INTRODUCTION TO THE STUDY

1
 BANKING INDUSTRY

A bank is a financial institution that accepts deposits from the public and creates credit.
Lending activities can be performed either directly or indirectly through capital markets. Due
to their importance in the financial stability of a country, banks are highly regulated in most
countries. Most nations have institutionalized a system known as fractional reserve
banking under which banks hold liquid assets equal to only a portion of their current
liabilities. In addition to other regulations intended to ensure liquidity, banks are generally
subject to minimum capital requirements based on an international set of capital standards,
known as the Basel Accords.

Banking in its modern sense evolved in the 14th century in the prosperous cities
of Renaissance Italy but in many ways was a continuation of ideas and concepts
of credit and lending that had their roots in the ancient world.

HISTORY

Banking began with the first prototype banks of merchants of the ancient world, which
made grain loans to farmers and traders who carried goods between cities. This began around
2000 BC in Assyria and Babylonia. Later, in ancient Greece and during the Roman Empire,
lenders based in temples made loans and added two important innovations: they
accepted deposits and changed money. Archaeology from this period in ancient
China and India also shows evidence of money lending activity.

The origins of modern banking can be traced to medieval and early Renaissance Italy, to the
rich cities in the centre and north like Florence, Lucca, Siena, Venice and Genoa.
The Bardi and Peruzzi families dominated banking in 14th-century Florence, establishing
branches in many other parts of Europe. One of the most famous Italian banks was
the Medici Bank, set up by Giovanni di Bicci de' Medici in 1397. The earliest known state
deposit bank, Banco di San Giorgio (Bank of St. George), was founded in 1407
at Genoa, Italy.

Modern banking practices, including fractional reserve banking and the issue of banknotes,
emerged in the 17th and 18th centuries. Merchants started to store their gold with

2
the goldsmiths of London, who possessed private vaults, and charged a fee for that service. In
exchange for each deposit of precious metal, the goldsmiths issued receipts certifying the
quantity and purity of the metal they held as a bailee; these receipts could not be assigned,
only the original depositor could collect the stored goods.

Gradually the goldsmiths began to lend the money out on behalf of the depositor, which led
to the development of modern banking practices; promissory notes (which evolved into
banknotes) were issued for money deposited as a loan to the goldsmith. The goldsmith paid
interest on these deposits. Since the promissory notes were payable on demand, and the
advances (loans) to the goldsmith's customers were repayable over a longer time period, this
was an early form of fractional reserve banking. The promissory notes developed into an
assignable instrument which could circulate as a safe and convenient form of money backed
by the goldsmith's promise to pay, allowing goldsmiths to advance loans with little risk
of default. Thus, the goldsmiths of London became the forerunners of banking by creating
new money based on credit.

The Bank of England was the first to begin the permanent issue of banknotes, in
1695. The Royal Bank of Scotland established the first overdraft facility in 1728. By the
beginning of the 19th century a bankers' clearing house was established in London to allow
multiple banks to clear transactions. The Rothschilds pioneered international finance on a
large scale, financing the purchase of the Suez canal for the British government.

DEFINATION

The definition of a bank varies from country to country. See the relevant country pages under
for more information.

Under English common law, a banker is defined as a person who carries on the business of
banking, which is specified as:

 conducting current accounts for his customers,

 paying cheques drawn on him/her, and
 collecting cheques for his/her customers.

3
In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in
relation to negotiable instruments, including cheques, and this Act contains a statutory
definition of the term banker: banker includes a body of persons, whether incorporated or not,
who carry on the business of banking' Although this definition seems circular, it is actually
functional, because it ensures that the legal basis for bank transactions such as cheques does
not depend on how the bank is structured or regulated.

The business of banking is in many English common law countries not defined by statute but
by common law, the definition above. In other English common law jurisdictions there are
statutory definitions of the business of banking or banking business. When looking at these
definitions it is important to keep in mind that they are defining the business of banking for
the purposes of the legislation, and not necessarily in general. In particular, most of the
definitions are from legislation that has the purpose of regulating and supervising banks
rather than regulating the actual business of banking. However, in many cases the statutory
definition closely mirrors the common law one. Examples of statutory definitions:

 "banking business" means the business of receiving money on current or deposit account,
paying and collecting cheques drawn by or paid in by customers, the making of advances
to customers, and includes such other business as the Authority may prescribe for the
purposes of this Act:
 "banking business" means the business of either or both of the following:

1. receiving from the general public money on current, deposit, savings or other similar
account repayable on demand or within less than [3 months] ... or with a period of
call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers

4
CAPITAL AND RISK

Some of the main risks faced by banks include:

 Credit risk: risk of loss arising from a borrower who does not make payments as
promised.
 Liquidity risk: risk that a given security or asset cannot be traded quickly enough in the
market to prevent a loss (or make the required profit).
 Market risk: risk that the value of a portfolio, either an investment portfolio or a trading
portfolio, will decrease due to the change in value of the market risk factors.
 Operational risk: risk arising from execution of a company's business functions.
 Reputational risk: a type of risk related to the trustworthiness of business.
 Macroeconomic risk: risks related to the aggregate economy the bank is operating in.

The capital requirement is a bank regulation, which sets a framework within which a bank or
depository institution must manage its balance sheet. The categorization of assets and capital
is highly standardized so that it can be risk weighted

TYPES OF BANKS

 Commercial banks: the term used for a normal bank to distinguish it from an investment
bank. After the Great Depression, the U.S. Congress required that banks only engage in
banking activities, whereas investment banks were limited to capital market activities.
Since the two no longer have to be under separate ownership, some use the term
"commercial bank" to refer to a bank or a division of a bank that mostly deals with
deposits and loans from corporations or large businesses.
 Community banks: locally operated financial institutions that empower employees to
make local decisions to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services and
credit to under-served markets or populations.
 Land development banks: The special banks providing long-term loans are called land
development banks (LDB). The history of LDB is quite old. The first LDB was started at
Jhang in Punjab in 1920. The main objective of the LDBs are to promote the

5
 development of land, agriculture and increase the agricultural production. The LDBs
provide long-term finance to members directly through their branches.
 Credit unions or co-operative banks: not-for-profit cooperatives owned by the depositors
and often offering rates more favourable than for-profit banks. Typically, membership is
restricted to employees of a particular company, residents of a defined area, members of a
certain union or religious organizations, and their immediate families.
 Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high-net-worth individuals. Historically a
minimum of USD 1 million was required to open an account, however, over the last years
many private banks have lowered their entry hurdles to USD 350,000 for private
investors.
 Offshore banks: banks located in jurisdictions with low taxation and regulation. Many
offshore banks are essentially private banks.
 Savings bank: in Europe, savings banks took their roots in the 19th or sometimes even in
the 18th century. Their original objective was to provide easily accessible savings
products to all strata of the population. In some countries, savings banks were created on
public initiative; in others, socially committed individuals created foundations to put in
place the necessary infrastructure. Nowadays, European savings banks have kept their
focus on retail banking: payments, savings products, credits and insurances for
individuals or small and medium-sized enterprises. Apart from this retail focus, they also
differ from commercial banks by their broadly decentralized distribution network,
providing local and regional outreach and by their socially responsible approach to
business and society.
 Building societies and Land banks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make only what
they consider to be socially responsible investments.
 A direct or internet-only bank is a banking operation without any physical bank branches,
conceived and implemented wholly with networked computers.

6
 RBI

The Reserve Bank of India (RBI) is India's central banking institution, which controls
the monetary policy of the Indian rupee. It commenced its operations on 1 April 1935 during
the British Rule in accordance with the provisions of the Reserve Bank of India Act,
1934. The original share capital was divided into shares of 100 each fully paid, which were
initially owned entirely by private shareholders. Following India's independence on 15
August 1947, the RBI was nationalised on 1 January 1949.

The RBI plays an important part in the Development Strategy of the Government of India. It
is a member bank of the Asian Clearing Union. The general superintendence and direction of
the RBI is entrusted with the 21-member Central Board of Directors: the Governor, 4 Deputy
Governors, 2 Finance Ministry representatives, 10 government-nominated directors to
represent important elements of India's economy, and 4 directors to represent local boards
headquartered at Mumbai, Kolkata, Chennai and New Delhi. Each of these local boards
consists of 5 members who represent regional interests, the interests of co-operative and
indigenous banks.

A Central Bank is an independent apex monetary authority which regulates banks and
provides important financial services like storing of foreign exchange reserves, control of
inflation, monetary policy report. A Central Bank is known by different names in different
countries. The functions of a Central Bank vary from country to country and are autonomous
or quasi-autonomous body and perform or through another agency vital monetary functions
in the country. A central bank is a vital financial apex institution of an economy and the key
objects of central banks may differ from country to country still they perform activities and
functions with the goal of maintaining economic stability and growth of an economy.

The bank is also active in promoting financial inclusion policy and is a leading member of
the Alliance for Financial Inclusion (AFI).

7
HISTORY

The Reserve Bank of India was founded on 1 April 1935 to respond to economic troubles
after the First World War. The Reserve Bank of India was conceptualized based on the
guidelines presented by the Central Legislative Assembly passed these guidelines as the RBI
Act 1934. RBI was conceptualized as per the guidelines, working style and outlook presented
by Dr B R Ambedkar in his book. It was titled “The Problem of the Rupee – Its origin and its
solution” and presented to the Hilton Young Commission. The bank was set up based on the
recommendations of the 1926 Royal Commission on Indian Currency and Finance, also
known as the Hilton–Young Commission. The original choice for the seal of RBI was The
East India Company Double Mohur, with the sketch of the Lion and Palm Tree. However, it
was decided to replace the lion with the tiger, the national animal of India. The Preamble of
the RBI describes its basic functions to regulate the issue of bank notes, keep reserves to
secure monetary stability in India, and generally to operate the currency and credit system in
the best interests of the country. The Central Office of the RBI was established in Calcutta
(now Kolkata) but was moved to Bombay (now Mumbai) in 1937. The RBI also acted as
Burma's central bank, except during the years of the Japanese occupation of a (1942–45),
until April 1947, even though Burma seceded from the Indian Union in 1937. After
the Partition of India in 1947, the bank served as the central bank for Pakistan until June 1948
when the State Bank of Pakistan commenced operations. Though set up as a shareholders’
bank, the RBI has been fully owned by the Government of India since its nationalization in
1949.

1950–1960

In the 1950s, the Indian government, under its first Prime Minister Jawaharlal Nehru,
developed a centrally planned economic policy that focused on the agricultural sector. The
administration nationalized commercial banks and established, based on the Banking
Companies Act of 1949 (later called the Banking Regulation Act), a central bank regulation
as part of the RBI. Furthermore, the central bank was ordered to support economic plan with
loans.

1960–1969

As a result of bank crashes, the RBI was requested to establish and monitor a deposit
insurance system. Meant to restore the trust in the national bank system, it was initialized on

8
7 December 1961. The Indian government founded funds to promote the economy, and used
the slogan "Developing Banking". The government of India restructured the national bank
market and nationalized a lot of institutes. As a result, the RBI had to play the central part in
controlling and supporting this public banking sector.

1969–1985

In 1969, the Indira Gandhi-headed government nationalized 14 major commercial banks.

Upon Gandhi's return to in 1980, a further 6 banks were nationalized. The regulation of the
economy and especially the financial sector was reinforced by the Government of India in the
1970s and 1980s. The central bank became the central player and increased its policies a lot
for a lot of tasks like interests, reserve ratio and visible deposits. These measures aimed at
better economic development and had a huge effect on the company policy of the institutes.
The banks lent money in selected sectors, like agri-business and small trade companies.

The branch was forced to establish two new offices in the country for every newly
established office in a town. The oil crises in 1973 resulted in increasing inflation, and the
RBI restricted monetary policy to reduce the effects.

1985–1991

A lot of committees analysed the Indian economy between 1985 and 1991. Their results had
an effect on the RBI. The Board for Industrial and Financial Reconstruction, the Indira
Gandhi Institute of Development Research and the Security & Exchange Board of
India investigated the national economy as a whole, and the security and exchange board
proposed better methods for more effective markets and the protection of investor interests.
The Indian financial market was a leading example for so-called "financial repression"
(Mackinnon and Shaw). The Discount and Finance House of India began its operations in the
monetary market in April 1988; the National Housing Bank, founded in July 1988, was
forced to invest in the property market and a new financial law improved the versatility of
direct deposit by more security measures and liberalisation.

1991–2000 the new century

The national economy contracted in July 1991 as the Indian rupee was devalued. The
currency lost 18% relative to the US dollar, and the Narsimham Committee advised

9
restructuring the financial sector by a temporal reduced reserve ratio as well as the statutory
liquidity ratio. New guidelines were published in 1993 to establish a private banking sector.
This turning point was meant to reinforce the market and was often called neo-liberal. The
central bank deregulated bank interests and some sectors of the financial market like the trust
and property markets This first phase was a success and the central government forced a
diversity liberalisation to diversify owner structures in 1998.

The National Stock Exchange of India took the trade on in June 1994 and the RBI allowed
nationalized banks in July to interact with the capital market to reinforce their capital base.
The central bank founded a subsidiary company—the Bharatiya Reserve Bank Note Mudran
Private Limited—on 3 February 1995 to produce banknotes.

Since 2000

The Foreign Exchange Management Act from 1999 came into force in June 2000. It should
improve the item in 2004–2005 (National Electronic Fund Transfer) The Security Printing &
Minting Corporation of India Ltd., a merger of nine institutions, was founded in 2006 and
produces banknotes and coins.

The national economy's growth rate came down to 5.8% in the last quarter of 2008–2009 and
the central bank promotes the economic development.

STUCTURE OF RBI

The Central Board of Directors is the main committee of the Central Bank. The Government
of India appoints the directors for a 4-year term. The Board consists of a Governor, and not
more than 4 Deputy Governors, 4 Directors to represent the regional boards, 2 from the
Ministry of Finance and 10 other directors from various fields. RBI wants to create a post of
Chief Operating Officer (COO) and re-allocate work between the five of them(4 Deputy
Governor and COO).

The bank is headed by the Governor and the post is currently held by economist Urjit Patel.
There are 4 Deputy Governors BP Kanungo, S S Mundra, N S Vishwanathan and Viral
Acharya. Two of the four Deputy Governors are traditionally from RBI ranks and are
selected from the Bank's Executive Directors. One is nominated from among the

10
Chairpersons of public sector banks and the other is an economist. An Indian Administrative
Service officer can also be appointed as Deputy Governor of RBI and later as the Governor of
RBI as with the case of Y. Venugopal Reddy. Other persons forming part of the central
board of directors of the RBI are Dr. Nachiket Mor, Y C Deveshwar, Prof Damodar Acharya,
Ajay Tyagi and Anjuly Duggal.

MAIN FUNCTIONS

Financial Supervision:

The primary objective of BFS is to undertake consolidated supervision of the financial sector
comprising commercial banks, financial institutions and non-banking finance companies.

The Board is constituted by co-opting four Directors from the Central Board as members for
a term of two years and is chaired by the Governor. The Deputy Governors of the Reserve
Bank are ex-officio members. One Deputy Governor, usually, the Deputy Governor in charge
of banking regulation and supervision, is nominated as the Vice-Chairman of the Board. The
Board is required to meet normally once every month. It considers inspection reports and
other supervisory issues placed before it by the supervisory departments.

BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory
audit and internal audit functions in banks and financial institutions. The audit sub-committee
includes Deputy Governor as the chairman and two Directors of the Central Board as
members. The BFS oversees the functioning of Department of Banking Supervision (DBS),
Department of Non-Banking Supervision (DNBS) and Financial Institutions Division (FID)
and gives directions on the regulatory and supervisory issues.

Regulator and supervisor of the financial system:

The institution is also the regulator and supervisor of the financial system and prescribes
broad parameters of banking operations within which the country's banking and financial
system functions. Its objectives are to maintain public confidence in the system, protect
depositors' interest and provide cost-effective banking services to the public. The Banking

11
Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for effective
addressing of complaints by bank customers. The RBI controls the monetary supply,
monitors economic indicators like the gross domestic product and has to decide the design of
the rupee banknotes as well as coins.

Managing of exchange control:

The central bank manages to reach different goals of the Foreign Exchange Management Act,
1999. Objective: to facilitate external trade and payment and promote orderly development
and maintenance of foreign exchange market in India

Issue of currency:

The bank issues and exchanges currency notes and coins and destroys the same when they are
not fit for circulation. The objectives are to issue bank notes and give public adequate supply
of the same, to maintain the currency and credit system of the country to utilize it in its best
advantage, and to maintain the reserves. RBI maintains the economic structure of the country
so that it can achieve the objective of price stability as well as economic development
because both objectives are diverse in themselves. For printing of notes, the Security Printing
and Minting Corporation of India Limited (SPMCIL), a wholly owned company of the
Government of India, has set up printing presses at Nashik, Maharashtra and Dewas, Madhya
Pradesh. The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), also has
set up printing presses in Mysuru in Karnataka and Salboni in West Bengal. In all, there are
four printing presses. And for the minting of coins, SPMCIL has four mints at Mumbai,
Noida (UP), Kolkata and Hyderabad for coin [Link] banks create credit. It is
the duty of the RBI to control the credit through the CRR, bank rate and open market
operations. As banker's bank, the RBI facilitates the clearing of cheques between the
commercial banks and helps the inter-bank transfer of funds. It can grant financial
accommodation to schedule banks. It acts as the lender of the last resort by providing
emergency advances to the banks. It supervises the functioning of the commercial banks and
takes action against it if the need arises. The RBI also advices the banks on various matters
for example Corporate Social Responsibility

12
POLICY RATES AND RESERVE RATIOS
Repo rate:

Repo (Repurchase) rate also known as the benchmark interest rate is the rate at which the
RBI lends money to the banks for a short-term. When the repo rate increases, borrowing from
RBI becomes more expensive. If RBI wants to make it more expensive for the banks to
borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks to
borrow money it reduces the repo [Link] the repo rate is increased, banks can't carry out their
business at a profit whereas the very opposite happens when the repo rate is cut down.
Generally, repo rates are cut down whenever the country needs to progress in banking and
economy. Currently, the new RBI Governor Sri Urjit Patel has cut the previous Repo rate to
6.25% for facilitation of India's economy.

Reverse Repo Rate (RRR):

Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks.
The Reserve bank uses this tool when it feels there is too much money floating in the banking
system. An increase in the reverse repo rate means that the banks will get a higher rate of
interest from RBI. As a result, banks prefer to lend their money to RBI which is always safe
instead of lending it others (people, companies etc.) which is always risky.

Repo Rate signifies the rate at which liquidity is injected into the banking system by RBI,
whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from
the banks. Reverse Repo Rate is linked to Repo Rate with a difference of 0.5% between
them.

Statutory liquidity ratio (SLR):

Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash
and approved securities. Higher liquidity ratio forces commercial banks to maintain a larger

13
proportion of their resources in liquid form and thus reduces their capacity to grant loans and
advances, thus it is an anti-inflationary impact. A higher liquidity ratio diverts the bank funds
from loans and advances to investment in government and approved securities. In well-
developed economies, central banks use open market operations—buying and selling of
eligible securities by the central bank in the money market—to influence the volume of cash
reserves with commercial banks and thus influence the volume of loans and advances they
can make to the commercial and industrial sectors. In the open money market, government
securities are traded at market-related rates of interest. The RBI is resorting more to open
market operations in the more recent years. Generally, RBI uses

1. Minimum margins for lending against specific securities.

2. Ceiling on the amounts of credit for certain purposes.
3. The discriminatory rate of interest charged on certain types of advances.

Direct credit controls in India are of three types:

1. Part of the interest rate structure, i.e. on small savings and provident funds, are
administratively set.
2. Banks are mandatory required to keep 21.50% of their deposits in the form of
government securities.
3. Banks are required to lend to the priority sectors to the extent of 40% of their
advances.

14
PUBLIC SECTOR BANKS
Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held
by a government. The shares of these banks are listed on stock exchanges. There are a total of
21 PSBs in India.

EMERGENCE OF PUBLIC SECTOR BANKS:

The Central Government entered the banking business with the nationalization of the
Imperial Bank Of India in 1955. A 60% stake was taken by the Reserve Bank of India and the
new bank was named as the State Bank of India. The seven other state banks became the
subsidiaries of the new bank when nationalised on 19 July 1960. The next major
nationalisation of banks took place in 1969 when the government of India, under prime
minister Indira Gandhi, nationalised an additional 14 major banks. The total deposits in the
banks nationalised in 1969 amounted to 50 crores. This move increased the presence of
nationalised banks in India, with 84% of the total branches coming under government
control.

The next round of nationalisation took place in April 1980. The government nationalised six
banks. The total deposits of these banks amounted to around 200 crores. This move led to a
further increase in the number of branches in the market, increasing to 91% of the total
branch network of the country. The objectives behind nationalisation were:

 To break the ownership and control of banks by a few business families,

 To prevent the concentration of wealth and economic power,
 To mobilize savings from masses from all parts of the country,
 To cater to the needs of the priority sectors total public sector banks are 21 including
IDBI .

15
LIST OF PUBLIC SECTOR BABKS IN INDIA

1. Allahabad Bank
2. Andhra Bank
3. Bank of India
4. Bank of Baroda
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. Indian Bank
11. Indian Overseas Bank
12. IDBI Bank
13. Oriental Bank of Commerce
14. Punjab & Sindh Bank
15. Punjab National Bank
16. State Bank of India
17. Syndicate Bank
18. UCO Bank
19. Union Bank of India
20. United Bank of India
21. Vijaya Bank

16
PRIVATE SECTOR BANKS

The private-sector banks in India represent part of the indian banking sector that is made
up of both private and public sector banks. The "private-sector banks" are banks where
greater parts of state or equity are held by the private shareholders and not by government.

Banking in India has been dominated by public sector banks since the 1969 when all major
banks were nationalised by the Indian government. However, since liberalisation in
government banking policy in the 1990s, old and new private sector banks have re-emerged.
They have grown faster & bigger over the two decades since liberalisation using the latest
technology, providing contemporary innovations and monetary tools and techniques.

The private sector banks are split into two groups by financial regulators in India, old and
new. The old private sector banks existed prior to the nationalisation in 1969 and kept their
independence because they were either too small or specialist to be included in
nationalisation. The new private sector banks are those that have gained their banking license
since the liberalisation in the 1990s.

ODL PRIVATE SECOR BANKS

The banks, which were not nationalized at the time of bank nationalization that took place
during 1969 and 1980 are known to be the old private-sector banks. These were not
nationalized, because of their small size and regional focus. Most of the old private-sector
banks are closely held by certain communities their operations are mostly restricted to the
areas in and around their place of origin. Their Board of directors mainly consists of locally
prominent personalities from trade and business circles. One of the positive points of

17
these banks is that, they lean heavily on service and technology and as such, they are likely to
attract more business in days to come with the restructuring of the industry round the corner.

List of the old private-sector banks in India

1. City Union Bank

2. Karur Vysya Bank

3. Catholic Syrian Bank

4. Tamilnad Mercantile Bank

5. Nainital Bank

6. Karnataka Bank

7. Lakshmi Vilas Bank

8. Dhanlaxmi Bank

9. South Indian Bank

10. ING Vysya Bank Merged with kotak Mahindra bank

11. Federal Bank

12. Jammu and Kashmir Bank

13. Bank of punjab merged with Centurion Bank to form Centurion Bank of Punjab in June
2005

14. RBL Bank

15. SBI Commercial and international Bank

16. IDB Bank Ltd

18
NEW PRIVATE SECOR BANKS

The banks, which came in operation after 1991, with the introduction of economic reforms
and financial sector reforms are called "new private-sector banks". Banking regulation act
was then amended in 1993, which permitted the entry of new private-sector banks in
the Indian banking s sector. However, there were certain criteria set for the establishment of
the new private-sector banks, some of those criteria [Link] bank should have a minimum
net worth of Rs. 200 crores.

1. The promoters holding should be a minimum of 25% of the paid-up capital.

2. Reliance Capital, India Post, Larsen & Toubro, Shriram Transport Finance are
companies pending a banking license with the RBI under the new policy, while IDFC
& Bandhan were given a go ahead to start banking services for 2015.
3. Within 3 years of the starting of the operations, the bank should offer shares to public
and their net worth must increased to 300 crores.

List of the new private-sector banks in India

1. Axis Bank

2. Bank of Punjab

3. Centurion Bank Ltd.

4. Development Credit Bank

5. ICICI Bank

6. IndusInd Bank

7. Kotak Mahindra Bank

8. Yes Bank

9. Capital Local Area Bank Ltd.

19
10. Global Trust Bank (India)

11. Balaji Corporation Limited - Private Loan Company, not a Bank

12. HDFC Bank

13. Bandhan Bank

14. IDFC Bank

20
 Mobile Banking

Mobile banking is a service provided by a bank or other financial institution that allows its
customers to conduct financial transactions remotely using a mobile device such as a mobile
phone or tablet. It uses software, usually called an app, provided by the financial institution
for the purpose. Mobile banking is usually available on a 24-hour basis. Some financial
institutions have restrictions on which accounts may be accessed through mobile banking, as
well as a limit on the amount that can be transacted.

Transactions through mobile banking may include obtaining account balances and lists of
latest transactions, electronic bill payments, and funds transfers between a customer's or
another's accounts. Some apps also enable copies of statements to be downloaded and
sometimes printed at the customer's premises; and some banks charge a fee for mailing
hardcopies of bank statements.

From the bank's point of view, mobile banking reduces the cost of handling transactions by
reducing the need for customers to visit a bank branch for non-cash withdrawal and deposit
transactions. Mobile banking does not handle transactions involving cash, and a customer
needs to visit an ATM or bank branch for cash withdrawals or deposits. Many apps now have
a remote deposit option; using the device's camera to digitally transmit cheques to their
financial institution.

Mobile banking differs from mobile payments, which involves the use of a mobile device to
pay for goods or services either at the point of sale or remotely, analogously to the use of a
debit or credit card to effect an EFTPOS payment.

History

The earliest mobile banking services used SMS, a service known as SMS banking. With the
introduction of smart phones with WAP support enabling the use of the mobile web in 1999,
the first European banks started to offer mobile banking on this platform to their customer.

Mobile banking before 2010 was most often performed via SMS or the mobile
web. Apple's initial success with iPhone and the rapid growth of phones based
on Google's Android (operating system) have led to increasing use of special mobile apps,
downloaded to the mobile device. With that said, advancements in web technologies such
as HTML5, CSS3 and JavaScript have seen more banks launching mobile web based services

21
to complement native applications. A recent study (May 2012) by Mapa Research suggests
that over a third of bank have mobile device detection upon visiting the banks' main website.
A number of things can happen on mobile detection such as redirecting to an app store,
redirection to a mobile banking specific website or providing a menu of mobile banking
options for the user to choose from.

Mobile banking services

Typical mobile banking services may include:

Account information :

Mini-statements and checking of account history

1. Alerts on account activity or passing of set thresholds

2. Monitoring of term deposits
3. Access to loan statements
4. Access to card statements
5. Mutual funds / equity statements
6. Insurance policy management

Transaction:

1. Funds transfers between the customer's linked accounts

2. Paying third parties, including bill payments and third party fund transfers(see,
e.g., FAST)
3. Check Remote Deposit

22
Investments:

1. Portfolio management services

2. Real-time stock quotes
3. Personalized alerts and notifications on security prices

Support:

1. Status of requests for credit, including mortgage approval, and insurance coverage
2. Check (cheque) book and card requests
3. Exchange of data messages and email, including complaint submission and tracking
4. ATM Location

Content services:

1. General information such as weather updates, news

2. Loyalty-related offers
3. Location-based services

A report by the US Federal Reserve (March 2012) found that 21 percent of mobile phone
owners had used mobile banking in the past 12 months. Based on a survey conducted by
Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy"
customer segment. A third of mobile phone users say that they may consider performing
some kind of financial transaction through their mobile phone. But most of the users are
interested in performing basic transactions such as querying for account balance and making
bill payment.

Future functionalities in mobile banking

Based on the 'International Review of Business Research Papers' from World business
Institute, Australia, following are the key functional trends possible in world of Mobile
Banking.

23
With the advent of technology and increasing use of smartphone and tablet based devices, the
use of Mobile Banking functionality would enable customer connect across entire customer
life cycle much comprehensively than before. With this scenario, current mobile banking
objectives of say building relationships, reducing cost, achieving new revenue stream will
transform to enable new objectives targeting higher level goals such as building brand of the
banking organization. Emerging technology and functionalities would enable to create new
ways of lead generation, prospecting as well as developing deep customer relationship and
mobile banking world would achieve superior customer experience with bi-directional
communications. Among digital channels, mobile banking is a clear IT investment priority in
2013 as retail banks attempt to capitalise on the features unique to mobile, such as location-
based service

Advantages / Benefits of Mobile banking

Mobile banking through cell phone offers many advantages for customers as well as banks.
Some of them are as follows:-

 Mobile banking has an edge over internet banking. In case of online banking, you
must have an internet connection and a computer. This is a problem in developing
countries. However, with mobile banking, connectivity is not a problem. You can find
mobile connectivity in the remotest of places also where having an internet
connection is a problem.
 You can make transactions or pay bills anytime. It saves a lot of time.
 Mobile banking thorough cell phone is user friendly. The interface is also very
simple. You just need to follow the instructions to make the transaction. It also saves
the record of any transactions made.
 Cell phone banking is cost effective. Various banks provide this facility at a lower
cost as compared to banking by self.
 Banking through mobile reduces the risk of fraud. You will get an SMS whenever
there is an activity in your account. This includes deposits, cash withdrawals, funds
transfer etc. You will get a notice as soon as any amount is deducted or deposited in
your account.
 Banking through cell phone benefits the banks too. It cuts down on the cost of tele-
banking and is more economical.
 Mobile banking through cell phone is very advantageous to the banks as it serves as a
guide in order to help the banks improve their customer care services.

24
 Banks can be in touch with their clients with mobile banking.
 Banks can also promote and sell their products and services like credit cards, loans
etc. to a specific group of customers.
 Various banking services like Account Balance Enquiry , Credit/Debit Alerts, Bill
Payment Alerts, Transaction History, Fund Transfer Facilities, Minimum Balance
Alerts etc. can be accessed from your mobile.
 You can transfer money instantly to another account in the same bank using mobile
banking.
 It offers to banks is that it drastically cuts down the costs of providing service to the
customers.
 This new channel gives the bank ability to cross-sell up-sell their other complex
banking products and services such as vehicle loans, credit cards etc.
 For service providers, Mobile banking offers the next surest way to achieve growth.
Service providers are increasingly using the complexity of their supported mobile
banking services to attract new customers and retain old ones.
 Countries like Korea where mobile penetration is nearing saturation, mobile banking
is helping service providers increase revenues from the now static subscriber base.
Banks offering mobile access are mostly supporting some or all of the following
services:
 Account Balance Enquiry
 Account Statement Enquiries.
 Cheque Status Enquiry.
 Cheque Book Requests.
 Fund Transfer between Accounts.
 Credit/Debit Alerts.
 Minimum Balance Alerts.
 Bill Payment Alerts.
 Bill Payment.
 Recent Transaction History Requests.
 Information Requests like Interest Rates/Exchange Rates.

25
Disadvantage of Mobile Banking

Some of the disadvantages of mobile banking are:

 Though the security threat is less than Internet Banking, Mobile Banking has to
security [Link] of the great threat to Mobile Banking is "Smishing" which is
similar to "phishing"..In "Smishing" users receives fake message asking for
their Bank [Link] users have fallen to this trap.

 Mobile Banking is not available on all mobile [Link] time it requires you to
install apps on your phone to use the Mobile Banking feature which is available on
high end [Link] you don't have a smartphone than the use of Mobile Banking
becomes limited. Transaction like transfer of funds are only available on high end
phones.

 Regular use of Mobile Banking may lead to extra charges levied by the bank for
providing the services.

 Mobile phones are limited in processing speeds,screen size and battery [Link] act as
a barrier in Mobile Banking.

 Mobile banking users can receive fake messages regard disclose of key financial
details as hackers here pose as lead banks or financial advisors.

 Mobile banking users assume the cost of smartphone or tablet device and the data
usage cost that make their mobile banking possible.

 The consumer may experience a charge from the financial institution for using the
service.

 Credit Unions, and in particular smaller local credit unions, struggle to match the
level of convenience (ATMs and branches) that many banks provide their customers,
although many CUs are part of shared networks which enhance the breadth of
delivery channels available to their members

 Some Credit Unions are limited in their product offerings

 One must qualify for membership

 One must pay a membership fee to join

26
COMPANY PROFILE

27
 HDFC bank

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in
the private sector, as part of RBI’s liberalisation of the Indian Banking Industry in 1994.
HDFC Bank Limited is an Indian banking and financial services company headquartered
in Mumbai, Maharashtra. It has 90,421 employees and has a presence in Bahrain, Hong Kong
and Dubai. HDFC Bank is India’s second-largest private sector lender by assets. It is the
largest bank in India by market capitalization as of February 2016. It was ranked 69th in 2016
Brand Top 100 Most Valuable Global Brands.

HISTORY
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in
the private sector, as part of RBI’s liberalisation of the Indian Banking Industry in 1994.
HDFC Bank Limited is an Indian banking and financial services company headquartered
in Mumbai, Maharashtra. It has 90,421 employees and has a presence in Bahrain, Hong Kong
and Dubai. HDFC Bank is India’s second-largest private sector lender by assets. It is the
largest bank in India by market capitalization as of February 2016. It was ranked 69th in 2016
BrandZ Top 100 Most Valuable Global Brands

PRODUCT AND SERVICES

Market leader in e-commerce, HDFC Bank provides a series of digital offerings like - 10
second personal loan, Chillr, PayZapp, SME Bank, Watch Banking, 30-Minute Auto Loan,
15-minute Two-Wheeler Loan, e-payment gateways, Digital Wallet, etc.

HDFC Bank provides a number of products and services which includes Wholesale banking,
Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal loans, Loan
Against Property and Credit Cards.

28
The latest entry in the league is 'Project AI', under which HDFC Bank, over the next few
weeks, would deploy robots at select bank branches. These robots will offer options such as
cash withdrawal or deposit, forex, fixed deposits and demat services displaying on the screen
to persons coming into the branch

BUSINESS FOCOUS

HDFC Bank’s mission is to be a World Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider
of banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank’s risk appetite. The bank is
committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. HDFC Bank’s business philosophy
is based on five core values: Operational Excellence, Customer Focus, Product
Leadership, People and Sustainability.

ACQUISITIONS

HDFC Bank merged with Times Bank in February 2000. This was the first merger of
two private banks in the New Generation Private Sector Banks category. In 2008,
Centurion Bank was acquired by HDFC Bank. HDFC Bank Board approved the
acquisition of CBoP for 95.1 billion INR in one of the largest mergers in the financial
sector in India.

29
LISTING AND SHAREHOLDING

The equity shares of HDFC Bank are listed on Bombay Stock Exchange and
the National Stock Exchange of India. Its American Depository Shares are listed
on NYSE and the Global depository receipt are listed on the Luxembourg Stock
Exchange where two GDRs represent one equity share of HDFC Bank

Shareholders (as of 31 December-2015) Shareholding[17]

Promoter Group (HDFC) 21.57%

Foreign Institutional Investors (FII) 32.4%

Individual shareholders 8.5%

Bodies Corporate 7.5%

Insurance companies 5.38%

Mutual Funds/UTI 8.65%

NRI/OCB/Others 0.29%

Financial Institutions/Banks 2.75%

ADS/GDRs 18.78%

30
DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. As of March 31, 2015, the Bank’s distribution
network was at 4,014 branches in 2,464 [Link] branches are linked on an online real-time
basis. Customers across India are also serviced through multiple delivery channels such as
Phone Banking, Net Banking, Mobile Banking and SMS based banking. The Bank’s
expansion plans take into account the need to have a presence in all major industrial and
commercial centres, where its corporate customers are located, as well as the need to build a
strong retail customer base for both deposits and loan products. Being a clearing / settlement
bank to various leading stock exchanges, the Bank has branches in centres where the NSE /
BSE have a strong and active member base.

The Bank also has a network of 11,766 ATMs across India. HDFC Bank’s ATM network can
be accessed by all domestic and international Visa / MasterCard, Visa Electron / Maestro,
Plus / Cirrus and American Express Credit / Charge cardholders.

TECHNOLOGY

HDFC Bank operates in a highly automated environment in terms of information technology

and communication systems. All the bank’s branches have online connectivity, which enables
the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also
provided to retail customers through the branch network and Automated Teller Machines
(ATMs).
The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. In terms of core
banking software, the Corporate Banking business is supported by Flexcube, while the Retail
Banking business by Finware, both from i-flex Solutions Ltd. The systems are open,
scaleable and web-enabled.
The Bank has prioritised its engagement in technology and the internet as one of its
key goals and has already made significant progress in web-enabling its core

31
 businesses. In each of its businesses, the Bank has succeeded in leveraging its market
position, expertise and technology to create a competitive advantage and build market
share

BUSINESS PROFILE

HDFC Bank caters to a wide range of banking services covering commercial and investment
banking on the wholesale side and transactional / branch banking on the retail side. The bank
has three key business segments:

 Wholesale Banking:

The Bank’s target market is primarily large, blue-chip manufacturing companies in the Indian
corporate sector and to a lesser extent, small & mid-sized corporates and agri-based
businesses. For these customers, the Bank provides a wide range of commercial and
transactional banking services, including working capital finance, trade services, transactional
services, cash management, etc. The bank is also a leading provider of structured solutions,
which combine cash management services with vendor and distributor finance for facilitating
superior supply chain management for its corporate customers. Based on its superior product
delivery / service levels and strong customer orientation, the Bank has made significant
inroads into the banking consortia of a number of leading Indian corporates including
multinationals, companies from the domestic business houses and prime public sector
companies. It is recognised as a leading provider of cash management and transactional
banking solutions to corporate customers, mutual funds, stock exchange members and banks.

 Treasury:

Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
treasury products are provided through the bank’s Treasury team. To comply with statutory

32
 reserve requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and market risk on
this investment portfolio.

 Retail Banking:

The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and delivered
to customers through the growing branch network, as well as through alternative delivery
channels like ATMs, Phone Banking, Net Banking and Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and
the Investment Advisory Services programs have been designed keeping in mind needs of
customers who seek distinct financial solutions, information and advice on various
investment avenues. The Bank also has a wide array of retail loan products including Auto
Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It
is also a leading provider of Depository Participant (DP) services for retail customers,
providing customers the facility to hold their investments in electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the MasterCard Maestro debit card
as well. The Bank launched its credit card business in late 2001. By March 2015, the
bank had a total card base (debit and credit cards) of over 25 million. The Bank is also
one of the leading players in the “merchant acquiring” business with over 235,000
Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant
establishments. The Bank is well positioned as a leader in various net based B2C
opportunities including a wide range of internet banking services for Fixed Deposits,
Loans, Bill Payments, etc.

33
 UNION BANK OF INDIA

Union Bank of India (UBI) (BSE: 532477) is one of the largest government-owned banks of
India (the government owns 63.44% of its share capital). It is listed on the Forbes 2000, and
has assets of USD 13.45 billion. All the bank's branches have been networked with its 6909
ATMs as on 30 September 2015. Its online Telebanking facility are available to all its Core
Banking Customers - individual as well as corporate. As of September 2016, UBI has 4214
branches. Four of these are overseas in Hong Kong, Dubai International Financial Centre,
Antwerp, and Sydney (Australia). UBI also has representative offices at Shanghai, Beijing
and Abu Dhabi. Lastly, UBI operates in the United Kingdom through its wholly owned
subsidiary, Union Bank of India (UK).

HISTORY

Union Bank of India (Union Bank) was registered on 11 November 1919 as a limited
company in Mumbai and was inaugurated by Mahatma Gandhi. At the time of India's
Independence in 1947, Union Bank only had four branches - three in Mumbai and one
in Saurashtra, all concentrated in key trade centres. After Independence Union Bank
accelerated its growth and by the time the government nationalised it in 1969, it had grown to
240 branches in 28 states. Shortly after nationalisation, Union Bank merged in Belgaum
Bank, a private sector bank established in 1930 that had itself merged in a bank in 1964, the
Shri Jadeya Shankarling Bank (Bijapur; incorporated on 10 May 1948). Then in 1985 Union
Bank merged in Miraj State Bank, which had been established in 1929, and which had 26
branches. In 1999 the Reserve Bank of India requested that Union Bank acquire Sikkim
Bank in a rescue after extensive irregularities had been discovered at the non-scheduled
bank. Sikkim Bank had eight branches located in the North-east, which was attractive to
Union Bank.

Union Bank began its international expansion in 2007 with the opening of representative
offices in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of China. The
next year, Union Bank established a branch in Hong Kong, its first branch outside India. In
2009, Union Bank opened a representative office in Sydney, Australia.

At present, the offshore banking operations of Union Bank of India are led by its branches in
Hong Kong and newly opened branch in Dubai at Dubai International Financial Centre.

34
Union Bank Of India's Shareholding Pattern
Description Percent of Share (%)

Promoters 54.35

Individuals 8.64

Institutions 18.90

FII 9.59

Govt. 0.00

Others 8.52

Tech-Savvy

With the age of global banking, Union Bank of India also changed its style,
boasting of urbanized and computerized core banking systems. A front runner
among public sector banks in modern-day banking, it has all the facilities that
a modern bank should have - internet banking and centrally computerized
branches. UBI was one of the pioneer public sector banks, which launched
Core Banking Solution in 2002. As of September 2005, more than 670
branches/extension counters of Bank are networked under Core Banking
Solution. The Bank has launched multiple Electronic Delivery Channels and
has installed nearly 423 networked ATMs.

35
Business Operations

Union Bank has huge and varied customer base approximating to 24 millions.
Bank is targeting customers from all demographic and economic profiles and
introducing products and services to meet their needs. The Bank operates in all
the areas including retail lending, personal banking, corporate banking,
international banking and investments & treasury.

Bank’s lending also caters to the rural and semi urban centers, financing
Agriculture and allied activities, rural artisans, micro & medium enterprises in
these areas. Bank has opened 198 “Village Knowledge Centres” to provide
information to the local community on better agriculture practices,
commodities, marketing facilities and financial education.

Bank also offers third party products like life and general insurance, mutual
funds, on-line trading, wealth management services through tie- up with other
FIs.

Bank places customer at the centre of all its operations and has transformed
the process, people and organizational structure. Bank has initiated a large
scale transformation process named “Nav Nirman” to address two critical
aspects of growth-instilling the drive of sales & marketing across bank staff
and reconfiguration of bank’s business model. The transformation process
focuses on four key initiatives

a) Retail Asset ( marketing & processing)

b) SME marketing & processing)

c) Branch sales and services( improving the customer experience in the

branch)

d) Centralisation of key processes

Bank has brought all its branches under Core banking solutions .Union Bank
is the first large bank to achieve 100% CBS roll out. Bank has taken lead to
establish alternate delivery channels in the form of ATMs, internet banking,
phone banking and Mobile Banking. Bank has introduced many technology

36
based services like RTGS, online NEFT free of cost, on line application for
products and services and online redressal of grievances.

Network and distribution

The business is grouped under various Verticals and well defined “Business
Strategic Units” were formed, which will drive the growth. Bank has a
network of more than 2500 service outlets which includes specialized
branches for MSME (SME SARALS), corporate credit, Union Loan points for
Retail Products etc.

Bank has representative offices in Abu Dhabi and Shanghai and is in the
process of opening its office in Sydney, Australia.

A full fledged overseas branch was opened in Hong Kong. To serve the
varied banking needs of the NRIs, Bank has placed number of Marketing
Officials at various centers in UAE and Shanghai. Bank has plans to deploy
more number of Marketing Officials at many other places. Bank plans to open
500 new branches in the next six months for which it has received licences
from RBI. The bank will accelerate its presence in the global market space at
key locations in the next two years as part of the Vision strategy.

Diversification

Union Bank in partnership with Bank of India and Dai-Ichi of Japan has
formed a subsidiary for distribution of Life insurance products, which has
started selling the products.

Bank has signed an agreement with Belgian KBC group for setting up a joint
venture AMC in India. Union Bank has signed MoU with NSIC for training
and setting up Incubation cum Training centers to promote first generation
entrepreneurs in MSME segment.

Bank has entered into MoU with NCMSL for financing against warehouse
receipts for agri. commodities kept at NCMSL warehouses. Bank has

37
announced opening 100 specialised Business Banking branches across the
country to focus exclusively on MSME sector with turn around time of 2
weeks for sanction of proposals.

Bank has launched mobile banking facility “Umobile” which facilitates

limited transactions and other services through mobile phones.

The brand and the promises

Bank has adopted a simple new logo for universal appeal and to aid top of
mind recall. The new logo symbolizes the qualities and values we stand for-
Blue standing for the commitment and the Red for the passion the Bank brings
to the work. Union bank has promised 4 key deliverables to customers based
on the strength built in

1) Value for money

2) Committed turnaround time for delivery of products and services

3) Choice of banking channels for customers and

4) Transparency in product offerings and prices

38
RESEARCH METHODOLOGY

39
Objectives of the study

 To analyse HDFC bank and UNION bank of India mobile banking services.
 To know the behaviour of people regarding risk factor involved in mobile banking
services.
 To study the effectiveness of mobile banking comparison to public and private sector
banks.
 To get suggestions for improvement or change in the services of public and private sector banks.

 To study what do people expect in the new era of banking

 To study whether the customers are satisfied with their services

 To know about the Customer preferences

 To give Suggestions to improve the services

40
Scope of the study

 To make people aware about concept of mobile banking services.

 To provide information regarding advantages and disadvantages of mobile banking.
 To advice where to use mobile banking or not.
 To provide information regarding types of internet service which is beneficial for
whom.

41
Research design

Research refers to search of knowledge. One can also define research as a scientific and
systematic search for pertinent information on a specific topic. It is an art of scientific
investigation.

The brief description of EXPLORATORY RESEARCH design is as follows:-

Exploratory research studies are also termed as formularize research studies. The main
purpose of such studies is that of formulating a problem for more precise investigation or to
developing the working hypothesis from an operational point of views. The major emphasis
is such studies are on the discovery of ideas and insight.

As such the research design appropriate for such studies must be flexible enough to provide
opportunity for considering different aspects of a problem under study. In built flexibility in
research design is needed because the research problem, broadly defined initially transformed
into one with more precise meaning in exploratory studies, which fact may necessitate
changes in the research procedure for gathering relevant data.

Exploratory research is that part of the overall market research, which is used to discover
something new. Normally in any case there can be a number of opportunities or possible
problems and it is impractical to study each of them. Exploratory research in such a case is
very useful to find out the most likely alternatives

42
METHODS OF DATA COLLECTION

The project was descriptive in nature and required data collection to achieve the desired
objective.

Sample techniques

In order to achieve the desired objective, for the purpose of filling up the questionnaires, a
sample group of consumers was randomly selected on the basis of their number of mutual
funds purchased by them.

DATA COLLECTION:

The task of data collection begins after a research problem has been defined and research
design chalked out. Collection of data is the first step in any statistical investigation.

Collection of data is a very important function. The success and failure of investigation
mainly depends upon the quality of data. Adequacy and accuracy of data is essential to arrive
at correct conclusion.

The person who is collecting statistical data has to observe self-restraint, confidence,
patience, caution and unbiased attitude while collecting data.

When we talk of collection of data we should be clear as to what does the word data cannot
the word DATUM is Latin word, which means SOMETHING GIVEN. It means a piece of
information which can be either quantitative or qualitative.

There are two types of data by which analysis can be done. These are as follows:

 Primary data
 Secondary data

43
Collection of Primary Data:

Primary data was collected by the personal visits to the company under study. The data was
collected by with the help of a semi-structured questionnaire. Today, intelligence is defined
as what is measured by the intelligence test. Therefore customers using mobile banking
services HDFC bank UNION bank of India at different levels were asked to fill
questionnaire.

Secondary Data Collection:

Secondary data was collected from various published and unpublished sources such as
manuals and documents, company website, magazines, internet etc.

Besides the methods stated earlier more information was collected during informal talks with
customers and from other documents provided by organizations.

RESEARCH DESIGN:

1) PROBLEM DEFINING: In a competitive situation with multiple mobile banking services

used in Indian market, it is necessary to know about the performance of different banks
that provide mobile bank services In this study my focus is upon performance of HDFC
bank & UNION bank of India. This is my problem to be studied for research.
2) TYPES OF RESEARCH: The research is that talk about the quality of the subject to be
researched and Descriptive Research is one that describes things as exists in present.

3) DATA COLLECTION DESIGN:

i. Sources of data ==

Primary Sources: I have used questionnaire as primary source for collecting data for my study

Secondary Sources: I had collected my secondary data from websites & journals.

ii. Sampling =

44
 It represents whole population. It is the proses of choosing a sample from whole
population. I have choose a sample of high lass and middle class people who have use mobile
banking services as a sample.

iii. Tools =

I have used some charts like pie chart, columns chat, cone chart etc.

iv. Sampling size =

It represents that how many candidates you have chosen to be filled up your questioner or
candidates upon whom you can study. I had chosen sample of 200 candidates.

v. Sampling techniques =

a. Deliberate

b. Convenience sampling

vi. Data interpretation =

It is that in which we analyse the whole collected data and tries to give it in simple words to
be understandable.

45
Limitations of the study

Due to constraints of time and resources, the study is likely to suffer from certain
[Link] of these are mentioned here under so that the findings of the study may be under stood in a
proper perspective.

The limitations of the study are:

 Some of the respondents of the survey were unwilling to share Information.

 The research was carried out in a short period of 2 months . Therefore the sample size and other
parameters were selected accordingly so as to finish the work within the given time
frame.

 The information given by the respondents might be biased because some of the m might not be
interested to give correct information.

 The officials of the bank supported me a lot, but did not have sufficient time to make the points more
clear

46
DATA PROCESSING & ANALYSIS

47
QUESTIONNAIRE
Occupation: -Please Tick (√)
Private sector service
Public sector/Govt.
Business
Professional
Retired
Student
Fore dealer
Housewife

Column1
35%
30%
25%
20%
15%
10%
5% Column1
0%

INTERPRETATION:
From the above chart it could be inferred that 13% of the private sector services , 15% of
public sector , 35% of the businessman , 10% of the professionals , 5% of the retired people ,
12% dealers, 4% of housewives like to use mobile banking. This chart shows that
businessman are use most mobile banking services and students use least.

48
1. Do you have any bank account?

Yes

No

Bank account

100%

80%

60%
Bank account

40%

20%

0%
yes no

INTERPRETATION:

As is shown in this figure that 96% have their bank account and only 4% people don’t
have their bank account.

49
[Link] you use mobile banking services provide by bank?

Yes

No

use mobile bank services

60%

50%

40%

30% use mobile bank services

20%

10%

0%
yes no

INTERPRETATION:

From about 200 people only 56% use mobile banking services and other 44% don’t

use mobile banking services.

50
3. Which bank provide better mobile banking services?

HDFC

UNION bank of india

provide better mobile services

80%
70%
60%
50%
40% provide better mobile
services
30%
20%
10%
0%
HDFC UNION bank of
india

INTERPRITATION:

As is shown in above chart that private banks provide better mobile bank services as
compared to public sector banks. It is because 76% people vote HDFC BANK and
only 34% people vote UNION bank of india.

51
4. Using mobile banking is financially not secure?

Yes

No

secured

70%
60%
50%
40% secured
30%
20%
10%
0%
yes no

INTERPRETATION:

In this chart we see that 67% people is satisfy with the security issue of mobile
banking and other 33% peoples are not satisfy with the security measures provide by
banks.

52
5. I fear that while making a mobile banking transaction, the connection will
disconnect by itself?

Yes

No

connection lost

100%

80%

60%
connection lost
40%

20%

0%
yes no

INTERPRETATION:

As is shown in this figure that most of the people i.e. 86% said that no connection is
lost while making transections and 14% people said that the connection is lost.

53
[Link] mobile banking should be an affordable price?

Yes

No

affordability

100%

80%

60%
affordability
40%

20%

0%
yes no

INTERPRETATION:

When we talk about the affordability of the mobile banking services 88% people said
that it is affordable and only 12% people said that t is irrelevant charges.

54
7. Using mobile banking enables me to utilize banking services more quickly and
enhance effectiveness?

Yes

No

improve effectiveness

70%
60%
50%
40% improve effectiveness
30%
20%
10%
0%
yes no

INTERPRETATION:

In the above column we see that 65% people said that mobile banking enables them to
utilise banking services more quickly and enhance effectiveness but on the other side
35% people doesn’t agree with this statement.

55
8. In my own opinion, mobile banking is easy to use?

Yes

No

easy to use

80%
70%
60%
50%
easy to use
40%
30%
20%
10%
0%
yes no

INTERPRETATION:

According to above figure 78% people said that it easy to use and 22% people said
that it is difficult in some aspects.

56
9. Which bank is more reliable HDFC or UNION bank of India in terms of mobile
banking services?

HDFC

UNION bank

relaible

80%
70%
60%
50%
relaible
40%
30%
20%
10%
0%
HDFC UNION bank of india

INTERPRETATION:

In the above figure we see that people relied more on private sector as compared to
public sector banks that’s why 73% people rely on HDFC bank and 27% rely on
UNION bank of india.

57
10. Instructions for using mobile banking are easy to follow?

Yes

No

easy instructions follow

80%
70%
60%
50%
40% easy instructions follow

30%
20%
10%
0%
yes no

INTERPRETATION:

Above chart shows that mobile banking is easy to use for 70% people and 30%
assume that it is difficult .

58
FINDINGS, CONCLUSION
&SUGGESTIONS

59
 Findings
In my research I have found following things:-

 More number of people have account with Public [Link] of the

respondents whether in public sectors or in private sector banks have savings
account with banks.

 HDFC bank is more reliable then UNION bank of india.

 Number of problem faced by the people is more in public sector banks.

 HDFC bank provide better mobile bank services as compared to UNION bank
of india

 People want a change in the behaviour of the staff of the public sector banks.

 People are more satisfied from the private sector banks due to their better
services provided by them in terms of speedy transactions, fully computerized
facilities, more working hours good investment Advisory services, efficient
and co-operative staff, better approach to Customer Relationship
Management.

 In private sector banks proper promotional activities should be taken up so as

to make the population aware of the services provided by the banks even in
rural areas.

60
 Conclusion

The customers now days are not only exposed of what type of service is being
provided by bank inIndia but in the world as a whole. They expect much more
than what is actually being provided. So the new coming banking sector has to
provide and cater to all the needs of the customers otherwise it is difficult to
survive in the competition coming up They not only expect the safety of money
but also best ways to invest that money which need needs to be fulfilled. Banks
need to have a better outlook towards to actually what customers are requiring.
Entries of the private sector banks have made the competition tougher.
If a bank is not functioning properly it is being closed. So it is difficult to face
these types of conditions. Here a simple philosophy can work that customers are
God and we need to follow this to survive and serve better .The banking sector is
poised for explosive growth.

In this, scenario, it is imperative that banks adopt technology at an aggressive

Pace, if they wish to remain competitive.
Man imam Allan makes a case for banks to out source their technology
infrastructure requirement, thus enabling early adoption and increased
efficiencies.

In the prevailing scenario, a number of Private banks have adopt a new

deployment strategy of infrastructure outsourcing, to lower the cost of service
channels. As a result, other banks too will need to align their reinvented business
models.

The required changes at both the business and technology levels

are [Link] highly competitive banking markets, early adopters are profiting
from increased efficiencies

61
 Suggestions
Based on the study conducted, there are some of the suggestions given by the
customers of how the modern banking should be. These are the comment given
by them about the improvement of the banking sector in India.

There is difference of opinion among the customers of public sector banks and
private sector banks regarding the service quality dimensions. Although customer is
the king in the present day market, their opinion is more important compared to
profitability of the banks. They regard the objectives of retail banking achievable on
the service quality dimensions. It is necessary for PSBs and private sector banks to
increase the motivational powers of the customers by satisfying them through well
organized efforts, especially by providing confidence that the working and products of
retail banking are highly useful for the customers.

The need for mobile banking services provided by public sector banks is to improve
their speed and efficiency of service delivery in a secure environment

There is need to improve the quality of service delivery in such areas as accuracy in
customer accounts management and, excellent and cordial banker-customer
relationships by public sector banks. It is felt that the retail banks to embark upon
confidence building of their customers, so that both the parties would grow
simultaneously in the process. This would help to increase credit facilities and
investment advisory services to their worthy customers. In order to have confidence
of customer, the public sector banks have to consciously cultivate the habit of treating
their customer as king. This would include provision of more and more customized
services that are tailor-made to suit their individual needs. The setting up of a new
competitive environment has resulted in new challenges for the public sector banks to
retain their share. Ongoing changes in the structure of Indian banking industry are
clearly visible.

62
The new private sector banks have succeeded in enhancing their position as retail
banks. The public sector banks need to recast their strategies model for the different
dimensions of service quality so that they can be able to choose the right dimension
and instrument to offer competitive services for the sake of holding sustainable
growth and profitability for the organization. The service quality dimension
“Tangibles” is defined by whether the physical facilities and material associated with
the services are visually appealing at the bank. All these are the factors that customer
notice or upon entering the banks. These visual factors help customer to form their
initial impression. All these tangibles that are the service facilities equipments and
communication material are clues about the intangible services. The public sector
banks can improve quality through tangible means to attract attention of customers to
the smallest details of the banks. This visible detail can add up for customers and
signal a message of caring and competence.

The service quality dimension “Reliability” is defined by the promise to do, problem
solving techniques, performed service right to the first time, and error free records.
The dimension reliability is associated with the bank’s ability to perform the promised
service accurately and dependably. Performing the services dependably and
accurately is the heart of service marketing excellence. Although there is no doubt
that the public sector banks have been acquiring the large number of customers as
compared to private sector banks but the customers of private sector banks feel more
satisfaction regarding the Reliability dimension.

The service quality dimension “Responsiveness” is defined by quick response to

request, behavior of employees. The dimension responsiveness is associated with the
overall customer satisfaction. The rudeness of the bank’s customer service
representative, the abruptness of the employees at the teller counter, reverses the
impression created by high technical quality. The public sector banks need to improve
on the responsiveness dimension by provision of personalized, courteous services and
helpful employees who understand the customer’s need and this can be the strongest
driver of success The service quality dimension “Assurance” is defined by willingness
63
to help, politeness of bank employees. The service quality dimension assurance is
associated with the dealing of individual customers and importance of customer at the
counter. Unwillingness to help or harsh behavior of employees has a negative
feedback about the bank’s employees which will reduce the faith of the customers in
the respective bank. Hence, the public sector banks need to improve their treatment of
customers on the dimension assurance by their employees in a positive way so as to
retain their customers.

Fair dealing with the customer . More contribution from the employee of the
bank. The staff Should be co-operative, friendly and must be capable
of understanding the problems of customers.

Internet banking facility must be made available in all the banks.

Prompt dealing with permanent customers and speedy transaction without

harassing the customers

Each section of every bank should be computerized even in rural areas [Link]
time gross settlement can play a very important role

The bank should bring out new schemes at time-to-time so that more people can
be attracted .Even some gifts and prizes may be offered to the customers for their
retention.

24hours banking should be induced so as to facilitate the customers who may not
have a free time in the day time. It will help in facing the competition more
effectively.

Customers generally complain that full knowledge is not granted to them. Thus,
the bank should properly disclose the features of the product and services to
the customers .Moreover door to door services can also be introduced by bank.

64
The need of the customer should properly be understood so that customer feels
satisfied. The relationship value should bemaintained.

The branch should promote cooperation and coordination among employees

which help them in efficient working.

Recommendations

For Public Sector Banks:

Bank staff should be customer friendly serve the normal customer.

Computerization should be done in banks at all level and the operators should be
properly trained.

Token system should be induced

Proper ambience in the banks can develop healthy working culture.

Quick services should be provided .For Private sector Banks

24hours banking should be induced so as to facilitate the customers who may not
have free time in the day time.
It will help in facing the competition more effectively.

Customer care services should be provided by banks.

65
BIBLIOGRAPHY

66
BIBLIOGRAPHY

Research Methodology-
ICFAI Publication
S.P. Gupta Statistics Book.

Websites:
[Link]@[Link]

[Link]

[Link]

[Link]

[Link]

67
ANNEXURE

68
ANNEXURE

Age group?
15-20 21-30 31-40 41-50 51-

60 61+

Gender?
Male Female

Occupational status?
Student Employed Unemployed Other

Do you own a mobile phone?

Yes No

Is it a smart phone?
Yes No

Do you have a bank account?

Yes No

Does your bank provide mobile banking

services? Yes No Not Sure

Do you use the mobile banking services

provided by your bank? Yes No

Do you have any anti-virus software

installed on your mobile device? Yes No

Do you only dowload ring tones, photos,

games from trusted sources? Yes No

Do you assign your phone a password to

access it? Yes No

MOBILE BANKING PERCEPTION:

Disagree Neutral Agree

Using mobile banking is financially not
secure.

I am worried about the security of mobile

banking.

Overall, matters of security have an

influence on my using mobile banking.

69
I fear that banks do not have the ability in
mobile banking to protect my privacy.

Overall, matters of privacy have an

influence on my using mobile banking.

I fear that while making a mobile banking

transaction, the connection will disconnect
by itself.

I fear that while making a mobile banking

transaction, the mobile device battery will
run out.

Overall, reliability is the factor influencing

my use of mobile banking.

Using mobile banking should be an

affordable service.

Using mobile banking enables me to

utilize banking services more quickly and
enhance effectiveness.

Overall, mobile banking is useful for me.

In my own opinion, mobile banking is easy

to use.

Instructions for using mobile banking are

easy to follow.

Which factors do you think are most important in the adoption of mobile banking? Rank of
the following choices (1 - Most IMportant to 6 - Least Important) according to your concerns
when using mobile banking services.

1 2 3 4 5 6
Security Concern/Risky

Privacy

70
Reliability

Cost

Perceived Usefulness

Perceived Ease of Use

71