Analysis of Banking

8/12/2019 Analysis of Banking

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Analysis of the Banking Sector

A REPORT ON

“ANALYSIS OF BANKIN SE!TOR"

S#B$ITTE% IN PARTIAL F#LFILL$ENT FOR T&E A'AR% OF

“POST GRADUATE DIPLOMA IN BUSINESS MANAGEMENT”

UNDER THE GUIDANCE OF

MR. KALPESH DODIA

RESEAR!& %EPART$ENT

$A( NE' YORK LIFE INS#RAN!E

N)L)%AL$IA INSTIT#TE OF $ANAE$ENT ST#%IES AN% RESEAR!&

$IRA ROA% *E+, $#$BAI-./00/.

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0




ACKNOWLEDGEMENT

'orking on the Pro1ect 2ith the $A( NE' YORK LIFE INS#RAN!E has 3een a

2on4erf5l e67erience o8er a 7erio4 of the last t2o 9onths) It 2as a great 7ri8ilege

2orking 2ith the Fir9 an4 getting a firsthan4 kno2le4ge of so9e of the f5nctions

7erfor9e4 3y the9)

I a9 gratef5l to Prof. P. L. Arya, %irector, N L %al9ia Instit5te of $anage9ent

St54ies an4 Research for gi8ing 9e this o77ort5nity)

I ackno2le4ge 2ith s7ecial thanks the hel7 of 9y 7ro1ect g5i4e $r) KALPESH DODIA

for his 8al5a3le g5i4ance an4 assisting 9e in co97letion of the 7ro1ect) I also thank hi9

for sharing lots of his kno2le4ge an4 i4eas, 2hich 2ere 5sef5l for 9y 7ro1ect)

I a9 thankf5l to all the officials of $A( NE' YORK LIFE INS#RAN!E, 2ho 2ere

forthco9ing an4 enth5siastic to ans2er all 9y :5eries) I 2o5l4 like to take this

o77ort5nity to thank the9 for their kin4 coo7eration an4 7atience)

NE&A $ASALIA

N) L) %al9ia Instit5e of $anage9ent St54ies an4 Research

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;




E(E!#TI<E S#$$ARY

This 7ro1ect gi8es an in-4e7th analysis an4 5n4erstan4ing of the c5rrent stat5s of the

Banking Sector in the co5ntry 2ith a foc5s on the 7erfor9ances of 9a1or 7layers

like P5n1a3 national 3ank, I!I!I 3ank, &%F! 3ank)

The re7ort gi8es a 3rief o8er8ie2 of the glo3al scenario in the 3anking In45stry an4 also

e67lains the e8ol5tion of In4ian 3anking sector) O8er the last 4eca4e an4 a half

Banking in45stry has 2itnesse4 9a1or changes an4 is no2 a9ong the fastest

gro2ing sectors in the In4ian econo9y)

Banking sector has contri35te4 to the 4e8elo79ent of the econo9y an4 has th5s 7a8e4

the 2ay for faster gro2th of the co5ntry=s %P o8er a 7erio4 of 0/-0> years there3y

increasing the 1o3s create4 for skille4 la3o5r)

The 3anking sector is the 3ack3one of the econo9y an4 is one of the key instr59ents

s577orting the gro2th of e67orts, th5s lea4ing to o8erall 4e8elo79ent) Also the

go8ern9ent is enco5raging an4 s577orting the setting 57 of foreign 3anks in IN%IA

2hich f5rther ena3les 3etter ser8ice an4 facilities to the c5sto9ers)

The re7ort gi8es 3rief i4ea a3o5t the gro2th 7ros7ects of In4ian Banking sector along

2ith 8al5ation an4 in8est9ent strategy of three In4ian Banking co97anies- P5n1a3

national 3ank, I!I!I 3ank, &%F! 3ank)

INDEX

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?




Sr. no Topic Pa! No.

0 Life Ins5rance

Intro45ction an4 O8er8ie2 >-@

A48antages of Life Ins5rance -

Ta6 Benefits -0/

Ty7es of life ins5rance 00-0.

&istory of life ins5rance 0>-0@

!o97etition 0

Relate4 acts 0-;/

; $a6 Ne2 York Life Ins5rance

O8er8ie2 ;0-;?

Pro45cts ;?-;>

? 'orl4 Econo9ic O5tlook ;@-;

. Banking Sector

O8er8ie2 C !5rrent O5tlook ;-..

> <al5ation

A) P5n1a3 National Bank .>-.@

B) I!I!I Bank .-.D

!) &%F! Bank >/->0

@ Relati8e <al5ation >;

!oncl5sion an4 In8est9ent Strategy >?->@

Bi3liogra7hy >

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ .




W"a# I$ Lif! In$%ranc!&

Life ins5rance offers a 2ay to re7lace the loss of inco9e that occ5rs 2hen so9eone 4ies

*5s5ally the 7erson 2ho 7ro45ces the 9a1ority of inco9e in a fa9ily sit5ation+) It is a

contract 3et2een yo5 as the ins5re4 7erson an4 the co97any or carrier that is

7ro8i4ing the ins5rance) If yo5 4ie 2hile the contract is in force, the ins5rance co97any

7ays a s7ecifie4 s59 of 9oney free of inco9e ta6 cash 3enefits to the 7erson or

7ersons yo5 na9e as 3eneficiaries)

A goo4 life ins5rance 7rogra9 4oes 9ore than 15st re7lace the loss of inco9e that

occ5rs if yo5 4ie) It sho5l4 also 7ro8i4e 9oney to co8er the ne2 costs that arise after

yo5r 4eath f5neral e67enses, ta6es, 7ro3ate costs, the nee4 for ho5sekee7ers an4

chil4 care, an4 so on) An4 these cash 3enefits sho5l4 7ro8i4e for yo5r fa9ilyGs f5t5renee4s as 2ell, incl54ing college e45cation for yo5r chil4ren an4 7art or all of yo5r

s7o5seGs retire9ent nee4s) In al9ost all cases, yo5r 3eneficiary can 5se the cash 3enefits

in the 2ay he or she sees fit, 2itho5t restriction)

So9e ty7es of life ins5rance 7er9anent life ins5rance 7olicies ha8e a cash 8al5e

that yo5 can o3tain 3y cashing o5t the 7olicy or 3y 3orro2ing against it) Tho5gh it can

see9 attracti8e, 9ost financial e67erts agree that this feat5re sho5l4 3e seen as a

secon4ary 75r7ose of life ins5rance) Another ty7e of ins5rance is ter9 life ins5rance

7olicies are a8aila3le as 2ell) To learn 9ore click the res7ecte4 link)

Do 'o% R!a((y N!!) Lif! In$%ranc!&

If there is so9eone 2ho 2o5l4 s5ffer econo9ic har4shi7 if yo5 4ie4, then the ans2er is

yes))) yo5 nee4 life ins5ranceH Fa9ilies 2ith yo5ng chil4ren ha8e a clear nee4 for life

ins5rance) If 3oth s7o5ses 2ork, the loss of one inco9e 2ill ca5se the fa9ily i99e4iate

econo9ic har4shi7 an4 9ake it har4er for the9 to realie f5t5re goals, s5ch as 7aying

for the chil4renGsG e45cation) B5t e8en if one s7o5se 2orks insi4e the ho9e an4 4oesnGt

3ring in a for9al inco9e, his or her 4eath 2ill re:5ire the s5r8i8ing s7o5se to hire chil4

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care, ho5sekee7ers an4 other 7rofessionals to hel7 r5n the ho5sehol4 - an4 that can 3e a

significant ne2 e67ense)

If yo5 are 9arrie4 2itho5t chil4ren or single, then yo5 9ay nee4 life ins5rance to

7rotect yo5r 7artner or s5r8i8ing fa9ily 9e93ers against the costs associate4 2ith yo5r

4eath) F5neral e67enses, 7ro3ate an4 a49inistrati8e fees, o5tstan4ing 4e3ts, s7ecial

o3ligations to charities, an4 fe4eral an4 state ta6es are costs that all of 5s 95st consi4er)

An4, they can a44 57 :5ickly) #nless yo5 alrea4y ha8e s5fficient financial reso5rces,

yo5r s5r8i8ors 2ill 7ro3a3ly nee4 life ins5rance to co8er these e67enses)

W"a# Happ!n$ To 'o%r Fa*i(y If 'o% Don+# Ha,! Eno%" Co,!ra!&

#n4er any circ59stances, the loss of a lo8e4 one is a tra59atic e67erience) B5t, if yo5r

fa9ily is also left 2itho5t s5fficient 9oney to 9eet 3asic li8ing nee4s or 7re7are for

f5t5re goals, they 2ill ha8e to co7e 2ith a financial crisis at the sa9e ti9e) %e7en4ing

57on their c5rrent financial reso5rces an4 a3ility to get 3ack on their feet e9otionally

an4 financially, yo5r fa9ily 9ight 3e force4 to 9o8e to a less 4esira3le ho9e or

co995nity, a3an4on e45cation an4 career 7lans, reor4er fa9ily 7riorities *s5ch as the

a9o5nt of ti9e s7ent 2ith the chil4ren+ an4, in general, c5t 3ack on the :5ality of life

yo5 ha8e 2orke4 har4 to achie8e)

Yo5r fa9ily 9ight e8en 3e force4 to go into 4e3t si97ly to 7ay the e67enses, like

f5neral costs, ta6es, an4 9e4ical 3ills, that res5lt fro9 yo5r 4eath) A 9o9entGs

reflection 2ill tell yo5 that the lack of s5fficient life ins5rance co8erage 2hen a lo8e4

one 4ies can ha8e 4e8astating conse:5ences for a fa9ily)))conse:5ences that can last foryears)

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A),an#a!$ of Ha,in Lif! In$%ranc!

It is a general 3elief that life ins5rance is 9eant only for those 2ith fa9ilies) It is tr5e

that Life Ins5rance Policies like 2hole-life ins5rance, 1oint-life-ins5rance, 7ension-life-

ins5rance etc are essential for fa9ilyGs financial sec5rity, 35t they are e:5ally i97ortant

for in4i8i45als) Ter9 Ins5rance 7olicies 7rotect yo5r financial reso5rces against the

5ncertainties of life so yo5 can 7rotect yo5r fa9ilyGs f5t5re)

So9e of the life ins5rance a48antages areJ

• If an estate o2ner has not acc595late4 eno5gh assets for his fa9ily,

• Ins5rance :5ote hel7s create an instant estate for the sake of the Fa9ilys

sec5rity)

• Life Ins5rance 7ro8i4es the o7tion to 7ass e:5al assets to the chil4ren 2ho are

not acti8e in the Fa9ily 35siness at the ti9e the fa9ily 35siness is 7asse4 on)

• Life Ins5rance 7olicies can hel7 sec5re the f5t5re of chil4ren for

collegee45cational 75r7oses as the a9o5nt of life Ins5rance Policy increases on

a 9inors or 7arents life)

• The gro2th of a cash-8al5e 7olicy is ta6-4eferre4 - yo5 4o not 7ay ta6es on the

cash 8al5e acc595lation 5ntil yo5 2ith4ra2 f5n4s fro9 the 7olicy)

• Life Ins5rance can 3e 5sef5l in 7aying estate ta6es, along 2ith other estate

settle9ent a9o5nts) Fe4eral Estate Ta6es are 45e nine 9onths after 4eath)

• If theres a B5siness Transfer, life ins5rance can 7ro8i4e rea4y cash to finance a

transaction 3et2een 35siness o2ners 2ho are rea4y to 35y the 4ecease4 o2ners

share fro9 his or her estate after 4eath)

• If theres a ho9e 9ortgage, one can 7ass the fa9ily resi4ence to their

s7o5sechil4ren to free the9 of any 9ortgage if one has a Life Ins5rance Policy

for the sa9e) It is 7referre4 to ha8e a 4ecreasing ter9 7olicy that 4ecreases in

face a9o5nt as the 9ortgage 3alance is 7ai4 4o2n)

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• Life Ins5rance hel7s retain yo5r B5siness fro9 the loss of a key e97loyee)

#nti9ely 4eath of a key e97loyee can 7ose se8ere financial loss to the 35siness)

• The right ins5rance 7rocee4s can 7ro8i4e li:5i4ity to 7ay off 7ersonal loans or

35siness loans)

• !harita3le Re9ain4er Tr5sts 7ro8i4e ta6 3enefits) Life Ins5rance hel7s re7lace a

charita3le gift)

• A lot of Ins5rance 7ro45cts 7resently 7ro8i4e goo4 ret5rns, 2hich co5l4 3e a

3eneficial 2ay for sa8ing necessary f5n4s for retire9ent years)

• Benefits are a8aila3le i99e4iately an4 9ay 3e 5se4 to hel7 7ay e67enses s5ch as

final illness an4 f5neral costs, eli9inating the nee4 to sell estate assets to co8er

these costs)

TAX -ENEFITS GAIN WITH LIFE INSURANCE

I$ #"!r! a Ta -!n!fi# on #"! pr!*i%* I pay for (if! in$%ranc!&

Re3ate is a8aila3le 5n4er Section for a9o5nt 7ai4 as life ins5rance 7re9i59 only 57

to Assess9ent Year ;//>-/@) Fro9 the Assess9ent Year ;//@-/, life ins5rance

7re9i59 7ai4 3y yo5 :5alifies for a 4e45ction 5n4er Section /! of Inco9e Ta6 Act,

0D@0) Yo5 can clai9 4e45ction on 7re9i59 7ai4 for a 9a6i959 of total inco9e)

A9o5nt 4e45cti3le 5n4er Section /! is e:5al to 0//M of the :5alifying in8est9ent,

2hich incl54es life ins5rance 7re9i59, or Rs 0//,///, 2hiche8er is lo2er)

W"a# ar! #"! Ta -!n!fi#$ in ca$! I op# for a P!n$ion P(an&

#n4er Section /!!!, 2here yo5 ha8e 7ai44e7osite4 any a9o5nt for any ann5ity 7lan

of the Life Ins5rance !or7oration of In4ia or any other ins5rer, yo5 2ill recei8e 7ension

fro9 a f5n4 referre4 to in Section 0/*;?AAB+) Yo5 can a8ail a 4e45ction of 57 to Rs

0/,/// fro9 the total inco9e)

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#n4er Section /!!%, 2here yo5, as an e97loyee of the !entral o8ern9ent on or

after an5ary 0, ;//., 4e7osit any a9o5nt in yo5r acco5nt 5n4er a 7ension sche9e

notifie4 3y the !entral go8ern9ent, a 4e45ction of 57 to a 9a6i959 of 0/M of yo5r

salary is a77lica3le) 'hen the !entral o8ern9ent contri35tes to the notifie4 7ension

sche9e, it is 4e45cti3le in yo5r han4s 57 to a 9a6i959 of 0/M of yo5r salary)

Any inco9e of a f5n4 set 57 3y the Life Ins5rance !or7oration of In4ia on or after

A5g5st 0, 0DD@, or any other ins5rer to 2hich contri35tion is 9a4e 3y yo5 for recei8ing

7ension an4 2hich is a77ro8e4 3y the !ontroller of ins5rance or the Ins5rance

Reg5latory an4 %e8elo79ent A5thority, is e6e97te4 fro9 Inco9e Ta6 5n4er Section

0/*;?AAB+)

Fro9 the Assess9ent Year ;//@-/, the 4e45ction aggregate, 5n4er Section /!,

/!!! an4 /!!% cannot e6cee4 Rs 0,//,///) Section /!!! an4 /!!%

a9en49ents 2ith effect fro9 the Assess9ent Year ;//@- / 7ro8i4e that 2here any

a9o5nt 7ai4 or 4e7osite4 3y yo5, it is allo2e4 as 4e45ction 5n4er

Sections /!!! an4 /!!%, a 4e45ction 2ith reference to that a9o5nt shall not 3e

allo2e4 5n4er Section /!)

Af#!r *y po(ici!$ *a#%r!/ 0i(( #"! *a#%ri#y proc!!)$ 1! #aa1(!&

The 9at5rity 7rocee4s of life ins5rance 7olicies are not ta6a3le) &o2e8er, 5n4er 7ension

7lans, yo5 can 2ith4ra2 57 to one-thir4 of the 9at5rity a9o5nt in cash an4 the sa9e is

ta6-free) If yo5 75rchase an ann5ity 2ith the re9aining t2o-thir4 a9o5nt) Pension

recei7ts fro9 the sa9e are 7art of yo5r inco9e an4 ta6e4 accor4ingly)

If I pay #"! pr!*i%* on po(icy for *y 0if!2"%$1an)/ can I c(ai* Ta 1!n!fi#$&

Yo5 can clai9 Ta6 re3ate 5n4er Section if yo5 the 7re9i59 on yo5r 2ifeh5s3an4GGs

7olicy 57 to Assess9ent Year ;//>-/@) Fro9 the Assess9ent Year ;//@-/ life

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ D




ins5rance 7re9i59 7ai4 3y yo5 on yo5r 2ifeh5s3an4GGs 7olicy :5alifies for a 4e45ction

5n4er Section /! of the Inco9e Ta6 Act, 0D@0)

If I )i$con#in%! payin pr!*i%*$ on *y (if! in$%ranc! or p!n$ion po(icy/ can I

c(ai* Ta -!n!fi#$&

If yo5 4iscontin5e 7aying 7re9i59 a9o5nts on yo5r 7olicy, it a9o5nts to

4iscontin5ation of the 7olicy an4 :5alifies for Inco9e Ta6) Yo5 cannot clai9 any ta6

3enefits) If yo5 4iscontin5e yo5r 7re9i59s after 7aying for ; years fro9

co99ence9ent of 7olicy, no ta6 4e45ction is 7er9issi3le on 7re9i59 7ai4 in the year

2hen 7olicy ter9inates) The a9o5nt ta6 4e45ction allo2e4 on the 7re9i59 7ai4 in the

7rece4ing year, is also ta6a3le in the year 2hen 7olicy ter9inates)

If I a* par#icipa#in in a Uni# Lin3!) In$%ranc! P(an 4ULIP5 an) I c"oo$! #o

#!r*ina#! *y po(icy/ can I c(ai* any #a 1!n!fi#$&

In s5ch a case, yo5 are not entitle4 to any ta6 3enefits)

W"a# ar! #"! Ta 1!n!fi#$ a,ai(a1(! on *!)ica( in$%ranc! pr!*i%*$&

The 7re9i59 7ai4 for 9e4ical ins5rance :5alifies for re3ate 5n4er Section /% as

follo2sJ

- Ins5rance 7re9i59 7ai4 or Rs 0/,///, 2hiche8er is lo2er)

- This li9it increases to Rs) 0>,/// in case any 4e7en4ent or 9e93er of yo5r fa9ily is a

senior citien *resi4ent in In4ia at least @> years of age in the 7re8io5s year+

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0/




T'PES OF LIFE INSURANCE

T!r* Lif! In$%ranc!

%$& it's (alle! )Te"m)

T!r* (if! in$%ranc! is calle4 ter9 3eca5se it 7ro8i4es co8erage for a s7ecific 7erio4

or ter9 *9ost often 0, >, 0/, 0> or ;/ years+) For this reason, it is also calle4

te97orary ins5rance) If 4eath occ5rs 45ring the ter9, the 7olicy 7ays cash 3enefits to

the 3eneficiary) &o2e8er, once the ter9 is o8er, an4 if the 7olicy is not rene2e4, the

co8erage ceases) If 4eath occ5rs after the co8erage ceases, no cash 3enefits are 7ai4 o5t)

Ter9 ins5rance is the 9ost straightfor2ar4 ty7e of life ins5rance an4 the easiest to

5n4erstan4) So9eti9es it is calle4 75re ins5rance, since the 7olicy has no financial

in8est9ent 8al5e an4 9ost of yo5r 7re9i59 goes to 7ay for co8erage, 2ith only a s9all

a9o5nt 5se4 to 7ay the ins5rance co97anyGs costs) If yo5 are looking for the 9a6i959

a9o5nt of co8erage for yo5r 4ollar, ter9 life ins5rance 2ill gi8e yo5 the 9ost 3ang for

yo5r 35ck)

Diffe"ent Te"ms f*" Diffe"ent Nee!s)

All #!r* (if! in$%ranc! po(ici!$ co8er yo5 for a s7ecific a9o5nt of ti9e - the ter9) The

ter9 thatGs right for yo5 4e7en4s on ho2 ol4 yo5r chil4ren are, ho2 9any years 3efore

yo5 retire, an4 other factors) $any 7eo7le like to kno2 theyGre ins5re4 5ntil theyGre

rea4y to retire, 5s5ally at age @>) $any 15st 2ant to ha8e ins5rance 5ntil their yo5ngest

chil4 gra45ates fro9 college, an4 so they 9ake s5re their life ins5rance co8erage

incl54es 9oney to 7ay for all of the college t5ition)

&ereGs an o8er8ie2 of the 4ifferent ty7es of ter9 7olicies a8aila3leJ

Ann5al rene2a3le ter9 ins5rance

Rene2a3le ter9 ins5rance





Le8el 7re9i59 ter9 ins5rance

%ecreasing ter9 ins5rance

!on8erti3le ter9 ins5rance

%$at Ha++ens %$en T$e Te"m Is O,e"-

It all 4e7en4s on the ty7e of ter9 ins5rance yo5 ha8e) 'ith rene2a3le ter9, yo5 are

g5arantee4 the right to take o5t another ter9 7olicy 2itho5t the for9ality of a ne2

a77lication or 9e4ical e6a9ination) 'ith stan4ar4 ter9, yo5r ins5rance co8erage

ceases, an4 yo5 ha8e to a77ly again, incl54ing taking a 9e4ical e6a9ination) 'ith

con8erti3le ter9, yo5 reser8e the right to con8ert yo5r ter9 7olicy to another ty7e of

7olicy like 'hole Life Ins5rance or #ni8ersal Life Ins5rance- or in so9e cases, another

ter9 7olicy - at any ti9e 45ring the ter9 of yo5r 7olicy) Yo5 sho5l4, ho2e8er, e67ect anincrease in yo5r 7re9i59s 2ith yo5r ne2 7olicy)

Disa!,antaes *f Te"m Life Insu"an#e

• It 4oesnGt 7ro8i4e a cash 8al5e acco5nt for so9e later 7oint s5ch as retire9ent)

• It 4oesnGt 7ro8i4e yo5 7er9anent life ins5rance 7rotection)

W"o(! Lif! In$%ranc!

As the na9e i97lies, 0"o(! (if! in$%ranc! co8ers the 7olicyhol4er for his or her 2hole

life) There is no fi6e4 en4 4ate for the 7olicy, as there is 2ith ter9 life ins5rance) 'hen

the 7olicy hol4er 4ies, the face 8al5e of the 7olicy, kno2n as a 4eath 3enefit, is 7ai4 to

the 7erson or 7ersons na9e4 in the life ins5rance 7olicy *the 3eneficiary or

3eneficiaries+)

The cost of a 2hole life ins5rance 7olicy is s7rea4 o5t across 9any years, so the

7re9i59 re9ains the sa9e) This ens5res that ol4er 7eo7le on a fi6e4 inco9e 2ill not

ha8e to co7e 2ith rising 7re9i59s)

Uni,!r$a( Lif! In$%ranc!

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0;




Uni,!r$a( (if! in$%ranc! offers 9any feat5res of 2hole life ins5rance, 35t allo2s

greater fle6i3ility once the 7olicy is in force) Like 2hole life ins5rance, 5ni8ersal life

ins5rance is a 7er9anent 7olicy) It 7rotects the 7olicyhol4er 5ntil 4eathho2e8er long

that 9ay 3e) Also like 2hole life ins5rance, 5ni8ersal life ins5rance accr5es cash 8al5e

o8er ti9e)

C"i()r!n+$ Lif! In$%ranc! 6 Lif! In$%ranc! for Ki)$

Par!n#$ an) ran)par!n#$ 0an# #"! 1!$# for #"! (i##(! (o,!) on!$ in #"!ir (i,!$7

fro* 3!!pin #"!* "!a(#"y an) "appy #o pro,i)in for #"!ir financia( f%#%r!.

!hil4rens life ins5rance is a tool 9any fa9ilies 5se to gi8e their chil4ren a financial

fo5n4ation that they can 4ra2 57on 2hen they are ol4er)

S!nior Lif! In$%ranc! 6 Lif! In$%ranc! for E()!r$

No on! 0an#$ #o 1! a 1%r)!n #o #"!ir $po%$! an) c"i()r!n 7 in (if! or !,!n in

)!a#". T"i$ i$ #"! *ain r!a$on 0"y $!nior$ of#!n #a3! a $!con) (oo3 a# (if!

in$%ranc!.

$ost seniors alrea4y ha8e life ins5rance of so9e kin4, 35t the 4eath 3enefit often is too

s9all to take care of f5neral e67enses an4 9e4ical 3ills) In 9ost states, a life ins5rance

4eath 3enefit is e6e97t fro9 cre4itors) It is also e6e97t fro9 inheritance ta6es) This

9akes it an e6cellent 8ehicle to transfer 2ealth to s5r8i8ors)

G%aran#!!) Acc!p#anc! Lif! In$%ranc!.

The 3est 7re9i59 rates are offere4 to seniors 2ho 7ass a health e6a9, 35t 9any

co97anies offer ins5rance 2ith no e6a9 re:5ire4) Ty7ically these 7olicies, kno2n as

5arantee4 Acce7tance Life Ins5rance *5s5ally a ty7e of 0"o(! (if! in$%ranc! or

%ni,!r$a( (if! in$%ranc!+ 2ill 7ay a f5ll 4eath 3enefit in the case of acci4ental 4eath as

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0?




soon as the 7olicy goes into effect) &o2e8er, the 7olicy 2ill 7ay a li9ite4 4eath 3enefit

if the 7olicyhol4er 4ies of nat5ral ca5ses 45ring the first t2o years of the 7olicy) The

ins5rance co97anies 7lace these li9its on the 7olicies to a8oi4 2riting “4eath3e4"

7olicies) The li9ite4 4eath 3enefit nor9ally consists of the 7re9i59s 7ai4 7l5s interest)

Once the t2o-year 2aiting 7erio4 is o8er, the 7olicy hol4er is f5lly ins5re4)

T!r* Lif! In$%ranc! for S!nior$)

$any seniors, es7ecially those on fi6e4 inco9es, 4o not look at life ins5rance as an

in8est9ent o77ort5nity) They are 9ore intereste4 in easing the 35r4en of their 4eath on

their s5r8i8ors) In these cases, ter9 life ins5rance 9ay 3e the 3est o7tion)

W"o(! Lif! In$%ranc! for S!nior$)

Thanks to i97ro8e9ents in 4iet an4 healthcare, seniors are li8ing longer than e8er) As a

res5lt, there is a risk of o5tli8ing yo5r ter9 life ins5rance 7olicy) 'hole life ins5rance

2ill co8er yo5 for yo5r 2hole life, no 9atter ho2 long that 9ay 3e) The 7re9i59 is

fi6e4 for the life of the 7olicy) It cannot go 57) The 7olicy 2ill 35il4 cash 8al5e)

Yo5 can 3orro2 that 9oney or 7asse4 it on ta6-free to yo5r heirs) 'hole life 7re9i59s

can 3e 95ch higher than ter9 life 7re9i59s)

Sin(!6pay In$%ranc!.

If yo5 ha8e acc595late4 consi4era3le 2ealth an4 are not 7lanning to 5se it for li8ing

e67enses, yo5 9ight consi4er a single-7ay ins5rance 7olicy) This 2ill allo2 yo5 to

“le8erage" yo5r 9oney for yo5r heirs) A 0//,/// 7olicy 7ai4 for 2ith a single

7re9i59 can 4o53le or tri7le in 8al5e o8ernight, an4 the 4eath 3enefit can 3e str5ct5re4

to 3e 7ai4 ta6-free)

As 2ith any ins5rance, yo5r goals sho5l4 4ictate the kin4 of ins5rance yo5 35y) !ons5lt

2ith an ins5rance 7rofessional 3efore 4eci4ing 2hich o7tion is right for yo5)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0.




Mor#a! Pro#!c#ion Lif! In$%ranc! 6 A Ho*! Sa,!r

Lif! In$%ranc! #o co,!r yo%r *or#a! can $a,! yo%r "o*!.

$ortgage 7rotection life ins5rance can 3e a lifesa8ernot for the 9ortgage 7rotection

life ins5rance 7olicyhol4er, of co5rse, 35t for the 9ortgage 7rotection life ins5rance

7olicyhol4ers fa9ily) $ortgage 7rotection life ins5rance eli9inates the risk of yo5r

fa9ily losing its ho9e in the e8ent that yo5 4ie 3efore yo5r ho9e 9ortgage is 7ai4 off)

HISTOR'

The first ins5rance co97any in the #nite4 States 2as for9e4 in !harleston, So5th

!arolina in 0?;, 35t it 7ro8i4e4 only fire ins5rance) The sale of life ins5rance in the

#)S) 3egan in the late 0@/s) The Pres3yterian Syno4s in Phila4el7hia an4 Ne2 York

create4 the !or7oration for Relief of Poor an4 %istresse4 'i4o2s an4 !hil4ren of

Pres3yterian $inisters in 0>D E7isco7alian 7riests organie4 a si9ilar f5n4 in 0@D)

PHASE I 489::68;::5

Bet2een 0 an4 0? 9ore than t2o 4oen life ins5rance co97anies 2ere starte4, 35t

fe2er than half a 4oen s5r8i8e4) Prior to the A9erican !i8il 'ar, 9any ins5ranceco97anies in the #nite4 States ins5re4 the li8es of sla8es for their o2ners) Ne2 York

Life for e6a97le re7orte4 that Na5til5s sol4 .> sla8ehol4er life ins5rance 7olicies

45ring a t2o-year 7erio4 in the 0./s)

In In4ia, Ins5rance is a national 9atter, in 2hich life an4 general ins5rance is yet a

3oo9ing sector 2ith h5ge 7ossi3ilities for 4ifferent glo3al co97anies, as life ins5rance

7re9i59s acco5nt to ;)>M an4 general ins5rance 7re9i59s acco5nt to /)@>M of In4iaGs

%P)

The history of Ins5rance in In4ia 4ates 3ack to 00, 2hen Oriental Life Ins5rance

!o97any 2as esta3lishe4 3y E5ro7eans in Kolkata to cater to their re:5ire9ents)

Ne8ertheless, there 2as 4iscri9ination a9ong the life of foreigners an4 In4ians, as

higher 7re9i59s 2ere charge4 fro9 the latter) In 0/, In4ians took a sigh of relief

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0>




2hen Bo93ay $5t5al Life Ass5rance Society, the first In4ian ins5rance co97any

co8ere4 In4ian li8es at nor9al rates)

PHASE II 48;::68;<:5

Beignning of the ;/th cent5ry 3ro5ght a 4rastic change in the Ins5rance sector) In 0D0;,

the o8t) of In4ia 7asse4 t2o acts - the Life Ins5rance !o97anies Act, an4 the

Pro8i4ent F5n4 Act - to reg5late the ins5rance 35siness) National Ins5rance !o97any

Lt4, fo5n4e4 in 0D/@, is the ol4est e6isting ins5rance co97any in In4ia) Earlier, the

Ins5rance sector ha4 only t2o state ins5rers - Life Ins5rers i)e) Life Ins5rance

!or7oration of In4ia *LI!+, an4 eneral Ins5rers i)e) eneral Ins5rance !or7oration of

In4ia *I!+)

PHASE III 48;<=6>:::5

Life Ins5rance in In4ia 2as nationalise4 3y incor7orating Life Ins5rance !or7oration

*LI!+ in 0D>@) All 7ri8ate life ins5rance co97anies at that ti9e 2ere taken o8er 3y LI!)

In 0DD? the o8ern9ent of Re753lic of In4ia a77ointe4 RN $alhotra !o99ittee to lay

4o2n a roa4 9a7 for 7ri8atisation of the life ins5rance sector) 'hile the co99ittee

s539itte4 its re7ort in 0DD., it took another si6 years 3efore the ena3ling legislation 2as 7asse4 in the year ;///, legislation a9en4ing the Ins5rance Act of 0D? an4 legislating

the Ins5rance Reg5latory an4 %e8elo79ent A5thority Act of ;///) The sa9e year the

ne2ly a77ointe4 ins5rance reg5lator - Ins5rance Reg5latory an4 %e8elo79ent A5thority

*IR%A+ starte4 iss5ing licenses to 7ri8ate life ins5rers)

PHASE I? 4>::: On0ar)$5

Life Ins5rance is the fastest gro2ing sector in In4ia since ;/// as o8ern9ent allo2e4

Pri8ate 7layers an4 F%I 57 to ;@M)As 7er the c5rrent *$ar /@+ F%I nor9s, foreign

7artici7ation in an In4ian ins5rance co97any is restricte4 to ;@)/M of its e:5ity

or4inary share ca7ital) The #nion B54get for fiscal ;//> ha4 reco99en4e4 that the

ceiling on foreign hol4ing 3e increase4 to .D)/M)The go8ern9ent a77ro8e4 the 95ch-

a2aite4 co97rehensi8e Ins5rance Bill that seeks to raise foreign 4irect in8est9ent *F%I+

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0@




ca7 in 7ri8ate sector to .D 7er cent fro9 ;@ 7er cent) Also, in %ece93er ;///, these

s53si4iaries 2ere 4e-linke4 fro9 their 7arent co97any an4 2ere 4eclare4 in4e7en4ent

ins5rance co97aniesJ Oriental Ins5rance !o97any Li9ite4, Ne2 In4ia Ass5rance

!o97any Li9ite4, National Ins5rance !o97any Li9ite4 an4 #nite4 In4ia Ins5rance

!o97any Li9ite4)

COMPETITION

All life ins5rance co97anies in In4ia ha8e to co97ly 2ith the strict reg5lations lai4 o5t

3y Ins5rance Reg5latory an4 %e8elo79ent A5thority of In4ia *IR%A+) Therefore there

is no risk in going in for 7ri8ate ins5rance 7layers) In ter9s of 3eing rate4 for financial

strength like international 7layers, only I!I!I Pr54ential is rate4 3y Fitch In4ia at

National Ins5rer Financial Strength Rating of AAA*In4+ 2ith sta3le o5tlook in4icating

the highest clai9s 7aying a3ility rating)

Life Ins5rance !or7oration of In4ia *LI!+, the state o2ne4 giant, re9ains 3y far the

largest 7layer in the 9arket) A9ong the 7ri8ate sector 7layers, I!I!I Pr54ential Life

Ins5rance*< 3et2een I!I!I Bank an4 Pr54ential PL!+ is the largest follo2e4 3y Ba1a1

Allian Life Ins5rance !o97any Li9ite4 *< 3et2een Ba1a1 ro57 an4 Allian+) They

are co9ing o5t 2ith ne2er) A9ong s5ch 7ro45cts are the #LIPs or the #nit Linke4

In8est9ent Plans 2hich offer 3oth life co8er as 2ell as sco7e for sa8ings or in8est9ent

o7tions as the c5sto9er 4esires)F5rther, these ty7e of 7lans are s531ect to a 9ini959

lock-in 7erio4 of three years to 7re8ent 9is5se of the significant ta6 3enefits offere4 to

s5ch 7lans 5n4er the Inco9e Ta6 Act)

Intense co97etition fro9 ne2 entrants, 4ereg5lation an4 a 9o4eration in ret5rns fro9

the e:5ities 9arket is 75tting 7ress5re on 7ricing an4 5lti9ately short-ter9 7rofita3ility)





G!n!ra( In$%ranc! -%$in!$$ 4Na#iona(i$a#ion5 Ac#/ 8;>

The eneral Ins5rance B5siness *Nationalisation+ Act, 0D; 2as enacte4 to nationalise

the 0// o44 general ins5rance co97anies an4 s53se:5ently 9erging the9 into fo5r

co97anies) All the co97anies 2ere a9alga9ate4 into National Ins5rance, Ne2 In4ia

Ass5rance, Oriental Ins5rance, #nite4 In4ia Ins5rance 2hich 2ere hea4:5artere4 in

each of the fo5r 9etro7olitan cities)

In$%ranc! R!%(a#ory an) D!,!(op*!n# A%#"ori#y 4IRDA5 Ac#/ 8;;;

Till 0DDD, there 2ere not any 7ri8ate ins5rance co97anies in In4ian ins5rance sector)The o8t) of In4ia, then intro45ce4 the Ins5rance Reg5latory an4 %e8elo79ent

A5thority Act in 0DDD, there3y 4e-reg5lating the ins5rance sector an4 allo2ing 7ri8ate

co97anies into the ins5rance) F5rther, foreign in8est9ent 2as also allo2e4 an4 ca77e4

at ;@M hol4ing in the In4ian ins5rance co97anies) In recent years 9any 7ri8ate 7layers

entere4 in the Ins5rance sector of In4ia) !o97anies 2ith e:5al strength co97eting in the

In4ian ins5rance 9arket) !5rrently, in In4ia only ; 9illion 7eo7le */); M of total

7o75lation of 0 3illion+, are co8ere4 5n4er $e4iclai9, 2hereas in 4e8elo7e4 nations

like #SA a3o5t > M of the total 7o75lation are co8ere4 5n4er so9e ins5rance sche9e)

'ith 9ore an4 9ore 7ri8ate 7layers in the sector this scenario 9ay change at a ra7i4

7ace)

Ei$#in In$%ranc! Co*pani!$2Corpora#ion$

0) Ba1a1 Allian Life Ins5rance !o97any Li9ite4

;) Birla S5n Life Ins5rance !o) Lt4

?) &%F! Stan4ar4 life Ins5rance !o) Lt4

.) I!I!I Pr54ential Life Ins5rance !o) Lt4)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ 0D

http://en.wikipedia.org/w/index.php?title=Bajaj_Allianz_Life_Insurance_Company_Limited&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Birla_Sun_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=HDFC_Standard_life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=ICICI_Prudential_Life_Insurance_Co._Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Bajaj_Allianz_Life_Insurance_Company_Limited&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Birla_Sun_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=HDFC_Standard_life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=ICICI_Prudential_Life_Insurance_Co._Ltd.&action=edit&redlink=1




>) IN <ysya Life Ins5rance !o97any Lt4)

@) Life Ins5rance !or7oration of In4ia

) $a6 Ne2 York Life Ins5rance !o) Lt4

) $et Life In4ia Ins5rance !o97any Lt4)

D) Kotak $ahin4ra Ol4 $5t5al Life Ins5rance Li9ite4

0/)SBI Life Ins5rance !o) Lt4

00)Tata AI Life Ins5rance !o97any Li9ite4

0;)Reliance Life Ins5rance !o97any Li9ite4)

0?)A8i8a Life Ins5rance !o) In4ia P8t) Lt4)

0.)Sahara In4ia Life Ins5rance !o, Lt4)

0>)Shrira9 Life Ins5rance !o, Lt4)

0@)Bharti A(A Life Ins5rance !o97any Lt4)

0)F5t5re enerali Life Ins5rance !o97any Lt4)

0)I%BI Fortis Life Ins5rance !o97any Lt4)

0D)!anara &SB! Oriental Bank of !o99erce Life Ins5rance !o) Lt4

;/)AEON Religare Life Ins5rance !o97any Li9ite4)

;0)%LF Pra9erica Life Ins5rance !o) Lt4)

;;)Star #nion %ai-ichi Life Ins5rance !o97) Lt4)

;?) National Ins5rance !o97any Lt4)

INSURANCE -USINESSJ

Ins5rance 35siness is 4i8i4e4 into fo5r classes J

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;/

http://en.wikipedia.org/w/index.php?title=ING_Vysya_Life_Insurance_Company_Ltd.&action=edit&redlink=1


http://en.wikipedia.org/w/index.php?title=Max_New_York_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Met_Life_India_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Kotak_Mahindra_Old_Mutual_Life_Insurance_Limited&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=SBI_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Tata_AIG_Life_Insurance_Company_Limited&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Reliance_Life_Insurance_Company_Limited.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Aviva_Life_Insurance_Co._India_Pvt._Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Sahara_India_Life_Insurance_Co,_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Shriram_Life_Insurance_Co,_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Bharti_AXA_Life_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Future_Generali_Life_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=IDBI_Fortis_Life_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Canara_HSBC_Oriental_Bank_of_Commerce_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=AEGON_Religare_Life_Insurance_Company_Limited.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=DLF_Pramerica_Life_Insurance_Co._Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Star_Union_Dai-ichi_Life_Insurance_Comp._Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=National_Insurance_Company_Ltd.&action=edit&redlink=1



http://en.wikipedia.org/w/index.php?title=Max_New_York_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Met_Life_India_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Kotak_Mahindra_Old_Mutual_Life_Insurance_Limited&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=SBI_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Tata_AIG_Life_Insurance_Company_Limited&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Reliance_Life_Insurance_Company_Limited.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Aviva_Life_Insurance_Co._India_Pvt._Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Sahara_India_Life_Insurance_Co,_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Shriram_Life_Insurance_Co,_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Bharti_AXA_Life_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Future_Generali_Life_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=IDBI_Fortis_Life_Insurance_Company_Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Canara_HSBC_Oriental_Bank_of_Commerce_Life_Insurance_Co._Ltd&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=AEGON_Religare_Life_Insurance_Company_Limited.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=DLF_Pramerica_Life_Insurance_Co._Ltd.&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Star_Union_Dai-ichi_Life_Insurance_Comp._Ltd.&action=edit&redlink=1





0+ Life Ins5rance ;+ Fire Ins5rance ?+ $arine Ins5rance an4 .+ $iscellaneo5s Ins5rance)

Life Ins5rers transact life ins5rance 35siness eneral Ins5rers transact the rest)

No co97osites are 7er9itte4 as 7er la2)

CUSTOMER PROTECTIONB

Ins5rance In45stry has O9354s9en in 0; cities) Each O9354s9an is e97o2ere4 to

re4ress c5sto9er grie8ances in res7ect of ins5rance contracts on 7ersonal lines 2here

the ins5re4 a9o5nt is less than Rs) ;/ lakhs, in accor4ance 2ith the O9354s9anSche9e)

A-OUT MAX NEW'ORK LIFE INSURANCE

$a6 Ne2 York Life Ins5rance !o97any Lt4) is a 1oint 8ent5re 3et2een Ne2 York Life

a Fort5ne 0// co97any an4 $a6 In4ia Li9ite4 one of In4iaGs lea4ing 95lti-35siness

cor7orations) The co97any has 7ositione4 itself on the :5ality 7latfor9) In line 2ith its

8ision to 3e the $ost A49ire4 Life Ins5rance !o97any in In4ia, it has 4e8elo7e4 astrong cor7orate go8ernance 9o4el 3ase4 on the core 8al5es of e6cellence, honesty,

kno2le4ge, caring, integrity an4 tea92ork) The strategy is to esta3lish itself as a

Tr5ste4 Life Ins5rance S7ecialist thro5gh a :5ality a77roach to 35siness)

$a6 Ne2 York Life Ins5rance !o97any, Lt4) 7ro8i4es in4i8i45al an4 gro57 life an4

health ins5rance 7ro45cts in In4ia) The co97any offers 7rotection, chil4ren, in8est9ent,

retire9ent, health, sa8ings, an4 r5ral 7lans to in4i8i45als, as 2ell as gro57 cre4it life,

gro57 grat5ity c59 ter9 ass5rance, 5nit linke4 gro57 grat5ity, 5nit linke4 gro57

s57erann5ation, life shiel4, an4 e97loyee 4e7osit linke4 ins5rance 7lans to gro57s) It

offers its 7ro45cts thro5gh a 95lti-channel 4istri35tion net2ork, incl54ing agency

4istri35tors, 7artnershi7 4istri35tors, 3ank ass5rance, an4 sales force) The co97any 2as

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;0




fo5n4e4 in ;/// an4 is 3ase4 in 5rgaon, In4ia) $a6 Ne2 York Life Ins5rance

!o97any, Lt4) o7erates as a s53si4iary of $a6 In4ia, Lt4)

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N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;?

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Uni# Lin3!) Gro%p S%p!rann%a#ion P(anB

To gi8e ass5rance of a financially sec5re4 7resent an4 rela6e4 retire4 life in the f5t5reto e97loyees)

Uni# Lin3!) Gro%p Gra#%i#y P(anBrat5ity can act as a 7o2erf5l tool to re2ar4 loyal e97loyees an4 retain e6istinge97loyees as 2ell)

SMART Epr!$$

A fle6i3le 5nit-linke4 ins5rance 7lan *#LIP+ 2ith net asset 8al5e *NA<+ g5arantee an4syste9atic transfer 7lan, clai9ing to offer sec5re ret5rns e8en 45ring 9arket 8olatility)

SMART S#!p$

This 7lan ai9s at ai4ing 7lanning for chil4renGs nee4s an4 7ro8i4es financial 7rotection)

?ISION OF THE COMPAN'

$a6 Ne2 York Life Ins5rance !o97any has a 8ision of 3eing the Mo$# A)*ir!) Lif!

In$%ranc! Co*pany of In)ia) O5r constant en4ea8or is to 7ro8i4e high :5ality

7ro45cts an4 ser8ices to o5r !5sto9ers) To ser8e o5r !5sto9ers effecti8ely an4 to their

satisfaction , 2e are stea4ily on a 1o5rney of 5ality an4 B5siness E6cellence)

MISSION OF THE COMPAN'

The 9ission of Ne2 York Life is to 9aintain its s57erior Gfinancial strengthG, a4here to

the highest stan4ar4s of GintegrityG an4 4e9onstrate Gh59anityG 3y treating its c5sto9ers,

agents an4 e97loyees 2ith co97assion, consi4eration an4 res7ect)

-OARD OF DIRECTORS

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;.




NAMES DESIGNATIONS

$r) ANALIT SIN& !&AIR$AN

$r) RI!&AR% $#!!I %IRE!TOR

$r) AN#ROOP SIN& <I!E !&AIR$AN$r) RAES& S#% !EO C $ANAIN %IRE!TOR

$r) RAIT $E&TA E(E!#TI<E %IR!TOR C !&IEF

OPERATIN OFFI!ER

$r) O&N &ARRISON %IRE!TOR

%r) O$KAR OS'A$I %IRE!TOR

$r) RAES& K&ANNA %IRE!TOR

PROMOTERS

The 7ro9oters of $a6 Ne2 York Life *$NYL+ $a6 In4ia an4 Ne2 York Life

Ins5rance) Pro9inent sharehol4ers are $r Anal1it Singh an4 a lea4ing 7ri8ate e:5ity

fir9, 'ar35rg Pinc5s 2hich acco5nts for ;)M of the total sharehol4ing) The 3alance

sharehol4ing is hel4 3y the 753lic an4 Instit5tional In8estor

ORGANIATION STRUCTURE OF MNL'

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;>




Managing director

Vice president

Associate vice president

Regional manager

Multi partner multi locations

Partner in charge

Partner

Associate partner

Sales manager

Associate sales manager

Advisors

Associate agency partner

WORLD ECONOM' OUTLOOK

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;@




It clearly sho2s that E9erging an4 4e8elo7ing econo9ies ha8e o5t7erfor9e4 A48ance4

econo9ies o8er a 7erio4 of a 4eca4e *;///-;/0/+)

GLO-AL PRESENCE OF THE -ANKING SECTOR

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;




The n593er of large an4 9e4i59

4o9estic 3anks, 4efine4 as the n593er of 3anks ranke4 in the 2orl4s to7

0///, ten4s to 3e 95ch larger in 4e8elo7e4 co5ntries as co97are4 2ith

e9erging econo9ies) Ill5strati8ely, as at en4-0DD, the n593er of s5ch 3anks

2as 0D an4 00@ in the #S an4 a7an as co97are4 2ith in Argentina, ;; in

Brail an4 00 in In4ia) This is 7erha7s reflecti8e of 4ifferences in sies of

econo9y an4 the financial sector)

Secon4, the share of 3ank asset in total financial sector assets) In 9ost

e9erging 9arkets, 3anking sector assets co97rise 2ell o8er / 7er cent of

total financial sector assets, 2hereas these fig5res are 95ch lo2er in

4e8elo7e4 econo9ies) In In4ia, the share of 3anking assets in total financial

sector assets is aro5n4 > 7er cent, as of en4-$arch ;//.) There is, th5s, 9erit

in recognising the i97ortance of 4i8ersification in the instit5tional an4

instr59ental as7ects of financial inter9e4iation in the interests of 2i4er

choice, co97etition an4 sta3ility) &o2e8er, the 4o9inant role of 3anks in

financial inter9e4iation in e9erging econo9ies, in 7artic5lar In4ia 2ill

contin5e in the 9e4i59-ter9 an4 3anks 2ill contin5e to 3e s7ecial for a long

ti9e in f5t5re)

Thir4, in45stry concentration, 9eas5re4 3y the 7ercentage of a

co5ntrys 3anking sector assets controlle4 3y the largest 3anks) In 9ost

e9erging 9arket econo9ies, the fi8e largest 3anks *5s5ally 4o9estic+ acco5nt

for o8er t2o-thir4s of 3ank assets) These fig5res ten4 to 3e 95ch lo2er in

4e8elo7e4 econo9ies) Ill5strati8ely, for ;//., in In4ia, the sai4 7ercentage is

/).0) In ;//0, the corres7on4ing fig5res 2ere /)?? for Ne2 Uealan4, /); for

Italy an4 /); for the #nite4 States) This is an interesting factor that sho5l4 3e

3orne in 9in4 2hile consi4ering the 2ay for2ar4 in consoli4ation in 3anking

sector in In4ia)

Fo5rth, internationalisation of 3anking o7erations) As 7er cent of total 4o9estic assets,

foreign-controlle4 assets increase4 significantly in se8eral

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ;D




E5ro7ean co5ntries *A5stria, Irelan4, S7ain, er9any an4 Nor4ic co5ntries+,

35t increases ha8e 3een fairly s9all in others *#K an4 S2iterlan4+) A9ong

e9erging econo9ies, 2hile there 2ere 9arke4 increase of foreign-controlle4

o2nershi7 in se8eral Latin A9erican econo9ies, the increase has, at 3est,

3een 9o4est in East Asian econo9ies) A8aila3le e8i4ence see9s to in4icate

so9e correlation 3et2een the e6tent of li3eralisation of ca7ital acco5nt in

e9erging 9arkets an4 share of assets controlle4 3y foreign 3anks) As 7er

e8i4ence a8aila3le, the foreign 3anks in In4ia 2ho are 7resent in the for9 of

3ranches, see9 to en1oy greater free4o9 in their o7erations incl54ing retail

3anking in the co5ntry 8irt5ally on 7ar 2ith 4o9estic 3anks, co97are4 to

9ost other 4e8elo7ing co5ntries) F5rther, the 7rofita3ility of their o7erations

in In4ia is consi4era3ly higher than 4o9estically-o2ne4 an4, in fact, are

higher than the foreign 3anks o7erating in 9ost other 4e8elo7ing co5ntries)

In4ia contin5es to grant 3ranch licenses 9ore li3erally than the 'TO

co99it9ents)

Finally, the share of state-o2ne4 3anks in total 3anking sector assets)

E9erging econo9ies, 2ith 7re4o9inantly o8ern9ent-o2ne4 3anks, ten4 to

ha8e 95ch higher state-o2nershi7 of 3anks as co97are4 2ith their4e8elo7e4 co5nter7arts) 'hile 9any e9erging co5ntries choose to 7ri8atise

their 753lic sector 3anking in45stry, after a 7rocess of a3sor7tion of o8erhang

7ro3le9s 3y the o8ern9ent, 2e ha8e enco5rage4 state-r5n 3anks to

4i8ersify o2nershi7 3y in45cting 7ri8ate share ca7ital an4 a3sor3 the

o8erhang 7ro3le9s) The 7rocess has hel7e4 re45ce 35r4en on o8ern9ent,

i97ro8e efficiency as reflecte4 in stock 9arket 8al5ation, 7ro9ote ne2

efficient 7ri8ate sector 3anks, 2hile 4rastically re45cing the share of 753lic

sector 3anks 2holly o2ne4 3y o8ern9ent in a ra7i4ly gro2ing in45stry)

O5r s5ccessf5l refor9 of 753lic sector 3anks is an e6cellent e6a97le of a

4yna9ic 9i6 of 753lic an4 7ri8ate o2nershi7 in 3anks)

-ASEL NORMS

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?/




A9i4st glo3alisation Banking Syste9 in In4ia has attaine4 8ital i97ortance) %ay 3y

4ay there has 3een increasing 3anking co97le6ities in 3anking transactions, ca7ital

re:5ire9ents, li:5i4ity, cre4it an4 risks associate4 2ith the9)

The 'orl4 Tra4e Organisation *'TO+, of 2hich In4ia is a 9e93er nation, re:5ires the

co5ntries like In4ia to get their 3anking syste9s at 7ar 2ith the glo3al stan4ar4s in ter9s

of financial health, safety an4 trans7arency, 3y i97le9enting the Basel II Nor9s 3y

;//D)

BASEL !O$$ITTEEJ

The Basel !o99ittee on Banking S57er8ision 7ro8i4es a for59 for reg5lar coo7eration

on 3anking s57er8isory 9atters) Its o31ecti8e is to enhance 5n4erstan4ing of key

s57er8isory iss5es an4 i97ro8e the :5ality of 3anking s57er8ision 2orl42i4e) It seeks to

4o so 3y e6changing infor9ation on national s57er8isory iss5es, a77roaches an4

techni:5es, 2ith a 8ie2 to 7ro9oting co99on 5n4erstan4ing) The !o99itteeGs

Secretariat is locate4 at the Bank for International Settle9ents *BIS+ in Basel,

S2iterlan4)

NEE% FOR S#!& NOR$SJ

The first accor4 3y the na9e )Basel Accor4 I) 2as esta3lishe4 in 0D an4 2as

i97le9ente4 3y 0DD;) It 2as the 8ery first atte97t to intro45ce the conce7t of 9ini959

stan4ar4s of ca7ital a4e:5acy) Then the secon4 accor4 3y the na9e Basel Accor4 II 2asesta3lishe4 in 0DDD 2ith a final 4irecti8e in ;//? for i97le9entation 3y ;//@ as Basel II

Nor9s) #nfort5nately, In4ia co5l4 not f5lly i97le9ent this 35t, is no2 gearing 57 5n4er

the g5i4ance fro9 the Reser8e Bank of In4ia to i97le9ent it fro9 0 A7ril, ;//D)

Basel II Nor9s ha8e 3een intro45ce4 to o8erco9e the 4ra23acks of Basel I Accor4) For

In4ian Banks, its the nee4 of the ho5r to 35ckle-57 an4 7ractice 3anking 35siness at 7ar

2ith glo3al stan4ar4s an4 9ake the 3anking syste9 in In4ia 9ore relia3le, trans7arent

an4 safe) These Nor9s are necessary since In4ia is an4 2ill 2itness increase4 ca7ital

flo2s fro9 foreign co5ntries an4 there is increasing cross-3or4er econo9ic C financial

transactions)

FEATURES OF -ASEL II NORMSB

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?0




Basel II Nor9s are consi4ere4 as the refor9e4 C refine4 for9 of Basel I Accor4) The

Basel II Nor9s 7ri9arily stress on ? factors, 8i) !a7ital A4e:5acy, S57er8isory Re8ie2

an4 $arket 4isci7line) The Basel !o99ittee calls these factors as the Three Pillars to

9anage risks)

Pillar IJ Capi#a( A)!%acy R!%ir!*!n#$B

#n4er the Basel II Nor9s, 3anks sho5l4 9aintain a 9ini959 ca7ital a4e:5acy

re:5ire9ent of M of risk assets) For In4ia, the Reser8e Bank of In4ia has 9an4ate4

9aintaining of DM 9ini959 ca7ital a4e:5acy re:5ire9ent) This re:5ire9ent is

7o75larly calle4 as !a7ital A4e:5acy Ratio *!AR+ or !a7ital to Risk 'eighte4 Assets

Ratio *!RAR+)

Pillar IIJ S%p!r,i$ory R!,i!0J

Banks 9a1orly enco5nter 2ith ? Risks, 8i) !re4it, O7erational C $arket Risks)

Basel II Nor9s 5n4er this Pillar 2ants to ens5re that not only 3anks ha8e a4e:5ate

ca7ital to s577ort all the risks, 35t also to enco5rage the9 to 4e8elo7 an4 5se 3etter risk

9anage9ent techni:5es in 9onitoring an4 9anaging their risks) The 7rocess has fo5r

key 7rinci7lesJ

a+ Banks sho5l4 ha8e a 7rocess for assessing their o8erall ca7ital a4e:5acy in relation to

their risk 7rofile an4 a strategy for 9onitoring their ca7ital le8els)

3+ S57er8isors sho5l4 re8ie2 an4 e8al5ate 3ankGs internal ca7ital a4e:5acy assess9ent

an4 strategies, as 2ell as their a3ility to 9onitor an4 ens5re their co97liance 2ith

reg5latory ca7ital ratios)

c+ S57er8isors sho5l4 e67ect 3anks to o7erate a3o8e the 9ini959 reg5latory ca7ital

ratios an4 sho5l4 ha8e the a3ility to re:5ire 3anks to hol4 ca7ital in e6cess of the

9ini959)

4+ S57er8isors sho5l4 seek to inter8ene at an early stage to 7re8ent ca7ital fro9 falling

3elo2 9ini959 le8el an4 sho5l4 re:5ire ra7i4 re9e4ial action if ca7ital is not

9entione4 or restore4)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?;




Pillar IIIJ Mar3!# Di$cip(in!B

$arket 4isci7line i97oses 3anks to con45ct their 3anking 35siness in a safe, so5n4 an4

effecti8e 9anner) $an4atory 4isclos5re re:5ire9ents on ca7ital, risk e67os5re

*se9iann5ally or 9ore fre:5ently, if a77ro7riate+ are re:5ire4 to 3e 9a4e so that 9arket

7artici7ants can assess a 3ankGs ca7ital a4e:5acy) 5alitati8e 4isclos5res s5ch as risk

9anage9ent o31ecti8es an4 7olicies, 4efinitions etc) 9ay 3e also 753lishe4)

CONCLUSIONB

Basel II Nor9s offers a 8ariety of o7tions in a44ition to the stan4ar4 a77roach to

9eas5ring risk) Pa8es the 2ay for financial instit5tions to 7roacti8ely control risk in

their o2n interest an4 kee7 ca7ital re:5ire9ent lo2)

B5t Re:5ires strategiing risk 9anage9ent for the entire enter7rise, 35il4ing h5ge 4ata

2areho5ses, cr5nching n593ers an4 7erfor9ing co97le6 calc5lations an4 7oses great

challenges of co97liance for 3anks an4 financial instit5tions)

Increasingly, 3anks an4 sec5rities fir9s 2orl4 o8er are getting their act together)

ISSUES AND CHALLENGES

'hile there is no secon4 o7inion regar4ing the 75r7ose,necessity an4 5sef5lness of the

7ro7ose4 ne2 accor4 the techni:5es an4 9etho4s s5ggeste4 in the cons5ltati8e

4oc59ent 2o5l4 7ose consi4era3le i97le9entational challenges for the 3anks es7ecially

in a 4e8elo7ing co5ntry like In4ia)!a7ital Re:5ire9entJ The ne2 nor9s 2ill

al9ost in8aria3ly increase ca7ital re:5ire9ent in all 3anks across the 3oar4) Altho5gh

ca7ital re:5ire9ent for cre4it risk 9ay go 4o2n 45e to a4o7tion of 9ore

risk sensiti8e 9o4els s5ch a48antage 2ill 3e 9ore than offset 3y a44itional ca7ital

charge for o7erational risk an4 increase4 ca7ital re:5ire9ent for 9arket risk)

This 7artly e67lains the c5rrent tren4 of consoli4ation in the 3anking in45stry)

Profita3ilityJ !o97etition a9ong 3anks for highly rate4 cor7orates nee4ing lo2er

a9o5nt of ca7ital 9ay e6ert 7ress5re on alrea4y thinning interest

s7rea4) F5rther, h5ge i97le9entation cost 9ay also i97act 7rofita3ility for s9aller

3anks)

Risk $anage9ent Architect5reJ The ne2 stan4ar4s are an a9alga9 of international 3est

7ractices an4 calls for intro45ction of a48ance4 risk 9anage9ent

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ??




syste9 2ith 2i4er a77lication thro5gho5t the organiation) It 2o5l4 3e a 4a5nting task

to create the re:5ire4 le8el of technological architect5re an4 h59an

skill across the instit5tion)

Rating Re:5ire9entJ Altho5gh there are a fe2 cre4it rating agencies in In4ia the le8el

of rating 7enetration is 8ery lo2) A st54y re8eale4 that in 0DDD, o5t of D@./ 3orro2ers

en1oying f5n4-3ase4 2orking ca7ital facilities fro9 3anks only ?// 2ere rate4 3y

9a1or agencies) F5rther, rating is a lagging in4icator of the cre4it risk an4 the agencies

ha8e 7oor track recor4 in this res7ect) There is a 7ossi3ility of rating 3lack9ail thro5gh

5nsolicite4 rating) $oreo8er rating in In4ia is restricte4 to iss5es an4 not iss5ers)

Enco5raging rating of iss5ers 2o5l4 3e a challenge)

!hoice of Alternati8e A77roachesJ The ne2 fra9e2ork 7ro8i4es for alternati8e

a77roaches for co975tation of ca7ital re:5ire9ent of 8ario5s risks)

&o2e8er, co97etiti8e a48antage of IRB a77roach 9ay lea4 to 4o9ination of this

a77roach a9ong 3ig 3anks) Banks a4o7ting IRB a77roach 2ill 3e 9ore sensiti8e

than those a4o7ting stan4ar4ie4 a77roach) This 9ay res5lt in high-risk assets flo2ing

to 3anks on stan4ar4ie4 a77roach - as they 2o5l4 re:5ire lesser ca7ital for

these assets than 3anks on IRB a77roach) &ence, the syste9 as a 2hole 9ay 9aintain

lo2er ca7ital than 2arrante4 an4 3eco9e 9ore 85lnera3le) It is to 3e consi4ere4

2hether in o5r :5est for 7erfect stan4ar4s, 2e ha8e lost the only 5ni8ersally acce7te4stan4ar4)

A3sence of &istorical %ata3aseJ !o975tation of 7ro3a3ility of 4efa5lt, loss gi8en

4efa5lt, 9igration 9a77ing an4 s57er8isory 8ali4ation re:5ire creation of

historical 4ata3ase, 2hich is a ti9e cons59ing 7rocess an4 9ay re:5ire initial s577ort

fro9 the s57er8isor)

Incenti8e to Re9ain #nrate4J In case of 5nrate4 so8ereigns, 3anks an4 cor7orates the

7rescri3e4 risk 2eight is 0//M, 2hereas in case of those entities 2ith

lo2est ratting, the risk 2eight is 0>/M) This 9ay create incenti8e for the category of

co5nter7arties, 2hich antici7ate lo2er rating to re9ain 5nrate4)

Basel II nor9s 2ill 7ro8e a challenging task for the 3ank s57er8isors as 2ell) i8en the

7a5city of s57er8isory reso5rces there is a nee4 to reorient the reso5rce

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?.




4e7loy9ent strategy) S57er8isory ca4re has to 3e 7ro7erly traine4 for 5n4erstan4ing of

critical iss5es for risk 7rofiling of s57er8ise4 entities an4 8ali4ating an4

g5i4ing 4e8elo79ent of co97le6 IRB 9o4els)

!or7orate o8ernance Iss5esJ Basel II 7ro7osals

5n4erscore the interaction 3et2een so5n4 risk 9anage9ent 7ractices an4 cor7orate goo4

go8ernance) The 3anks 3oar4 of 4irectors has the res7onsi3ility for setting

the 3asic tolerance le8els for 8ario5s ty7es of risk) It sho5l4 also ens5re that

9anage9ent esta3lishes a fra9e2ork for assessing the risks, 4e8elo7 a syste9 to relate

risk to the 3anks ca7ital le8els an4 esta3lish a 9etho4 for 9onitoring co97liance 2ith

internal 7olicies)

National %iscretionJ Basel II nor9s set o5t a n593er of areas 2here national s57er8isor

2ill nee4 to 4eter9ine the s7ecific 4efinitions, a77roaches or threshol4s that 2ish

to a4o7t in i97le9enting the 7ro7osals) The criteria 5se4 3y s57er8isors in 9aking these

4eter9inations sho5l4 4ra2 57on 4o9estic 9arket 7ractice an4 e67erience an4 3e

consistent 2ith the o31ecti8es of Basel II nor9s)

%isclos5re Regi9eJ Pillar ? 75r7orts to enforce 9arket 4isci7line thro5gh stricter

4isclos5re re:5ire9ent) 'hile a49itting that s5ch 4isclos5re 9ay 3e 5sef5l for

s57er8isory a5thorities an4 rating agencies the e67ertise an4 a3ility of the general

753lic to co97rehen4 an4 inter7ret 4isclose4 infor9ation is o7en to :5estion) $oreo8er,too 95ch 4isclos5re 9ay ca5se infor9ation o8erloa4 an4 9ay e8en 4a9age financial

7osition of 3ank)

%isa48antage for S9aller BanksJ The ne2 fra9e2ork is 8ery co97le6 an4 4iffic5lt to

5n4erstan4) It calls for re8a97ing the entire 9anage9ent infor9ation syste9 an4

allocation of s53stantial reso5rces) Therefore, it 9ay 3e o5t of reach for 9any s9aller

3anks) As $oo4ys In8estors Ser8ices 75ts it, “It is 5nlikely that these 3anks 2ill ha8e

the financial reso5rces, intellect5al ca7ital, skills an4 large scale co99it9ent that larger

co97etitors ha8e to 35il4 so7histicate4 syste9s to allocate reg5latory ca7ital o7ti9ally

for 3oth cre4it an4 o7erational risks)"

%iscri9inatory against %e8elo7ing !o5ntriesJ

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?>




%e8elo7ing co5nties ha8e high concentration of lo2er rate4 3orro2ers) The cali3ration

of IRB has lesser incenti8es to len4 to s5ch 3orro2ers) This, along2ith 2ith4ra2al of

5nifor9 risk 2eight of /M on so8ereign clai9s 9ay res5lt in o8erall re45ction in

len4ing 3y internationally acti8e 3anks in 4e8elo7ing co5ntries an4 increase their cost of

3orro2ing)

E6ternal an4 Internal A54itorsJ The 2orking ro57 set 57 3y the Basel !o99ittee to

look into i97le9etational iss5es o3ser8e4 that s57er8isors 9ay 2ish to in8ol8e thir4

7arties, s5ch a e6ternal a54itors, internal a54itors an4 cons5ltants to assist the9 carrying

o5t so9e of the 45ties 5n4er Basel II) The 7recon4ition is that there sho5l4 3e a s5ita3ly

4e8elo7e4 national acco5nting an4 a54iting stan4ar4s an4 fra9e2ork, 2hich are in line

2ith the 3est international 7ractices) A 9ini959 :5alifying criteria for fir9s sho5l4 3e

those that ha8e a 4e4icate4 financial ser8ices or 3anking 4i8ision that is 7ro7erly

researche4 an4 ha8e 7ro8en a3ility to res7on4 to training an4 57gra4es re:5ire4 of its

o2n staff to co97lete the tasks a4e:5ately) 'ith the i97le9entation of the ne2

fra9e2ork, internal a54itors 9ay 3eco9e increasingly in8ol8e4 in 8ario5s 7rocesses,

incl54ing 8ali4ation an4 of the acc5racy of the 4ata in75ts, re8ie2 of acti8ities

7erfor9e4

3y cre4it f5nctions an4 assess9ent of a 3anks ca7ital assess9ent 7rocess)

CONCLUSION

I97le9entation of Basel II has 3een 4escri3e4 as a long 1o5rney rather than a

4estination 3y itself) #n4o53te4ly, it 2o5l4 re:5ire co99it9ent of s53stantial ca7ital

an4 h59an reso5rces on the 7art of 3oth 3anks an4 the s57er8isors) RBI has 4eci4e4 to

follo2 a

cons5ltati8e 7rocess 2hile i97le9enting Basel II nor9s an4 9o8e in a gra45al,

se:5ential an4 co-or4inate4 9anner) For this 75r7ose, 4ialog5e has alrea4y

3een initiate4 2ith the stakehol4ers) As en8isage4 3y the Basel !o99ittee, the

acco5nting 7rofession too, 2ill 9ake a 7ositi8e contri35tion in

this res7ect to 9ake In4ian 3anking syste9 stronger)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?@




PHASE OF THE INDIAN -ANKING SECTOR

The In4ian Banking in45stry, 2hich is go8erne4 3y the Banking Reg5lation Act of

In4ia, 0D.D can 3e 3roa4ly classifie4 into t2o 9a1or categories, non-sche45le4 3anksan4 sche45le4 3anks) Sche45le4 3anks co97rise co99ercial 3anks an4 the co-o7erati8e

3anks) In ter9s of o2nershi7, co99ercial 3anks can 3e f5rther gro57e4 into

nationalie4 3anks, the State Bank of In4ia an4 its gro57 3anks, regional r5ral 3anks an4

7ri8ate sector 3anks *the ol4 ne2 4o9estic an4 foreign+) These 3anks ha8e o8er @,///

3ranches s7rea4 across the co5ntry)

The first 7hase of financial refor9s res5lte4 in the nationaliation of 0. 9a1or 3anks in

0D@D an4 res5lte4 in a shift fro9 !lass 3anking to $ass 3anking) This in t5rn res5lte4 in

a significant gro2th in the geogra7hical co8erage of 3anks) E8ery 3ank ha4 to ear9ark a

9ini959 7ercentage of their loan 7ortfolio to sectors i4entifie4 as “7riority sectors")

The 9an5fact5ring sector also gre2 45ring the 0D/s in 7rotecte4 en8irons an4 the

3anking sector 2as a critical so5rce) The ne6t 2a8e of refor9s sa2 the nationaliation

of @ 9ore co99ercial 3anks in 0D/) Since then the n593er of sche45le4 co99ercial

3anks increase4 fo5r-fol4 an4 the n593er of 3ank 3ranches increase4 eight-fol4)

After the secon4 7hase of financial sector refor9s an4 li3eraliation of the sector in the

early nineties, the P53lic Sector Banks *PSB+ fo5n4 it e6tre9ely 4iffic5lt to co97ete

2ith the ne2 7ri8ate sector 3anks an4 the foreign 3anks) The ne2 7ri8ate sector 3anks

first 9a4e their a77earance after the g5i4elines 7er9itting the9 2ere iss5e4 in an5ary

0DD?) Eight ne2 7ri8ate sector 3anks are 7resently in o7eration) These 3anks 45e to their

late start ha8e access to state-of-the-art technology, 2hich in t5rn hel7s the9 to sa8e on

9an7o2er costs an4 7ro8i4e 3etter ser8ices)

%5ring the year ;///, the State Bank Of In4ia *SBI+ an4 its associates acco5nte4 for a

;> 7ercent share in 4e7osits an4 ;)0 7ercent share in cre4it) The ;/ nationalie4 3anks

acco5nte4 for >?); 7ercent of the 4e7osits an4 .)> 7ercent of cre4it 45ring the sa9e

7erio4) The share of foreign 3anks *n593ering .;+, regional r5ral 3anks an4 other





sche45le4 co99ercial 3anks acco5nte4 for >) 7ercent, ?)D 7ercent an4 0;); 7ercent

res7ecti8ely in 4e7osits an4 ).0 7ercent, ?)0. 7ercent an4 0;)> 7ercent res7ecti8ely in

cre4it 45ring the year ;///)

!5rrent Scenario

The in45stry is c5rrently in a transition 7hase) On the one han4, the PSBs, 2hich are the

9ainstay of the In4ian Banking syste9 are in the 7rocess of she44ing their fla3 in ter9s

of e6cessi8e 9an7o2er, e6cessi8e non Perfor9ing Assets *NPA=S+ an4 e6cessi8e

go8ern9ental e:5ity, 2hile on the other han4 the 7ri8ate sector 3anks are consoli4ating

the9sel8es thro5gh 9ergers an4 ac:5isitions)

PSBs, 2hich c5rrently acco5nt for 9ore than 7ercent of total 3anking in45stry assets

are sa44le4 2ith NPAs *a 9in4-3oggling Rs ?/ 3illion in ;///+, falling re8en5es fro9

tra4itional so5rces, lack of 9o4ern technology an4 a 9assi8e 2orkforce 2hile the ne2

7ri8ate sector 3anks are forging ahea4 an4 re2riting the tra4itional 3anking 35siness

9o4el 3y 2ay of their sheer inno8ation an4 ser8ice) The PSBs are of co5rse c5rrently

2orking o5t challenging strategies e8en as ;/ 7ercent of their 9assi8e e97loyee

strength has 42in4le4 in the 2ake of the s5ccessf5l <ol5ntary Retire9ent Sche9es*<RS+ sche9es)

The 7ri8ate 7layers ho2e8er cannot 9atch the PSBs great reach, great sie an4 access

to lo2 cost 4e7osits) Therefore one of the 9eans for the9 to co93at the PSBs has 3een

thro5gh the 9erger an4 ac:5isition *$C A+ ro5te) O8er the last t2o years, the in45stry

has 2itnesse4 se8eral s5ch instances) For instance, &%F! Banks 9erger 2ith Ti9es

Bank I!I!I Banks ac:5isition of IT! !lassic, Anagra9 Finance an4 Bank of $a45ra)

!ent5rion Bank, In45sin4 Bank, Bank of P5n1a3, <ysya Bank are sai4 to 3e on the

looko5t) The #TI 3ank- lo3al Tr5st Bank 9erger ho2e8er o7ene4 a 7an4oras 3o6 an4

3ro5ght a3o5t the realiation that all 2as not 2ell in the f5nctioning of 9any of the

7ri8ate sector 3anks)





Pri8ate sector Banks ha8e 7ioneere4 internet 3anking, 7hone 3anking, any2here

3anking, 9o3ile 3anking, 4e3it car4s, A5to9atic Teller $achines *AT$s+ an4

co93ine4 8ario5s other ser8ices an4 integrate4 the9 into the 9ainstrea9 3anking arena,

2hile the PSBs are still gra77ling 2ith 4isgr5ntle4 e97loyees in the after9ath of

s5ccessf5l <RS sche9es) Also, follo2ing In4ias co99it9ent to the 'TO agree9ent in

res7ect of the ser8ices sector, foreign 3anks, incl54ing 3oth ne2 an4 the e6isting ones,

ha8e 3een 7er9itte4 to o7en 57 to 0; 3ranches a year 2ith effect fro9 0DD-DD as

against the earlier sti75lation of 3ranches)

Talks of go8ern9ent 4il5ting their e:5ity fro9 >0 7ercent to ?? 7ercent in No8e93er

;/// has also o7ene4 57 a ne2 o77ort5nity for the takeo8er of e8en the PSBs) The F%I

r5les 3eing 9ore rationalie4 in 0FY/; 9ay also 7a8e the 2ay for foreign 3anks

taking the $C A ro5te to ac:5ire 2illing In4ian 7artners)

$ean2hile the econo9ic an4 cor7orate sector slo24o2n has le4 to an increasing

n593er of 3anks foc5sing on the retail seg9ent) $any of the9 are also entering the ne2

8istas of Ins5rance) Banks 2ith their 7heno9enal reach an4 a reg5lar interface 2ith the

retail in8estor are the 3est 7lace4 to enter into the ins5rance sector) Banks in In4ia ha8e

3een allo2e4 to 7ro8i4e fee-3ase4 ins5rance ser8ices 2itho5t risk 7artici7ation, in8est inan ins5rance co97any for 7ro8i4ing infrastr5ct5re an4 ser8ices s577ort an4 set 57 of a

se7arate 1oint-8ent5re ins5rance co97any 2ith risk 7artici7ation)

%P C !ONTRIB#TION OF SER<I!E SE!TOR TO T&E %P

The In)ia GDP is the c5l9ination of all the 4ifferential factors that contri35tes to the

econo9y of In4ia) In4ia %P reflects a consoli4ate4 re7ort of the 7erfor9ance of the

In4ian econo9y) The In4ian ross %o9estic Pro45ct is 4eter9ine4 either 3y Gcost

factorG or Gact5al 7riceG 9etho4) The gro2th of In4ia %P es7ecially, after the 0DD/s 2as

the effect of o7ening-57 of In4ian econo9y) This 7ara4ig9 shift of In4ian econo9y

occ5rre4 in the 2ake of 3alance-of-7ay9ents crisis in the 0D/s) The o8ern9ent of

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ?D




In4ia o7ene4 57 In4ian 9arkets to facilitate entry of 7ri8ate in8est9ents into the In4ian

9arkets)

This change in In4ian econo9ic 7olicy, fro9 a highly ins5late4 9arket to an o7en

9arket facilitate4 inflo2 of foreign 4irect in8est9ent *F%I+ an4 foreign instit5tional

in8estor *FII+) A goo4 n593er of o8ern9ent of In4ia 5n4ertakings 2ere 4i8este4 to

7ri8ate 35siness ho5se)

The 7erio4 after the 0DD/s 2itnesse4 s544en incre9ental gro2th of the ann5al a8erage

gross 4o9estic 7ro45ct of the In4ian econo9y an4 till then it 5se4 to 3e aro5n4 .)>M to

>M) 'ith the 9eteoritic rise of In4ian Infor9ation Technology, In4ian ser8ice in45stry

an4 the In4ian BPO sector, the a8erage In4ian %P skyrockete4 to aro5n4 @M, 45ring

the 7erio4 fro9 0D to ;//?) Fro9 the financial year ;//. on2ar4s the a8erage gross

4o9estic 7ro45ct of In4ia Gat cost factorG reflecte4 a sta3le gro2th) This 7erio4 9arks the

9eteoritic rise of gross 4o9estic 7ro45ct of In4ia an4 this rise 2as affecte4 3y ser8ice

an4 9an5fact5ring in45stry) The In4ian %P registere4 an i97ressi8e gro2th rate of

)>M 45ring this 7erio4 an4 the 7resent gro2th target is sec5re4 at D)>M to 0/ M)

The latest scenario of In4ian gross 4o9estic 7ro45ct factor is 95ch higher than the

2orl4Gs ann5al a8erage %P of >)>M) 'ith s5ch rate of econo9ic gro2th, the In4ian

econo9y is 7oise4 to 3eco9e the secon4 largest econo9y after !hina in the year ;/>/)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ./




R!$pon$! of -an3$

Large sco7e in retailJ Share of organise4 retailJ #SA >M, Thailan4 ./M, Brail?@M, !hina ;/M, In4ia >M)

Large sco7e for financing ser8ices sector

In4 Agl Ser8ice

Bank !re4it %P *M+ @>)/ 00)/ 0.)/

Share in %P *M+ ;0) ;;)0 >@)0

R5ral In4ia financing o77ort5nities for 3anks) Strategies to ta7 r5ral c5sto9ersJ

A recent s5r8ey sho2s that >?M of F$! sales C >DM of cons59er 45ra3les

are in r5ral areas) Of the ; 9n BSNL 9o3ile connections, >/M 2ent to s9all

to2ns an4 8illages)

A(( Sc"!)%(!) Co**!rcia( -an3$

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ .0




C"anin Mar3!# S"ar! of -an3$ 45

P%1(ic S!c#or OSC- For!in -an3$

D!po$i#$ 8;;< 9<.<8 =.;< .<

D!po$i#$ >::= <.> 8;.> <.@

A),anc!$ 8;;< 9<.== =.98 .<@

A),anc!$>::=

@.>< >:.> =.<8

CASA DEPOSITS

!ASA %EPOSITS or c5rrent acco5nt an4 sa8ings acco5nt 4e7osits of large 753licsector 3anks ha8e fallen 45ring the financial year ;//-/D, accor4ing to a re7ort

a77earing in the “B5siness Stan4ar4" 4ate4 $ay 0;, ;//D *internet e4ition+) This has

co9e a3o5t 3eca5se 4e7ositors 9o8e4 a 7art of their !ASA 3alances to ter9 4e7osits

*or fi6e4 4e7osits, as the co99on 9an calls it+ 2hich 2ere re2ar4e4 2ith a higher rate

of interest 3y the 3anks for a 9a1or 7art of the year)

'here 4o 7ri8ate 3anks stan4 8is-a-8is !ASA 4e7ositsV I!I!I Bank sa2 its !ASA

4e7osits gro2 3eca5se its !ASA hol4ers staye4 a2ay fro9 the 9ore l5crati8e 35lk

4e7osits) Any2ay, the 3ank itself 4i4 not raise high-cost 35lk 4e7osits) In the case of

&%F! 3ank, !ASA 4e7osits as a 7ro7ortion of total 4e7osits fell not 3eca5se !ASA

4e7osits fell as s5ch 35t 3eca5se cor7orates like Reliance Po2er 7arke4 2ith it the f5n4s

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ .;




9o3ilise4 3y the9 thro5gh initial 753lic offers *IPOs+ 45ring the last :5arter of ;//-

/) Th5s, the 4eno9inator, 8i), total 4e7osits rose, 2hich le4 to a re45ce4 :5otient)

A9ongst the lea4ing 753lic sector 3anks, the fall of !ASA 4e7osits as a 7ro7ortion of

total 4e7osits 2as the highest in the case of Bank of In4ia *> 7er cent+ follo2e4 3y

#nion Bank of In4ia an4 State Bank of In4ia *. 7er cent each+) For !entral Bank of

In4ia, the fall 2as only ;) 7er cent 2hile for Bank of Baro4a, it 2as only 0)0? 7er

cent)

As regar4s 7ri8ate 7layers, the fall 2as 0/)> 7er cent for &%F! Bank, follo2e4 3y A6is

Bank *? 7er cent+ ) I!I!I Bank on the other han4, sa2 its !ASA ratio rise 3y ;)? 7er

cent)

This is 3a4 ne2s for 3anks gi8en that !ASA 3alances re7resent the chea7est so5rce of

2orking ca7ital for the9) As 2e at $erine2s ha8e 3een highlighting, the interest

allo2e4 on sa8ings 3ank acco5nts is 95ch, 95ch lo2er than the ostensi3le ?)> 7er cent)

'hen there is a significant ga7 3et2een the SB interest rate of ?)> 7ercent an4 e8en a @

or 0;-9onth ter9 4e7osit rate, it is 35t nat5ral for the SB acco5nt hol4er to 9o8e a 3ig

ch5nk of the 3alance in the SB acco5nt to the @ or 0;-9onth ter9 4e7osit acco5nt) The

SB interest rate is a49inistere4 *in other 2or4s, the 3anks cannot ta97er 2ith it+ an4hence they cannot 3e 2holly 3la9e4 for kee7ing the SB interest rate at s5ch a 9easly

le8el)

It is for the RBI to raise the a49inistere4 SB interest rate 3y s5ch an e6tent that the

4e7ositors are not te97te4 to 9o8e their 3alances fro9 SB acco5nts to @ or 0;-9onth

ter9 4e7osit acco5nts) By 4oing so, the RBI 2ill 3e hel7ing the 3anks to i97ro8e the

7ro7ortion of their !ASA 4e7osits an4 to access chea7er 2orking ca7ital) Their net

interest 9argin 2ill i97ro8e too) The 4e7ositors 2ill not 3e incline4 to 9o8e their

3alances fro9 SB acco5nts at the 4ro7 of a hat gi8en that SB 4e7osits are 4e9an4

4e7osits an4 any 4ay, they are 9ore li:5i4 than the ter9 4e7osits 2hich 2ill inflict a

loss on the 4e7ositors in case of 7re9at5re 2ith4ra2al)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ .?




If the cash-rich cor7orates 4eser8e s53-PLR loans, the ha7less SB acco5nt hol4ers

4efinitely 4eser8e at least a 4ecent ret5rn on their 7recio5s sa8ings) By hel7ing the SB

acco5nt hol4ers, the RBI an4 the 3anks 2ill 3e hel7ing the9sel8es) Again if the cash-

rich 3anks 4eser8e ?);> 7er cent 3y 2ay of interest on the s5r7l5s they 7ark 2ith the

RBI thro5gh the re8erse re7o 2in4o2, the ha7less SB acco5nt hol4ers 4efinitely 4eser8e

9ore than ?)> 7er cent) P53lic sector 3anks in the co5ntry ha8e note4 a sli4e in their

c5rrent an4 sa8ings acco5nt *!ASA+ 4e7osits 45ring the ongoing fiscal) A 4ro7 in

3ankGs !ASA 4e7osits 9eans that is has to 7ay an increase4 cost in the for9 of higher

interest gi8en on their 7ri9ary 4e7osits)

In4iaGs largest len4er, State Bank of In4ia *SBI+ sa2 a 4i7 in its !ASA 4e7osits fro9

.?)0M in $arch ;// to ?D)M)

E8en P5n1a3 National BankGs !ASA 4e7osits of lia3ility 4ro77e4 to ?DM fro9 .?M

45ring this 7erio4) A senior official fro9 PNB sai4 that an increase in the high cost

4e7osits 3eco9es a 2orrying factor as it re45ces the 7rofit 9argin of the 3anks) It is

9ore so no2 as the 3anking in45stry is face4 2ith a to5gh challenge in the 2ake of the

colla7se of the glo3al financial sector, he sai4)

In fact s9aller 7layers of the 753lic sector 3anking in45stry like P5n1a3 an4 Sin4 Bank,!or7oration Bank, <i1aya Bank an4 %ena Bank are affecte4 9ore 3y the 9elt4o2n) The

!ASA 4e7osits of P5n1a3 an4 Sin4 Bank has 4ecline4 fro9 ?@)?.M in $arch ;// to

?0)?>M) Si9ilarly !or7oration Bank also note4 a 4eclining !ASA 4e7osits fro9 ?>M in

$arch ;// to ;>)..M in Se7te93er)

The official a44e4 that stronger 7layers are so9eho2 a3le to 9anage this fall 35t it has

3een har4 for the s9aller ones to 9ake their stan4) In PS# 3anks !ASA 4e7osits, there

has 3een a 8ery 9eager 4i7 fro9 2hat it 2as in $arch, the official sai4)

The finance 9inistry has 3een constantly e97hasiing on the nee4 for 3anks to foc5s on

their !ASA 4e7osits) Earlier in A5g5st 3anks 2ere 5rge4 3y the finance 9inister to

increase their c5rrent acco5nt, sa8ings acco5nt *!ASA+ 4e7osits to ./M of the total

4e7osits)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ ..




MAOR CHANGES IN THE LAST TEN 'EARS 48;;;6>::;5

In the last 4eca4e the financial 9arkets of In4ia shot 57 5ne67ecte4ly) Since 0DD/ e8ery

other state go8ern9ent took 9a1or ste7s in refor9ing the financial sector of their

res7ecti8e states) I97ortant sections s5ch as financial 9arkets, reg5lators, 3anking

syste9s, non- 3anking financial co97anies, ca7ital 9arkets, 95t5al f5n4s C

consoli4ation i97erati8es 2ere han4le4 2ith a7t 9at5rity) In case of financial 9arkets

7ri8ate sector instit5tions 7laye4 an i97ortant role) They gre2 ra7i4ly in co99ercial

3anking an4 asset 9anage9ent 35siness) 'ith the o7enings of ins5rance co97etition

arose 2hich gra45ally hel7e4 re45ce the interest rates) Reg5lators s5ch as the reser8e

3ank of In4ia 3eca9e 9ore in4e7en4ent an4 the ins5rance reg5latory an4 4e8elo79ent

a5thority 3eca9e 9ore i97ortant instit5tions) P53lic Sector Banks still 4o9inate the

co99ercial 3anking syste9 2ith their shares 3eing enliste4 in the stock 9arkets) !a7ital

$arkets acti8ely 3ring in c5sto9ers to tra4e in stocks an4 3on4s an4 2ith theintro45ction of 8ario5s 95t5al f5n4 sche9es 9ore in8est9ents on 4ifferent assets are

3eing 9a4e there3y 9aking the reg5lation of finances all the 9ore con8enient)

As of to4ay *;//+, Banking Ser8ices in In4ia is generally fair C 9at5re in ter9s of

s577ly, tho5gh reach in r5ral In4ia still re9ains a challenge for 7ri8ate sector C foreign

3anks) In ter9s of :5ality of assets C ca7ital a4e:5acy, In4ian 3anks are e67ecte4 to

ha8e clean 3alance sheets co97are4 to other foreign or 7ri8ate 3anks) The state4 7olicy

of the Bank on the In4ian R57ee is to 9anage 8olatility 35t 2itho5t any fi6e4 e6change

rate-an4 this has 9ostly 3een tr5e) The state4 7olicy of the Bank on the In4ian R57ee is

to 9anage 8olatility 35t 2itho5t any fi6e4 e6change rate) 'ith the gro2th in the In4ian

econo9y e67ecte4 to 3e strong for :5ite so9e ti9e-es7ecially in its ser8ices sector-the

4e9an4 for 3anking ser8ices, es7ecially retail 3anking, 9ortgages an4 in8est9ent

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ .>




ser8ices are e67ecte4 to 3e strong) !5rrently, In4ia has sche45le4 co99ercial 3anks,

; 753lic sector 3anks, ;D 7ri8ate 3anks C ?0 foreign 3anks) This 15st sho2s as to ho2

far the In4ian Banking Ser8ices ha8e i97ro8e4 since its creation)

COMPANIES ?ALUATION

PUNA- NATIONAL -ANK P5n1a3 National Bank 2ith its ..D offices is the largest nationalie4 3ank an4 is

ser8ing ?)> crore c5sto9ers) PNB is ranke4 as 0D/th a9ong 'orl4s To7 financial

Bran4s ;//D 3y T&E BANKER an4 has a total 35siness of Rs ??; crores an4 a

YOY gro2th of ??)?M )To4ay PNB is the 0st nationalie4 3ank in In4ia to ha8e all

3ranches net2orke4 on !BS, there 3y 9aking a8aila3le the facility of one 3ank-one ac

across the co5ntry to its c5sto9ers)

KE' HIGHLIGHTS

• 00. years of so5n4 an4 7r54ent 3anking

• E6tensi8e c5sto9er 3ase of ?9illion

• Secon4 largest 3ranch net2ork 2hich facilitates a strong 7an In4ia 7resence

thro5gh ..D 3ranches

• ;?r4 of PNB 3ranch net2ork is in r5ral an4 se9i-5r3an areas, gi8ing it an

5n7arallele4 reach in less 3anke4 locations

• PNB is the ?r4 largest 3ank in In4ia , constit5ting aro5n4 >);M of the total

35siness 4one 3y sche45le4 co99ercial 3anks)

• Acco5nts for a3o5t 0)0M of the total 3anking 35siness in the rich an4 fertile

Northern, In4o-angetic 3elt

M!r!r$ an) ac%i$i#ion$

• 0D./J PNB a3sor3e4 Bhag2an %ass Bank, a sche45le4 3ank locate4 in %elhi

circle)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ .@




• 0D>0J PNB ac:5ire4 the ?D 3ranches of Bharat Bank *est) 0D.;+ Bharat Bank

3eca9e Bharat Ni4hi Lt4)

• 0D@0J PNB ac:5ire4 #ni8ersal Bank of In4ia)

• 0D@/sJ PNB a9alga9ate4 In4o !o99ercial Bank *est) 0D??+ in a resc5e)

• 0D@J PNB ac:5ire4 &in45stan !o99ercial Bank *est) 0D.?+ in a resc5e) The

ac:5isition a44e4 &in45stanGs 0.; 3ranches to PNBGs net2ork)

• 0DD?J PNB ac:5ire4 Ne2 Bank of In4ia, 2hich the OI ha4 nationalie4 in

0D/)

• ;//?J PNB took o8er Ne45nga4i Bank, the ol4est 7ri8ate sector 3ank in Kerala)

SHARE PRICE OF PN- 4>::>6>::;5

PRICE MOVEMENT

!

"

#

$

%

&

'

A p r i l " "

( u l y "

"

O c t o ) e r " "

( a n u a r y " #

A p r i l " #

( u l y "

#

O c t o ) e r " #

( a n u a r y " $

A p r i l " $

( u l y "

$

O c t o ) e r " $

( a n u a r y " %

A p r i l " %

( u l y "

%

O c t o ) e r " %

( a n u a r y " &

A p r i l " &

( u l y "

&

O c t o ) e r " &

( a n u a r y " '

A p r i l " '

( u l y "

'

O c t o ) e r " '

( a n u a r y " *

A p r i l " *

( u l y "

*

O c t o ) e r " *

( a n u a r y " +

MONTHS

R U P E E S

PRICE MO?EMENT

• In a7ril ;//; the 7rice 2as ./ Rs 2hich 1597e4 57 to ;)D Rs till %ece93er

;//;

• The year ;//? sa2 tre9en4o5s gro2th in share 7rice an4 the 7rice in %ece93er

;//? 2as ;.0)?> Rs





• Stock 7rices follo2e4 a rally till %ece93er ;//. an4 the 7rices f5rther 2ent 57

to ./> Rs

• The year ;//> sa2 a 4o2nt5rn an4 the 7rice as on %ece93er ;//> 2as .@@

•

Since the year ;//@ the 7rices ha8e ke7t fl5ct5ating 3et2een .// an4 @// Rs an4the 7rice as on 9arch ;//D 2as .00)

ICICI -ANK

I!I!I Bank starte4 as a 2holly o2ne4 s53si4iary of I!I!I Li9ite4, an In4ian financial

instit5tion, in 0DD.) Fo5r years later, 2hen the co97any offere4 I!I!I BankGs shares to

the 753lic, I!I!IGs sharehol4ing 2as re45ce4 to .@M) In the year ;///, I!I!I Bank

offere4 9a4e an e:5ity offering in the for9 of A%Rs on the Ne2 York Stock E6change

*NYSE+, there3y 3eco9ing the first In4ian co97any an4 the first 3ank or financial

instit5tion fro9 non-a7an Asia to 3e liste4 on the NYSE) In the ne6t year, it ac:5ire4

the Bank of $a45ra Li9ite4 in an all-stock a9alga9ation) Later in the year an4 the ne6t

fiscal year, the 3ank 9a4e secon4ary 9arket sales to instit5tional in8estors)

'ith a change in the cor7orate str5ct5re an4 the 3544ing co97etition in the In4ian

Banking in45stry, the 9anage9ent of 3oth I!I!I an4 I!I!I Bank 2ere of the o7inion

that a 9erger 3et2een the t2o entities 2o5l4 7ro8e to 3e an essential ste7) It 2as in

;//0 that the Boar4s of %irectors of I!I!I an4 I!I!I Bank sanctione4 the a9alga9ation

of I!I!I an4 t2o of its 2holly-o2ne4 retail finance s53si4iaries, I!I!I Personal

Financial Ser8ices Li9ite4 an4 I!I!I !a7ital Ser8ices Li9ite4, 2ith I!I!I Bank) In the

follo2ing year, the 9erger 2as a77ro8e4 3y its sharehol4ers, the &igh !o5rt of 51arat

at Ah9e4a3a4 as 2ell as the &igh !o5rt of 54icat5re at $593ai an4 the Reser8e Bank

of In4ia)

Presently I!I!I Bank has its e:5ity shares liste4 in In4ia on Bo93ay Stock E6change

an4 the National Stock E6change of In4ia Li9ite4) O8erseas, its A9erican %e7ositary

Recei7ts *A%Rs+ are liste4 on the Ne2 York Stock E6change *NYSE+) As of %ece93er





?0, ;//, I!I!I is In4iaGs secon4-largest 3ank, 3oasting an asset 8al5e of Rs) ?,..)0/

3illion an4 7rofit after ta6 Rs) ?/)0. 3illion, for the nine 9onths, that en4e4 on

%ece93er ?0, ;//)

MERGERS AND ACJUISITIONS

• ;//0- BANK OF $A%#RA LT%

• ;//;- I!I!I LT% , STAN%AR% !&ARTERE% RIN%LAY -;, !#STO$ER

ASSET

• ;//.- A!!O#NT SOL#TIONS RO#P LL!

• ;//>- I<ESTITSIONNO- KRE%ITNY BANK , RE< IT SYSTE$S P<T LT%

• ;//- BP$ IN! , SANLI BANK LT% , RA%IANT RESEAR!& IN!, $E%

ASSIST IN!, <A TE!& 'ABA LT% OF IN%IA

• ;//- $ALLIN!KRO%T BAKER IN!

• ;//D- B#RRPL SOFT'ARE-LO!AL INFO B#S

SHARE PRICE OF ICICI -ANK 4>::86>::;5

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ .D




PRICE MOVEMENT

"

$

&

*

!!"

!$

A p

r i l " !

A u g u s t "

!

, e c e m ) e r

" !

A p

r i l " "

A u g u s t "

"

, e c e m ) e r

" "

A p

r i l " #

A u g u s t "

#

, e c e m ) e r

" #

A p

r i l " $

A u g u s t "

$

, e c e m ) e r

" $

A p

r i l " %

A u g u s t "

%

, e c e m ) e r

" %

A p

r i l " &

A u g u s t "

&

, e c e m ) e r

" &

A p

r i l " '

A u g u s t "

'

, e c e m ) e r

" '

A p

r i l " *

A u g u s t "

*

, e c e m ) e r

" *

MONTHS

R U P E E S

PRICE MO?EMENT

• The 7rice as on A7ril ;//0 2as 0D;)> Rs 2hich ca9e 4o2n 4rastically 57to

Rs as on %ece93er ;//0

• The year ;//; 2as goo4 for the 3ank an4 the 7rices 2ent 57 to Rs 0./ as on

%ece93er ;//;

• ;//? 2as a 35llish year an4 the 7rice 2as Rs ;D@ as on %ece93er ;//?

• The stock 7rices contin5o5sly 2ere on the 577er si4e in the years ;//. an4 ;//>

an4 the 7rice as on %ece93er ;//> 2as >> Rs

• The stock 7rice 4rastically 2ent 57 to Rs D/ in the year ;//@

• The stock reache4 a (if! #i*! "i" pric! of Rs 0;> in Octo3er ;//

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ >/




• Since 9arch ;// the 4o2nt5rn for the stock has starte4) The years ;// an4

;//D 2ere 4isastro5s an4 the 7rice as on 9arch ;//D 2as 9ere Rs ??;)

HDFC -ANK

&o5sing %e8elo79ent Finance !or7oration Li9ite4, 9ore 7o75larly kno2n as &%F!

Bank Lt4, 2as esta3lishe4 in the year 0DD., as a 7art of the li3eraliation of the In4ian

Banking In45stry 3y Reser8e Bank of In4ia *RBI+) It 2as one of the first 3anks to

recei8e an Gin 7rinci7leG a77ro8al fro9 RBI, for setting 57 a 3ank in the 7ri8ate sector)

The 3ank 2as incor7orate4 2ith the na9e G&%F! Bank Li9ite4G, 2ith its registere4office in $593ai) The follo2ing year, it starte4 its o7erations as a Sche45le4

!o99ercial Bank) To4ay, the 3ank 3oasts of as 9any as 0.0; 3ranches an4 o8er ?;>

AT$s across In4ia) This 3ank set 57 in 7ri8ate sector has its registere4 office in

$593ai) 0D). 7ercent of this 3ankGs shares are hel4 3y &%F! gro57, 0)@ 7ercent in

A%S *A9erican 4e7ository shares+, ; 7ercent 3y FIIs *foreign instit5tional in8estors+

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ >0




an4 re9aining ?> 7ercent 3y >/,/// sharehol4ers) A%S hel4 3y &%F! Bank are liste4

in Ne2 York Stock E6change) Asset 2orth of &%F! Bank, as on $arch ;//, 2as

aro5n4 ;0)/D 3illion) Sales in that s7ecifie4 ti9e a9o5nte4 to a3o5t 0)D@ 3illion an4

7rofits 2orth /); 3illion 2ere generate4)

A*a(a*a#ion$

In ;//;, &%F! Bank 2itnesse4 its 9erger 2ith Ti9es Bank Li9ite4 *a 7ri8ate sector

3ank 7ro9ote4 3y Bennett, !ole9an C !o) Ti9es ro57+) 'ith this, &%F! an4

Ti9es 3eca9e the first t2o 7ri8ate 3anks in the Ne2 eneration Pri8ate Sector Banks to

ha8e gone thro5gh a 9erger) In ;//, RBI a77ro8e4 the a9alga9ation of !ent5rion

Bank of P5n1a3 2ith &%F! Bank) 'ith this, the %e7osits of the 9erge4 entity 3eca9e

Rs) 0,;;,/// crore, 2hile the A48ances 2ere Rs) D,/// crore an4 Balance Sheet sie

2as Rs) 0,@?,/// crore)

SHARE PRICE OF HDFC -ANK 4>::86>::;5

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ >;




PRICE MOVEMENT

"$&*

!!"!$

!&!*"

A p r i l "

!

A u g u s

t "

!

, e c e m )

e r " !

A p r i l "

"

A u g u s

t "

"

, e c e m )

e r " "

A p r i l "

#

A u g u s

t "

#

, e c e m )

e r " #

A p r i l "

$

A u g u s

t "

$

, e c e m )

e r " $

A p r i l "

%

A u g u s

t "

%

, e c e m )

e r " %

A p r i l "

&

A u g u s

t "

&

, e c e m )

e r " &

A p r i l "

'

A u g u s

t " '

, e c e m )

e r " '

A p r i l "

*

A u g u s

t "

*

, e c e m )

e r " *

MONTH

R U P E E S

PRICE MO?EMENTS

• In a7ril ;//0 the 7rice of the stock 2as Rs ;;; 2hich re9aine4 aro5n4 the sa9e

le8el till %ece93er ;//;

• Since an5ary ;//? the stock starte4 catching 9o9ent59 an4 it 2ent 57 fro9 Rs

;? in an5ary to Rs ?@ in %ece93er

• The year ;//. 2as a year of 9o4erate 7erfor9ance an4 the 7rice as on

%ece93er ;//. 2as Rs >0)>

• The year ;//> an4 ;//@ 2ere a rally an4 the 7rices shot 57 on the stock

e6change an4 the 7rice as on %ece93er ;//@ 2as Rs 0//

• The stock 7rice reache4 a life ti9e high of Rs 0; in %ece93er ;//

• Since an5ary ;// the 7rices fell constantly an4 the 7rice as on 9arch ;//D

2as Rs D@)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ >?




RELATI?E ?ALUATION

FACTORS PN- -ANK ICICI -ANK HDFC -ANK

PE RATIO @)?> ;/).0 ;)/?

PRI!EBOOK <AL#E 0). 0).0 ;)D

ROE ;?)> 0). 0>)?;

ROA*M+ 0).. /)/ 0).;

NET NPA RATIO /)0M 0)D>M /)@/M

EPS*RS+*ANN#ALISE%+ D)/? ??) >;)

%I<I%EN%S&ARE*Rs+ ;/ 00 0/

PAYO#T RATIO ;?)@ ?.);. ;;)0@

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ >.




CONCLUSION

Financial Syste9 is the 9ost i97ortant instit5tional an4 f5nctional 8ehicle for

econo9ic transfor9ation of any co5ntry) Banking sector is reckone4 as a h53 an4

3aro9eter of the financial syste9) As a 7illar of the econo9y, this sector 7lays a

7re4o9inant role in the econo9ic 4e8elo79ent of the co5ntry) The geogra7hical

7er8asi8eness of the 3ank co57le4 2ith the range an4 4e7th of their ser8ices 9ake

the syste9 an in4is7ensa3le 9e4i59 in e8ery 4ay transactions) The 8irt5al

9ono7oly of 3anks in =Pay9ent $echanis9G to5ches the li8es of 9illions of 7eo7le

e8ery 4ay an4 e8ery 2here) Th5s the 3anking sector has 3een 7laying a significant

role as gro2th facilitator)

T$e #$anin +a"a!im *f Ban/in

Change is the only constant factor in this 4yna9ic 2orl4 an4 3anking is not an

e6ce7tion) The changes staring in the face of 3ankers relates to the f5n4a9ental 2ay

of 3anking-2hich is 5n4ergoing ra7i4 transfor9ation in the 2orl4 of to4ay, in

res7onse to the forces of co97letion 7ro45cti8ity an4 efficiency of o7erations,

re45ce4 o7erating 9argins 3etter assetlia3ility 9anage9ent, risk 9anage9ent, any

ti9e an4 any 2here 3anking) The 9a1or challenge face4 3y 3anks to4ay is to 7rotect

the falling 9argins 45e to the i97act of co97etition) Another significant i97act of

3anks to4ay is the technology iss5e) There is an i97erati8e nee4 for not 9ere

technology 57 gra4ation 35t also its integration 2ith the general 2ay of f5nctioning

of 3anks to gi8e the9 an e4ge in res7ect of ser8ices 7ro8i4e4 to o7ti9iing the 5se

of f5n4s an4 35il4ing 57 $IS for 4ecision 9aking an4 3etter 9anage9ent of assets

an4 lia3ilities an4 risk ass59e4 2hich in t5rns ha8e a 4irect i97act on the 3alance

sheet of 3anks as a 2hole) 'orl4 o8er, technology has 4e9onstrate4 7otential to

change 9etho4s of selling 9arketing, a48ertising, 4esigning, 7ricing an4 4istri35ting

financial 7ro45cts of an electronic, self-ser8ice 7ro45ct 4eli8ery channel) All these

changes call for a ne2, 9ore 4yna9ic, aggressi8e an4 challenging 2ork c5lt5re to

9eet the 4e9an4s of c5sto9er relationshi7s, 7ro45ct 4ifferentiation, 3ran4 8al5es,

re75tation, cor7orate go8ernance an4 reg5latory 7rescri7tions)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ >>




($allenes fa#in In!ian 0an/in

The 9ain challenges facing 3y In4ian 3anking are the role of financial

instr59entation in 4ifferent 7hases of the 35siness cycle, the e9erging co975lsions

of the ne2 7r54ential nor9s an4 3ench9arking the In4ian financial syste9 against

international stan4ar4s an4 3est 7ractices) The nee4 for intro45ction of ne2

technology in the 3anking an4 the i97ortance of skill 35il4ing an4 intellect5al

ca7ital for9ation in the 3anking in45stry are also e:5al i97ortant)

(*n#lusi*ns

The In4ian 3anking in45stry is facing ne2er challenges in ter9s of narro2ing

s7rea4s, ne2 3anking 7ro45cts an4 7layers an4 9ergers an4 ac:5isitions) A4o7tion

of risk 9anage9ent tools an4 ne2 infor9ation technology is no2 no 9ore a choice

35t a 35siness co975lsion) Technology 7ro45ct inno8ation, so7histicate4 risk

9anage9ent syste9s, generation of ne2 inco9e strea9s, B5il4ing 35siness 8ol59es

an4 cost efficiency 2ill 3e the key to s5ccess of the 3anks in the ne2 era) In the

7resent en8iron9ent 2here change is in8isi3le, it is not eno5gh if 3ank change 2ith

the change, 35t they ha8e to change 3efore the change) They sho5l4 7ercei8e 2hat

c5sto9er 2ant an4 accor4ingly str5ct5re their 7ro45ct an4 ser8ices)

N.L.Dalmia Institute Of Manaement Stu!ies An! Resea"#$ >@




In,!$#*!n# S#ra#!y

PUNA- NATIONAL -ANK

'e are NEUTRAL on the stock, at c5rrent 7rice of Rs @0. the stock is not a 8al5e 35y) 'e gi8e a HOLD rating to the stock)

One can consi4er 35ying the stock on e8ery fall fro9 here-on)

The stock looks a goo4 35y on 4ecline, an4 sho5l4 3e acc595late4 on e8ery le8el of

7rice re45ction, an4 reco99en4e4 as a goo4 35y for long ter9 in8est9ent horion)

ICICI -ANK

'e reco99en4 “SELL Rating on the stock, at c5rrent 9arket 7rice of Rs @; the

stock is tra4ing at PE of ;/)

!5rrent 8al5ations C In45stry scenario 4o not 15stify the 7rice) 'ith yiel4s e67ecte4

to rise in the near ter9 the 3anks 2o5l4 7ost treas5ry losses C cre4it gro2th fro9

I!I!I has slo2e4 4o2n to 95ch greater le8els as co97are4 to the in45stry a8erage)

The in8estors can consi4er 35ying the stock at re45ce4 le8els of 0/-0>M fro9

hereon)

HDFC -ANK

'e reco99en4 a SELL rating on the stock) At c5rrent 9arket 7rice of Rs)0?@ the

stock is tra4ing at PB< of ;)D C PE of ; , the stock looks o8er 8al5e4)





'e reco99en4 the in8estors to 4o a 7artial 7rofit 3ooking fro9 hereon C re-enter

the stock at lo2er le8els as the f5n4a9entals of the co97any are so5n4)

At e8ery 4ecline, 2e reco99en4 Acc595late the Stock)

$e4i59 to long ter9 8ie2 is 7ositi8e on the stock)

Pric!$ of #"! $#oc3$ *!n#ion!) a1o,! ar! a$ on 8:#" %(y :;.





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Analysis of Banking

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