This document provides an overview of banking operations and services in India. It discusses the changing nature of banking, importance of customer relationship management, products and services offered, role of technology, bookkeeping and account maintenance practices, asset-liability management, and the regulatory framework for compliance. The history of banking in India and its current structure is also outlined.

1. Banking Services Operations 1
Introduction to Banking Operations
Chapter - I

2. Banking Services Operations 2
Focus points
• Changing Nature of Banking Operations
• Importance of CRM in Banks
• Products and services offered to customers
• Role of technology in Banking operations
• Bookkeeping and Maintenance of accounts
• Necessity of Asset-liability management
• Regulatory framework for Compliance

3. Banking Services Operations 3
Changing Nature of Banking Operations
• Money economy existed in the ancient vedic times.
• Money lending for business purposes is found in the
Manu Smriti.
• Vaishyas emerged as a class of indigenous bankers and
‘hundi’ emerged as the earliest form of bill of exchange in
India.
• Banking operations gradually transcended from
individuals to groups and later on to companies.

4. History of Banking in India
The Hindustan Bank 1779
The General Bank of India 1786
The Bank of Calcutta 1806
East India Company Established the following three banks known as “Presidency
Banks”.
Bank of Bengal 1809
Bank of Bombay 1840
Bank of Madras 1843
Above three banks are amalgamated in 1920 and a new bank called, the Imperial
bank of India was established on 27th
January, 1921.
Imperial Bank of India was taken over by the newly constituted State Bank of
India, which is governed by State Bank of India Act, 1955.
Reserve Bank of India (RBI) which acts as the Central bank was created in 1935,
which is governed by Reserve Bank of India Act, 1934.

5. Banking Services Operations 5
Structure of Banking in India
Three tier Indian Banking system.
Commercial banks, Regional Rural
Banks and the cooperative and Special
purpose rural banks.
Core banking Operations
Financial Transactions, Loan
Origination/Application Processing
and Trade Finance.
Classification of banks in the
Banking System
Public sector Banks, Private sectors
banks, Co-operative sector banks and
Development banks.

6. Banking Services Operations 6
CRM in Banks
• Offering the right product to the right customer at the right
time through the right delivery channel is the basic concept
of CRM.
• Traditionally, banking was “personal” where the customer
knew the bank employee and vice versa.
• Newer technologies contribute to lack of personal touch and
a customer can be lured by big financial institutions.

7. Banking Services Operations 7
CRM in Banks, Cntd…
• To Implement CRM, a bank needs to have an Apex Level
Marketing and Business Intelligence function at the corporate
level.
• Significant improvement in customer relationship can be
achieved when the technology provides the customer
information.
• Bank must know the value of the customers, when he/she
valued will reciprocate the relationship with loyalty.

8. Banking Services Operations 8
CRM in Banks, Cntd…
Change in the Existing Business Models
Dividing its
customers in
various categories
like Retail, small
and medium
enterprises and
corporates.
Accomplished by
Categorizing the
customers in
segments like
personal finance,
Business finance
and corporate, etc.
Bank may also
decide to
follow a niche
strategy.
A bank adopt
“Universal
Banking”

9. Banking Services Operations 9
CRM in Banks, Cntd….
Formulating Business Model
Two Major aspects a bank has to
consider
Business Model needs to be flexible
and adaptable
Should not lose focus of its perceived
future growth

10. Banking Services Operations 10
Products and Services offered
• Product-needs and product-preferences of customers also
undergo changes.
• Business strategies have been shifting from ‘Product based’
to ‘Customer focused’ approach.
• Branches are the basic delivery channels of products and
services.
• Branches are required to focus on sales and services in
technology-enabled transformation.

11. Banking Services Operations 11
Role of Technology
• Technologies like enterprise level core banking solutions
enabling to run any business strategy.
• Networking and internet-based technologies enabled banks
to handle large volumes of businesses, also helped to
demolish physical boundaries for delivering cross border
services.
• Continuous fall in the prices of hardware and networking will
enable the banks to reduce the cost of transactions and
overheads.

12. Banking Services Operations 12
Bookkeeping in banks
Principle books of Accounts General Ledger, Profit and loss Ledger.
Subsidiary Books Personal Ledger, Bills registers.
Subsidiary Registers
Bills for Collection Register, Demand Draft
Register, Share Security Register, Jewellery
Register, Safe Custody Register, Letters of Credit
Register, Safe Deposit Vault Register, Standing
Order Register and Letter of Guarantee Register.
Departmental Journals
A journal is maintained by each department of
the bank to note the transfer entries passed by it.

13. Banking Services Operations 13
Memoranda
Books
Cash Department Receiving Cashier’s Cash Book, Paying
Cashier’s Cash Book, Main Cash Book and
Cash Balance Book.
Quick payment
system
In teller system, the teller keeps cash, ledger
cards and the specimen signature cards for
each customer.
Outward
Clearing
The onward clearing book is a clearing
“cheque received” book is for entering
cheques received from customers for clearing.
Inward Clearing Inward clearing relates to the cheques that
come into the bank. Cheques received are
checked against lists.
Bookkeeping in banks, Cntd…

14. Banking Services Operations 14
Memoranda
Books
Loans and
Overdraft
department
Registers for shares and other securities,
Summary books of securities, Godown registers,
price register, Overdraft sanction register,
Drawing power book, Delivery order book and
storage books.
Deposits
department
Account opening and closing register, Rate
register for fixed deposits, Due date diary and
Specimen signature book.
Establishment
Department
Salary and allied registers, Register of Fixed
assets, Stationery Register and Old records
register.
General Signature book of bank officer and Private
telegraphic code and cyphers.
Bookkeeping in banks, Cntd…

15. Banking Services Operations 15
Statistical Books
• Average balances in loans and advances.
• Deposits.
• Number of cheques paid.
• Number of cheques, bills and other items
collected.
Bookkeeping in banks, Cntd…

16. Banking Services Operations 16
Asset-Liability Management (ALM)
• Indian Financial Sector reforms in the 1990s brought
unprecedented changes in the banking sector.
• Pressures arising on the profitability, liquidity and
sustainability of the bank cannot always be tackled on a
firefighting basis.
• To take a strategic perspective, banks should first of all
understand the risks that have to be taken in order to gain
the rewards that are set as the target.

17. Banking Services Operations 17
Asset-Liability Management (ALM)
Cntd…
• ALM basically refers to the process by which an institution
manages its balance sheet in order to allow for alternative
interest rate and liquidity scenarios.
• ALM models enable institutions to measure and monitor risk,
and provide suitable strategies for their management.
• ALM includes not only a formalization of understanding the
risks, but also provides a way to quantify and manage these
risks.

18. Banking Services Operations 18
• RBI has developed an ALM framework based on GAP
Analysis and is intended to introduce the banks to the
process of ALM.
• Process of ALM is multifaceted and will vary from one bank
to another.
• Based on the RBI model, banks can segregate their assets
and liabilities into various maturity buckets.
Asset-Liability Management (ALM)
Cntd….

19. Banking Services Operations 19
Regulatory Frame work for Compliance
• Banks play a key role in the financial system since they are
the major players in mobilizing savings and turning them
into investments.
• Banking system can survive and grow only under an
authority that can guide and monitor it; i.e. RBI.
• RBI as the banking regulator has to monitor and regulate
the risk taken by banks.

20. Banking Services Operations 20
Regulatory Frame work for Compliance,
Cntd…
Different departments of the RBI
• Department of Banking Operations and Development
• Department of Government and Bank Accounts
• Department of Banking Supervision
• Department of Currency Management
• Urban Banks Department
• Rural planning and credit Department

21. Banking Services Operations 21
Banking in India today
• Rapid strides in information technology have, in fact,
redefined the role and structure of banking in India.
• Banks are coping up and adapting with time, to become
one-stop financial supermarkets.
• Market focus is shifting from mass banking products to
class banking with the introduction of value added as
customized products.
• SBI plans to open 100 new branches called Personal
Banking Branches.

22. Banking Services Operations 22
End points
• Changing Nature of Banking Operations
• Importance of CRM in Banks
• Products and services offered to customers
• Role of technology in Banking operations
• Bookkeeping and Maintenance of accounts
• Necessity of Asset-liability management
• Regulatory framework for Compliance