfers
and pay linked accounts;
D. Using a computer to perform direct banking- make a balance enquiry, inter-account transfers
and pay linked

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USES OF MODERN BANKING
A. Account Information: Real time balance informationand summary of day‟s transaction.
B. Fund Transfer: Manage your Supply-Chain network,effectively by using our online hand
transfer mechanism. We can effect fund transfer on a real time basis across the bank
locations.
C. Request: Make a banking request online.
D. Downloading of account statements as an excel file or text file.
E. Customers can also submit the following requests online: Registration for account statements
by e-mail daily / weekly / fortnightly / monthly basis.
Stop payment or cheques
Cheque book replenishment
Demand Draft / Pay-order
Opening of fixed deposit account
Opening of Letter of credit
F. Customers can Integrate the System with his own ERP
G. Bill Payment through Electronic Banking
H. The Electronic Shopping Mall
I. Effecting Personal Investments through Electronic Banking
J. Investing in Mutual funds
K. Initial Public Offers Online

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LIMITATION OF MODERN BANKING
A. Safety situations around ATMs.
B. Abuse of bank cards by fraudsters at ATMs.
C. Danger of giving your card number when buying on-line.
IMPACT OF MODERN BANKING ON TRADITIONAL BANKING
Modern banking transactions are much cheaper than branch or even phone transactions. This
could turn yesterday’s competitive advantage - a large branch network - into a comparative
disadvantage, allowing e-banks to undercut bricks-and-mortar banks. This is commonly known
as the “beached dinosaur” theory.
Modern banks are easy to set up, so lots of new entrants will arrive. „Old-world‟ systems,
cultures and structures will not encumber these new entrants. Instead, they will be adaptable and
responsive. E-banking gives consumers much more choice. Consumers will be less inclined to
remain loyal. Portal providers are likely to attract the most significant share of banking profits.
Indeed banks could become glorified marriage brokers. They would simply bring two parties
together e.g. buyer and seller, payer and payee. The products will be provided by monolines,
experts in their field. Traditional banks may simply be left with payment and settlement business
even this could be cast into doubt. Traditional banks will find it difficult to evolve. Not only will
they be unable to make acquisitions for cash as opposed to being able to offer shares, they will
be unable to obtain additional capital from the stock market. This is in contrast to the situation
for Internet firms for whom it seems relatively easy to attract investment. Modern banking is
just banking offered via a new delivery channel. It simply gives consumers another service (just
as ATMs did).
Experience in Scandinavia (arguably the most advanced e-banking area in the world) appears
to confirm that the future is „clicks and mortar‟ banking. Customers want full service banking
via a number of delivery channels. The future is therefore „Martini Banking‟ (any time, any
place, anywhere, anyhow). The start-up costs of an e-bank are high. Establishing a trusted brand

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is very costly as it requires significant advertising expenditure in addition to the purchase of
expensive technology (as security and privacy are key to gaining customer approval).
Modern -banks have already found that retail banking only becomes profitable once a large
critical mass is achieved. Consequently many e-banks are limiting themselves to providing a
tailored service to the better off.E-Banking transaction needs some interface to communicate
with banking customer. All the electronic transaction performs through some interfaces. The
electronic devices which perform interact with customers and communicate with other banking
system is called electronic banking delivery channels.
DIFFERENCES BETWEEN TRADITIONAL BANKING AND MODERN
BANKING
Ozsoy and Say full in (2006) found from the Word Net that banking is defined as a
financial institution that accept deposits and channels the money into lending activities.
According to online Oxford dictionary, we found that banking is defined as the business
conducted or services offered by a bank. Banking is organized in form of financial institution
which offers several financial functions which mainly included depositing and safekeeping,
lending financial sources and act as role of payment to each other.
The different traditional banking and modern banking. In the traditional banking, it has perform
the basic function such as depository institutions, maintain deposits, make loans, and control the
checkable deposits portion of the economy’s money. Traditional bank is the original banks which
was the original financial intermediaries in offering checking accounts. It also plays an important
role in the financial markets to manage the circular flow of the fund. However, there are some
limitations on the traditional banking and thus lead to the innovation in modern banking.
Traditional banking has a limited accessibility in which people only can conduct business at their
brick-and-mortar locations. It makes customers inconvenience in doing their business. It also
provides less efficient services to customers because customers can only do their transactions in
the bank. Therefore, customers would need to spend more time to complete the transaction by
heading to the banks.
In the comparison, modern banking has come out variety of services which fulfill the

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unsatisfactory in traditional banking. Nowadays, deposits have become an important source of
funds for financial institution. Thus, the ways to attract depositing are important for the financial
institution in getting funds. So, many strategies has implied such as adjust saving’s interest rate
or providing different types of financial instruments to collect funds. In addition, with the
technology development, modern banking has brought a great positive impact to the customers.
With the development of Automatic Teller Machine (ATM), Credit and Debit Cards, Phone
Banking and Online Banking, it able to reduce cost, save time for payment and also increase the
competitive advantage in financial service industry.
In conclusion, traditional banking provides the basic functions to public. However, by further
improvement, modern banking has brought much of benefits to public which is unreachable in
traditional banking.
(A) The changing character of the financial service industry and the role of consolidation
The financial services industry is consolidating around the globe. Consolidation of banks or
financial companies may obtain a greater purchasing power as well as reduce the number of
competitors in the market, increase economies of scales by eliminating repetitive assets, reduce
costs and increase revenues. Mergers and acquisitions (M&As) among financial institutions are
occurring at a torrid pace in US, which may also occur at a rapid in the near future Europe and
Asia. (Berger et al, 1999). In this case, the consolidation of financial service industry has
affected by the factors on the fundamental forces of change. The fundamental forces of change
have transformed the structure of financial markets and institution and reflect the intense
competition among the financial firms today. The factors are included deregulation and
reregulation, financial innovation, securitization, globalization and advanced in technology.
Loans have offer high gross yield and classify as a risky assets in a bank when it failed to
pay by the borrower. This may affect the liquidity position in a bank. In order to cope with this
problem, banks have involved in securitization. Securitization is the process that converting
assets into marketable securities.
B) Merger for the financial service industry Asian’s financial crisis started in 1997 when
ASEAN countries opened up their market to attract the foreign investment. However, this flow
cause the asset bubbles burst when their economies were not competitively overtime to sustain

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the high interest rates to support their fixed exchange rates (Andrew, 2010). United States was
seemed to be the initiator for the Asian’s financial crisis (Andrew, 2010). This financial crisis
had brought the negative effect to United States and the world. In 1998, a slowdown situation
happens in the world economy, which started from South East Asia (Sutthirak and Gonjanar,
2012). Therefore, according to Nanto (1998), stated that The United States Congress is likely to
consider the Asian financial crisis within the three major legislative backgrounds. The first is in
the financing and scope of the activities of the International Monetary Fund (IMF). The second
context is in the influence of the crisis on the United Stated economy and financial service
industry. Also, the last context is the efforts for trade and investment liberalization in the world.
(C) The trend of the dollar amount of assets Looking into the pie chart consisting of the assets of financial
services sector covering from year 2007-2011, we can see that there are changes in the amount among the
6 sectors, which are banking, securities, pensions, government related, insurance, and also others. We can
also witness an equal distribution in terms of the changes, with 3 sectors experiencing an increase and
another 3 sectors experiencing a decline. Firstly, we focus on the sectors which experience an increase in
the dollar amount of assets they control. The banking sector, government related sector, and also the
insurance sector have increase the dollar amount of assets. Among them, the banking sector increased the
most dollar amount of assets they control throughout these five years. Having assets totaling to
12362.1bilion in 2007, the amount increased to 14635.3 billion in 2011, recording the highest
increase.The second pie chart consists of the assets if financial services sector from 2004-2008.

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CASE STUDY OF TRADITIONAL BANKING AND MODERN
BANKING WITH REFERENCETO - LAKSHMI VILAS BANK
ORIGIN:
The Lakshmi Vilas Bank Limited (LVB) was founded in 1926 by seven people of Karur
city in Tamil Nadu under the leadership of Shri V.S.N. RamalingaChettiar, mainly to cater to the
financial needs of varied customer segments. The bank was incorporated on November 03, 1926
under the Indian Companies Act, 1913 and obtained the certificate to commence business on
November 10, 1926, The Bank obtained its license from RBI in June 1958 and in August 1958 it
became a Scheduled Commercial Bank.[2]
During 1961-65 LVB took over nine Banks and raised its branch network considerably.
To meet the emerging challenges in the competitive business world, the bank started expanding
its boundaries beyond Tamil Nadu from 1974 by opening branches in the neighbouring states of
Andhra Pradesh, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Gujarat, West Bengal, Uttar
Pradesh, Delhi and Pondicherry. Mechanization was introduced in the Head office of the Bank as
early as 1977. At present, with a network of 285 branches,1 satellite branch and 10 extension
counters, 516 ATMs, spread over 16 states and the union territory of Pondicherry. LVB has a
base in the state of Tamil Nadu. LVB has been focusing on retail banking, corporate banking and
bank assurance
The bank’s business crossed Rs. 12,606 Crores as on March 31, 2009. The bank earned a
net profit of Rs. 50.30 Crores. The net owned fund of the bank reaches Rs 453.70 crore. With a
fairly good quality of loan assets the net NPA of the bank was pegged at 1.24 % as on March 31,
2009.

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Vision of Lakshmi Vilas Bank:
“To be a sound and dynamic banking entity providing financial services of excellence with Pan
Indian presence”.
Mission of Lakshmi Vilas Bank:
“To develop a range of quality financial services and products to create value for the customers ,
shareholders and the society to motivate people to achieve excellence in performance leading to
sustained profitable growth and build a vibrant organization”.
Milestones / Journey of Lakshmi Vilas Bank:
YEAR EVENTS
1926 - The Company was incorporated at Karur, South India. The main object of the company is
the Bank transacts banking business of every description.
1958 - The Bank was licensed under the Banking Companies Act and it became a Scheduled
Bank the same year.
1961-1965 – Acquired nine other Banks: The Karur Mercantile Bank, Ltd. Karur, was
amalgamated with the Bank, as ordered by the Central Government. The Bank took over
particular assets and liabilities of Kannivadi Bank Pvt. Ltd, Trichinopoly Vysya Bank Ltd, and of
Tirirukkattupal Bank, Ltd. Salem Gugai Shree Krishna Bank, Ltd, was amalgamated with the
Bank. The Bank took over the particular assets and liabilities of The ShriNadiambal Bank (P)
Ltd, Kattuputtur Bank (P) Ltd., and Salem National Bank in August and Salem Shree
Ramaswamy Bank, Ltd.
1974 -Opened branches outside Tamil Nadu.
1976-License to deal in foreign exchange.
1989 - 6, 43,164 right equity shares issued in prop. 1: 2.

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1995-Introduced Co- Branded Credit Card.
1998 -Developed a credit product Gem Credit specifically for the artificial gem processing
industry.
1999 - Launched a money-back deposit scheme to suit the needs of investors who do not mind a
longer maturity period but want a larger pay-out.
2000 - Introduced a basket of products namely Lakshmi Agribike, Lakshmi Consumer Credit
and Lakshmi Rental Loan
2001- Board announces a distribution tie-up called Banc assurance with Lakshmi Vilas Bank to
develop a nationwide network which also has a strong regional focus.
-Signed a letter of intent with CGU Life Insurance to offer agency services.
-Board announces the launch of its education loan scheme – Vidya Lakshmi Loan.
-Forges an alliance with ICRA for putting in place a credit risk assessment system.
2003 - LVB forges alliance with ICICI InfoTech for core banking solution.
-Board Decided to set up three strategic business units (SBUs) to cash in on the increasing
opportunities in the large and mid-corporate, and retail and personal segments.
- Mr. AbhishekDalmia of the New Delhi-based Renaissance Group has picked up a 2-per cent
stake each in Lakshmi Vilas Bank. This will translate into around 2.3 Lakhs shares of Lakshmi
Vilas Bank.
2004 -The Lakshmi Vilas Bank has entered into a tie up with the Wall Street Exchange Centre
LLC, Dubai belonging to the House of Patel for remittances of NRIs through rupee drawing
arrangement (RDA)
2008 – 100% under CORE BANKING SYASTEM.
2009 - Lakshmi Vilas Bank has entered into an alliance with Pay Mate for mobile payment
solution, which is being made available to its customers across 250 branches. It was listed in
NSE (Share Price as on 01.06.2009 is Rs.90)

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2010- Lakshmi Vilas Bank Limited has co-opted Shri. P.R. Somasundaram as an additional
Director and also appointed him, as Managing Director & CEO of the Bank for a period of three
years.
2011 – Lakshmi Vilas Bank has tied up with Xpress Money &Ahalia (Money transfer from gulf
countries) E –tax payment, ASBA, PAN CARD, Pension Account and Introduced 320 NEW
ATM.
2012 – The Lakshmi Vilas Bank has entered into a tie up with Tata Consultancy Services (TCS)
for managing its back office operations and document management systems.
Lakshmi Vilas Bank Management
Name Designation
Parthasarathy Mukherjee Managing Director & CEO
N Saiprasad Director
Kusuma R Muniraju Director
B K Manjunath Director
S G Prabhakaran Director
K Balaji Director
K Ravindrakumar Director
D L N Rao Director
K R Pradeep Director
S Dattathreyan Director

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Business Strategies of LVB:
 To provide a range of financial products matching with the best in the industry.
 To provide the customer with “state of the art”, contemporary technology platform for
service delivery.
 To focus on personal customer interface.
 To focus on introducing multiple delivery channels offering a varied choice to the
customers.
 To offer card based products to make financial transactions more convenient and user
friendly.
 To offer the best in practice B2C and B2B facilities.
 LVB has been focusing on retail banking, corporate banking and banc assurance.
 The Lakshmi Vilas Bank Ltd. has entered into a tie up with the Giant in the Life
Insurance sector – LIC of India for soliciting Life Insurance policies for our customers.
 Tie – up with Bajaj Allianz General Insurance: Bajaj Allianz offer a comprehensive range
of Insurance Plans to suit the needs be it Individual or Corporate.

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INTERNAL PERFORMANCE
GROWTH OF LVB:
 Expanding presence:
The Bank has a 470 -branch network primarily in Tamil Nadu, with 95 branches in other
states. Vast Geographical Coverage-Spread over 16 states and 1 Union territory. It has applied
for 43 new branches to be opened this fiscal out of which 22 branches will be opened in Northern
India and rest in Southern states. It also plans to add 500 employees to its current 2,675
personnel force. The Bank is already 100% CBS and now intends to leverage on its IT expertise.
 Technology Driven:
The bank is a member of Cash Tree, NFS (National Financial Switch) and BANCS
(Banks ATM Network and Customer Services) ATM Network. ATM/Debit cards of other Banks
are free of charge. The customers have access to bank’s network of over 800ATMs which is
linked to around 10,00,000 ATMs of the Cash Tree, NFS and BANCS member banks for
carrying out transactions. LVB is 100% CBS networked bank.
The bank provides products like deposits, loans and distribution of third party products.
 Information Technology:
LVB has completed its first level of technology implementation by implementing the
Core Banking System in all its branches and offices. The entire bank data is now available in one
place. This has helped the bank in introducing a very high level management information system
giving a thrust to the decision support system of the Bank. Important and critical MIS reports are
now available to every user of the Bank through the MIS portal, which can be operated, anytime
from anywhere. The lead-time for collection of data has reduced considerably and an executive
dashboard is to be made available very shortly. Lakshmi Vilas Bank is one of the first Banks in
the country to implement the "Unified Communication" enabling any staff member to
communicate with any other staff/executive through voice, chat or mail. This has helped in
speedy decision making and faster turnaround time. The Bank was able to introduce a number of
IT enabled products, which has received good response from the customers and has become
quite popular. Implementation of an Integrated Treasury product is going on which will further
enhance the efficiency and productivity of the Treasury. The DR setup for all critical application
are up and running. It is being periodically tested as per RBI directives. The Bank has a well-
planned IT Road map in place, which should see it addressing all competitive challenges in
future.

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 Human Resource management:
As on 31st March 2010, the total number of employees of the Bank stood at 2655. The
employee productivity measured in terms of Business per employee, increased to Rs 5.60 Crores
from Rs 5.10 Crores in the previous year. Employees are trained at the bank's Staff training
college and reputed institutions such as NIBM, IDBRT, CAB, IMAGE, IFBA etc. During the
year 2008-09, promotions were effected to clerical, officer and executive cadre benefiting 54
sub-staff, 61 clerks and 143 officers. Focusing on the training its employees on a continuous
basis, training programs are being conducted by the bank continuously, with the internal and
external faculty.
The bank has assessed manpower requirement in alignment to the Business Plan. The
bank provides various benefits and perks to its employees like voluntary retirement schemes,
leave travel concession, compensation on transfer, hospitalization and travelling allowances etc.
Further, the bank has taken the initiative for competency based recruitment; need based Training
and Development, Talent Management, Performance Management and Peer recognition
practices. Talent acquisition and Talent Transformation are followed to meet existing and future
requirement.
 New initiative
LVB is introducing ESOPs for its employees which should help retain the talent pool etc.
 SOCIETAL INITIATIVES:
The Bank is running a medical centre at Vengamedu, Karur since 1994 catering to the
medical requirements of needy people under the aegis of Karur Rotary Club. Class rooms for
Vasavi Aided Primary School at Karur are provided by the bank and have participated in
fulfilling the needs of other aided primary schools as well. It has extended assistance to poor
students to continue their education and has participated in the ‘Green Karur; initiative of Isha
Foundation at Karur.

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PRODUCT AND SERVICS OFFERED BY LAKSHMI VILAS BANK
The diversified range of products and services offered by Lakshmi Vilas Bank includes the
following:
Cards
1. Lakshmi Kisan Card
2. ATM Cards
3. VISA Debit Card
4. Rupay Card
Customer Services
1. ATM Locator
2. Grievance Redressal
3. Customer Care
Deposits
1) Current
1. Lakshmi Current Krupa
2. Lakshmi Current Silver
3. Lakshmi Current Subham
4. Lakshmi Supreme
5. Current Diamond Plus
6. Lakshmi Current Diamond
2) Fixed Rate Deposits
1. Recurring
2. Dhanachakra
3. Lakshmi Freedom
4. Lakhpathy Recurring
5. Fixed Deposit
6. Tax Saver

46 | P a g e
3) Savings
1. Savings Youth Power
2. Savings Balance Free
3. Lakshmi Power
4. No frills
5. Lakshmi Savings Star Gold
6. Lakshmi Savings Gold
7. Savings Bank
4) Loans
1. Lakshmi Rental Loan
2. Lakshmi Easy Loan
3. Lakshmi Home Loan
4. Lakshmi Gold Power
5. Lakshmi Personal vehicle Loan
6. Lakshmi Business Credit
7. Lakshmi Commercial Vehicle Loan
8. Vidhya Lakshmi Loan
9. Corporate term loan
5) NRI Services
1. NRI Services
2. NRI Loans
3. NRI Deposits
4. Money Transfer
5. Forex Branches
6. Correspondents Overseas
6) Ancillary Services
1. Mutual Funds
2. General Insurance
3. Asset Insurance
4. Health Insurance
5. Rural Insurance

47 | P a g e
7) Other Services(Cost Effective Services)
1. Payment Services through mobile
2. Bill payment facilities
3. Modern Shopping
4. PAN card
5. Multicity cheques
8) Modern Services
1. RTGS
2. NEFT
3. SMS Banking
4. ATM Banking
5. Internet Banking
6. ECS
7. NFS and Cash Tree

48 | P a g e
BALANCESHEET–THE LAKSHMI VILAS BANK LTD
Balance Sheet of Lakshmi Vilas Bank ------------------- in Rs. Cr. -------------------
Mar 16 Mar 15 Mar 14 Mar 13 Mar 12
12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 179.46 179.17 97.56 97.54 97.53
Total Share Capital 179.46 179.17 97.56 97.54 97.53
Revaluation Reserve 171.73 78.46 76.43 77.79 79.22
Reserves and Surplus 1,412.40 1,298.52 879.61 839.01 781.62
Total Reserves and Surplus 1,584.13 1,376.98 956.04 916.80 860.84
Total ShareHolders Funds 1,763.59 1,556.14 1,053.60 1,014.34 958.37
Deposits 25,430.96 21,964.21 18,572.88 15,618.98 14,114.14
Borrowings 723.01 458.10 458.10 480.00 580.00
Other Liabilities and Provisions 814.60 726.98 568.48 553.36 591.06
Total Capital and Liabilities 28,732.16 24,705.44 20,653.06 17,666.68 16,243.57
ASSETS
Cash and Balances with Reserve Bank of India 1,286.50 1,143.44 1,192.08 728.15 810.02
Balances with Banks Money at Call and Short Notice 82.11 175.28 119.60 143.80 36.73
Investments 6,545.40 6,103.78 5,688.68 4,324.55 4,395.12
Advances 19,643.74 16,352.02 12,889.19 11,702.80 10,188.68
Fixed Assets 367.00 243.41 200.51 189.82 189.21
Other Assets 807.41 687.50 562.99 577.57 623.82
Total Assets 28,732.16 24,705.44 20,653.06 17,666.68 16,243.57
OTHER ADDITIONAL INFORMATION
Number of Branches 460.00 400.00 361.00 291.00 291.00
Number of Employees 3,565.00 3,459.00 3,292.00 3,149.00 3,054.00
Capital Adequacy Ratios (%) 11.00 11.00 11.00 12.00 13.00
KEY PERFORMANCE INDICATORS
Tier 1 (%) 9.00 9.00 8.00 9.00 9.00
Tier 2 (%) 2.00 2.00 3.00 3.00 4.00
ASSETS QUALITY
Gross NPA 391.25 454.62 546.46 459.91 307.73
Gross NPA (%) 2.00 3.00 4.00 4.00 3.00
Net NPA 231.64 302.49 443.39 283.81 177.09
Net NPA (%) 1.00 2.00 3.00 2.00 2.00
Net NPA To Advances (%) 1.00 2.00 3.00 2.00 2.00
CONTINGENT LIABILITIES, COMMITMENTS
Bills for Collection 2,136.80 1,730.06 1,475.43 1,306.34 1,178.83
Contingent Liabilities 2,434.65 1,805.43 1,692.60 1,917.02 2,915.85

49 | P a g e
DATA ANALYSIS AND INTERPRETION
1. Have you know about MODERN banking?
From the above table & chart, it is come to known that 76% people have knowledge of Modern
Banking, in which 10 Government Servant, 18 Businessmen, 15 Student & 7 professional
people. 24% people do not have knowledge of Modern Banking in which 10 Businessmen, 1
student & 1 professional people.

50 | P a g e
2. Have you ever using Modern banking?
From the above table & chart, it is come to known that 56% people have using of Modern
Banking, in which 7 Government Servant, 6 Businessmen, 9 Student & 6 professional people.
44% people do not have using of Modern Banking in which 3 government servant, 12
Businessmen, 6 student& 1 professional people.

51 | P a g e
3. Do you think modern banking is very easy than traditional Banking?
From the above table & chart, it is come to be known that use of Modern banking is very easy. In
which 54% of people who have to using Modern banking are very easy of 32% people say not
easy & 14 % people not responded. Maximum respondents like to use modern banking rather
than traditional banking.

52 | P a g e
4. Do you think Modern banking works very fast over TraditionalBanking?
From the above table & chart, it is come to be known that use of Modern banking is very fast. In
which 58 % of 100% people who have to using Modern banking are very fast 28 % of 100%
people say not fast & 14% of 100 % people not responded. This shows that people are focused
towards modern banking ways and products than traditional banking.

53 | P a g e
5. Do you think work done through Modern banking gets completed ?
From the above table & chart, it is come to be known that use of work with Modern banking is
completed. In which 80% of 100% people who have to work with Modern banking is a
completed. 16 % of 100% person says no & 4 % of 100% people not responded.

54 | P a g e
6.Would you like if Modern / Internet banking is compulsory?
From the above table & chart, it is come to be known that Modern banking is compulsory or not .
In which 50 % of 100% people who have to work with Modern banking is a compulsory. 50 %
of 100% person says no. This shows that people are bit worried about the technological products
and some people are very keen on getting use of newly developed technological products.

55 | P a g e
7. Is Modern banking difficult to understand than Traditional Banking?
From the above table & chart, it is come to be known that Modern banking is not difficult to understand.
In which 48 % of 100 % people who have to work with Modern banking is a difficult to understand.52 %
of 100% people say no. To understand modern banking people should be educated and tech savy.

56 | P a g e
8.Why don’t you use Modern banking?
A.)Because of unknown concept
B.)Seems to be complicated
C.)Because of unknown procedure
D.)Any other reason
From the above table & chart, it is come to be known that 22% people of 100%have not using of
Modern Because of unknown concept 26 % people of 100%have not using because Seems to be
complicated 24% people of 100% have not using because of unknown procedure 28% people of
100% have not using because Any other reason.

57 | P a g e
9. Do you desire to learn Modern banking?
From the above table & chart, it is come to be known that 86 % people of 100 % desire to learn
Modern banking. While 12 % people of 100% do not desire to learn Modern banking and 2%
people don’t gave response . This shows the interest of the respondents toward modern banking
development and encouragement of the banks in getting technological driven products which
will further enhance the productivity of the banks procedures.

58 | P a g e
10. Should YOUR BANK arrange the programmers to aware the publicabout
Modern banking?
From the above table & chart, it is come to be known that 14% people of 100% say BANKS
arrange the programmers to aware the public about Internet banking. While 38% people of 100%
said no& 48% people of 100% have no responded.

59 | P a g e
11. Do you think Modern banking is hazardous?
From the above table & chart, it is come to be known that 60% people of 100% thinking Modern
banking is hazardous. While 32 % people of 100% said no & 8% people of 100 % have no
responded.Because of people not trusting the technology, hacking of credit cards or online
banking accounts, etc.

60 | P a g e
12. Are you thinking that Indian economy will touch new height inbanking
sector because of Modern banking?
From the above table & chart, it is come to be known that 72% people of 100% thinking that
Indian economy will touch new height in banking sector because of Modern banking. While 18
% people of 100% have no responded. And 48 % person of 100% not thinking that Indian
economy will touch new height in banking sector because of Modern banking.

61 | P a g e
FINDINGS
 From my survey, I could come to know that there is awareness of Modern Banking to the
customer of LVB
 More then 50% customers of BANKS using Modern Banking with internet.
 Educated people who are most of used Modern Banking.
 Modern Banking is very easy, very fast, also completed work with Modern Banking
 Modern Banking is not a difficult to understand & in modern world it is compulsory.
 Most of people having knowledge of Modern Banking but they do not use because of
unknown the procedure.
 More then 50% people like to desire of Modern Banking concept & procedure.
 People wants to BANKS arrange the programmers to aware the public about Modern
banking.
 Many people thinking that Indian economy will touch new height in banking sector
because of Modern banking.
 Most of people are satisfied with the facilities provided by BANKS .

62 | P a g e
SUGGESTIONS
 The BANKS really should arrange programme to make people learn Modern Banking so
that the customers do not have to rush to banks which ultimately save their time also.
 Modern Banking is better option so it should use instead of traditional banking because
traditional banking system is wastage of time & incomplete process.
 The BANKS will have to think about how people adopt their technology.
 For Modern Banking English is necessary so everybody should have basic knowledge
regarding English.
 The knowledge regarding how to do the Modern banking and basic computer operating
knowledge is necessary so customer should have knowledge of it.

63 | P a g e
CONCLUSION
Modern Banking is a borderless entity permitting anytime, anywhere and anyhow
banking. This facilitates us with all the functions and many advantages as compared to
traditional banking services. During this step of the process, controls that could mitigate or
eliminate the identified risks, as appropriate to the organization’s operations, are provided. The
goal of the recommended controls is to reduce the level of risk to the IT system and its data to an
acceptable level.
Today, banks deployed to technology intensive solutions like enhancing core banking value,
revamping the digital agenda, moving from information to insight, dealing with a changing risk
regime, from cash to electronic modes of payment, grappling with financial inclusion,
empowering employees and accelerating innovation. Banks have changed in their operations and
moved towards universal banking along with the increased usage of technology. Majority of
banks are insisting on cashless and paperless payment modes. Today banking is known as
innovative banking. A wide range of services are being offered by banks using the electronic
media. Banking through internet has emerged as a strategic resource for achieving higher
efficiency, control of operations and reduction of cost by replacing paper based and labour
intensive methods with automated processes thus leading to higher productivity and profitability.
Challenging business environment within the banking system create more innovation in the
fields of product, process and market. Internet banking is highly comfort in our routine life, in
fact this made our life simple and convenient and over all we are able to enjoy quality service
smartly. These technologies created efficiency and time saving methods of conducting business
for people.
 From the survey, it is confirmed that people know about Modern Banking. People do not
using Modern Banking because unknown the procedure. The knowledge regarding how
to do the Modern banking and basic computer operating knowledge is necessary but
some people do not know about Modern Banking. So some people go with transaction of
traditional way. It may be in future it is possible that no transaction will be done through
traditional banking system.

64 | P a g e
 In short, we can say that Modern Banking is relatively a new concept in the global
banking. And compared to Banks Abroad, Indian banks offering Modern services still
have a long way to go. It is passing through into growth phase of its development cycle.
Results of recent developments and experiments in Modern Banking are yet to come, but
it is assured that Modern Banking will not remain as only a value added tool as long as it
becomes one of the most important key to success into Banking sector.

65 | P a g e
BIBLIOGRAPHY
 www.sbi.com [History, introduction & other more]
 www.Modern bankshub.com [importance & facilities of Modern Banking]
 Wikipedia.org / wiki / bank [facilities provided by traditional banking]
 www.wikipedia.com (about bank)
 www.managementparadise.com
 www.scribd.com
 www.google.com
 www.bffph.com

66 | P a g e
QUESTIONNAIRE
1 . Have you know about MODERN banking?
YES NO NO RESPONCE
2. Have you ever using Modern banking?
YES NO
3. Do you think modern banking is very easy than traditional Banking?
YES NO NO RESPONCE
4. Do you think Modern banking works very fast over Traditional
Banking?
YES NO NO RESPONCE
5. Do you think work done through Modern banking gets completed?
YES NO NO RESPONCE
6.Would you like if Modern / Internet banking is compulsory?
YES NO NO RESPONCE
7. Is Modern banking difficult to understand than Traditional Banking?
YES NO NO RESPONCE
8.Why don’t you use Modern banking?
A.)Because of unknown concept B.)Seems to be complicated
C.)Because of unknown procedure D.)Any other reason
9. Do you desire to learn Modern banking?
YES NO NO RESPONCE
10. Should YOUR BANK arrange the programmers to aware the public about Modern banking?
YES NO NO RESPONCE
11. Do you think Modern banking is hazardous?
YES NO NO RESPONCE
12. Are you thinking that Indian economy will touch new height in banking sector because of
Modern banking?
YES NO NO RESPONCE
Name of the Respondents:
Occupation:
Signature :

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