Project Report Banking System in India

8/2/2019 Project Report Banking System in India

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Project Report "Banking System" in India

Introduction of Banking

Banking regulation Act, 1949, defines banking as accepting for the purpose of lending

or investment, of deposits of money from the public, repayable on demands or

otherwise and with draw able on demand by cheques, draft or order otherwise.

Functions of Commercial Banks :

1. To change cash for bank deposits and bank deposits for cash.2. To transfer bank deposits between individuals and or companies.3. To exchange deposits for bills of exchange, govt. bonds, the secured and

unsecured promises of trade and industrial units.4. To underwrite capital issues. They are also allowed to invest 5% of their

incremental deposit liabilities in shares and debentures in the primary and

secondary markets.

5. The lending or advancing of money either upon securities or without securities.6. The borrowing, raising or taking of money.7. The collecting and transmitting of money and securities.8. The buying and selling of foreign exchange including foreign bank notes.

Banking scene in India

The banking sector in India is passing through a period of structural change

under the combined impact of financial sector reforms, internal competition,

changes in regulations, new technology, global competitive pressure and fast

evolving strategic objectives of banks and their existing and potentialcompetitors. Until the last decade, banks were regarded largely as institutions rather

akin to public utilities. The market for banking services were oligopolies and

Centralized while the market place was regulated and banks were expected to receive

assured spreads over their cost of funds. This phenomenon, which was caricatured as

3-6-3 banking in the united states, meaning that banks accepted deposits at 3%, lent at

6%, and went home at 3 p.m. to play golf, was the result of the sheltered markets and

administrated prices for banking products. Existence of entry barriers for new banks

meant that competition was restricted to existing players, who often operated as a

cartel, even in areas where the freedom to price their products existed.

The market place began to change for banks in India as a result of reforms of the

financial sectors initiated in the current decade. On account of policy measures


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introduce to infuse greater competitive vitality in the system, the banking has entered

in to a competitive phase. Competition has emerged not only from within the banking

system but also from non-banking institutions. Lowering of entry barriers,

deregulation of interest rates and growing sophistication of customers have made

banking far less oligopolistic today. Introduction of capital adequacy and other

prudential norms, freedom granted to enter into new turfs and greater overlap offunctions between banks and non-banks have forced banks to get out of their cozy

little world and think of the future of the banking.

Emerging Environment of Banking in India

Full convertibility of rupee leading to free mobility of capital, which will mean virtual

collapse of the national borders for trade and capital flows.

Greater coordination between monetary, fiscal and exchanged rate policies for

achieving the goals of faster and sustainable economic growth, macro-economic

stability and export promotion.

Close integration of various financial markets such as money market, capital market

and forex market.

Removal of lowering of existing barriers of competitiveness, which are present today

in the form of quantitative instructions on certain imports protective custom duties,

reservation of certain utilities for the public sector.

Growing privatization and commercialization infrastructure sector.

Today, Banks customers are better informed, more sophisticated anddiscerning. They also have a wide choice to choose from various banks and non-bank

intermediaries. Their expectations are soaring. This is particularly true for banks

corporate clientele but also applies to customers from personal segment.

This is changing profile of customers call for a shift from product-based

approach to customers-based approach. A bank aiming at maximizing customer

value must, of necessity, plan for customized products. A combination of marketing

skills and state-of-the-art technology should enable to bank in maximizing its profits

through customer satisfaction.

In the next millennium banks will have to be more and more cautions aboutcustomer service, profitability, increased productivity, to keep face with changing

banking scenario. As banks in India prepare themselves for the millenium these are

the shifts in the paradigm they are likely to experience. The 21st century may see the


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dawn of DARWINIAN BANKING. Only the banks could fulfill the demands ofmarkets and changing items would survive and prosper.

A word about SBI card

SBI Segment : Small business credit card (SBI credit card)

Preamble :

Small business units, retail traders, artisans, village industries, small-scale

industrial units and tiny units, professionals and self employed persons etc.,contribute significantly to the growth of our economy.The entrepreneur himself

manages many of the units. Very often, these entrepreneurs complain of procedural

delay in sanctions and renewal of limits. They also find it difficult to cope with the

demands for audited balance sheet and other statements sought by the bank from time

to time for availing credit facilities. With a view to providing hassle free financialsupports to the above categories of entrepreneurs who have shown commitment to run

the unit successfully and who are dealing with the banks for last two years

satisfactorily, new and friendly credit product namely small business credit card

scheme is designed. Under the scheme, cumbersome procedural aspects relating to

reviews and renewals, submission of balance sheet, stock statements and other

statements are done with credit delivery made simple and easy.

Purpose :

To meet the credit requirements of small business units, industrial unit, retail trader,artisan, Small Scale Industry (SSI) and tiny units.

Eligibility :

A. Customers of the following segments with a satisfactory track record for the last

two years enjoying credit facilities.

Small industrial units (SSI and tiny units including artisans) Small retail traders (Under SBF) Professional and self employed persons Small business enterprise

B. Units who do not enjoy credit limit with us/other banks at present with excellent

performance and credential may be considered.

Quantum of loan :


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Loan up to Rs. 5 Lakh can be sanctioned to eligible persons.

Assessment :

The small business credit card limit can be fixed as follows :

For small business, retail trader etc. 20% of the annual turnover declared for taxpurpose or last twelve months turnover in the operative accounts, whichever is

higher.

In respect of parties with good track record, where sales tax returns are not available,

the credit limits may be decided taking into consideration the actual turnover in the

accounts during the last two years.

For professionals and self employed persons, 50% of their gross annual incomeas per IT return shall be considered as the limit for issuing the SBI credit card.

For small scale industrial units, tiny sector units the assessment norms invogue as per the Nayak Committee recommendations would continue.

Validity :

Credit card limit will be valid for a period of three years, subject to satisfactoryconduct of the accounts.

Annual review will be done based on conduct/operations of the A/cs. A majorportion of the sales turnover should have been routed through the accounts as

revealed by the credit summations.

Repayment :

The working capital advance may be continued subject to that review everyyear provided the credit summations in the account is not less than 50% of the

projected sales turnover. If the credit summations is less than 50% of projected

sales turnover. The outstanding as on the due date of review should be made

repayable in suitable monthly installments.

The term loan is repayable in suitable installments with in a maximum periodof five years.

In case of composite loans, only the term loan is repayable in installments up toa maximum period of five years.

Interest rate :

As per extent instructions issued from time to time relating the market segment.


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Refinance :

No refinance is to be claim from SIDBI

Security :

Primary : Hypothecation of the stock in trade receivables, machinery, office

equipment.

Collateral :

Under SSI-No collateral security as per existing guidelines of RBI.

User SBF :

Up to Rs. 25000/- No collateral security. Over Rs. 25000/- charge over movable/immovable property or third party

granted.

However, in case of the excellent track record, sanctioning authority may waive

collateral requirement.

Margins :

Up to Rs. 25000/- - NIL

Rs. 25001/- to Rs. 5,00,000/- - 20%

Documentation :

Documents as per extant instructions.

Credit Card - A Convenient Banking Product :

The credit card is a hassle free convenient banking product aimed at simplifyingthe credit delivery mechanism. Cumbersome procedural aspects relating to reviews

and renewals, submission of stock statement, balance sheet and other statements aredone away with. The credit limit will be worked as detail above.

Small business credit card

Card No. Name


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Account No. Tel. No. Limit Rs. Date of issue Valid upto .. (Branch Code)

Signature of the Brach Manager Card holders Photograph with signature

The borrower would be issued a photo card indicating sanctioned limit and validity of

the limit (sample card)

Insurance :

Fixed assets/stock pledged/hypothecated to the bank be fully insured at least tothe extent of the bank interests.

Bank may waive insurance of assets for equipment against the fire and otherrisk up to Rs.25000/-

Cover under credit guarantee scheme :

All eligible loan accounts sanctioned for small scale industries (other thanservices) would qualify for cover under CGTFSI scheme(presently the scheme has

been introduce in five circles on pilot basis viz. New Delhi, Chandigarh, Lucknow,

Patna & Hydrabad).

Operation :

Small business credit card accounts should be maintained in a separate ledger. Cheque book should be issued and marked as small business credit card

account.

Pass book should be issued for mall business credit card holders. Stock statement waived. Submission of audited balance sheet waived. Borrower would be issued a small business credit card with photograph

thereon. Cost of photograph to be borne by banks. IRAC norms would be applicable. Brief opinion report should be recorded. Marked inquiries should be made and

recorded in the opinion report and singed by the field officer/cash officer or

officers not below that rank.


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Units within a radius of 5 kilometers may be covered intensively for the issueof credit card. This condition may be waived for such of those units already in

the book of the branch.

Inspections :

Half-yearly inspection/monitoring to ensure the end user funds.Sanction :

Required loan may be sanctioned with in a week after receipt of detailedinformation.

Control return after sanction may be sent to next higher authority for approval .Scoring Model :

Loan would be sanctioned up to Rs. 5,00,000/- based on the simplified scoringmodel as given in annexure- II. Those who are scoring less than 60% would not

qualify for the loan.

Rationale :

New schemes for hassle free credit facilities to small borrower.Automatic Teller Machine (ATM)

An ATM (Automatic Teller Machine) card is useful to a card holder as it helps himto withdraw cash from banks even when they are closed. This can be done by

inserting the card in the ATM installed at various banks locations.

State Bank Cash Plus CARD

Signature Panel. Magnetic Stripe

Features of State Bank Cash Plus Card

State Bank Cash Plus Card having the 19 digit. Name of the card holders mention there on it. In case of State Bank Cash Plus Card, there is no expiry period but for the old

card, the date after which your card needs to be renewed is the last day of the

month indicated on your card.


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Signature panel on which you must sign as soon as youre your card. Itidentifies the card as your State Bank Card Plus Card.

The magnetic stripe, which contains encoded information. ATM card possess pincode which having the 4 digit.

Use of State Bank Cash Plus Card

We uses our State Bank Cash Plus Card for cash withdrawal from ATMs. We uses it for making the payments for purchase made at the merchant

establishments.

Significance of the Study

This study entitled comparative study of various credit schemes of SBI V/sother banks will be helpful for bankers to maintain customers service policy,for

customers while deciding their financing needs and also helpful for other researchers

for further research in the future.

SBI card provides customers with an option, in addition to the existing banking credit

facilities available. With an SBI card customers can enjoy hassle-free credit facilities.

This study would help us to know about the problems that are faced by the consumers

during transactions. It would also reveal the problems that are being faced by the bank

employees while dealing with customers and would also highlight the future prospect

of SBI card.

Review of Existing Literature :

It is very essential to know whether the study has already been conducted before. If

so, how and to what extent ? And because of this scholar has to go through all the

existing literature related to the study. SBI Card, very limited studies have been

conducted on the subject. Due to the time restrictions scholar could seek advice from

only the limited literature, which is available with the bank.

As the concept is completely under the control of various banks and RBI. So theinformation is directly taken from these sources.

Conceptualization

As the concept includes two terms i.e. cash credit or working capital loans and terms

loans. Therefore both the terms are taken into consideration in the proposed study.


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Due to the privatization of banking sector many big private players entered in this

sector giving a tough competition to the existing players. So, to face this stiff

competition all the public sector banks have to review their functioning. These aspects

will be given importance in this project report.

The concept of SBI card, question crops in mind what is a SBI card, What is itsshape and size, what is its function. A SBI card is nothing but a identity card

containing card holders photographs with signature, card no. Name, A/c No. limit,validity period, branch code with signature of Branch Manager.

Focus of the problem

The study has been conducted at SBI Bhiwani. The main focus of the study is

to know about customers perceptions about various credit schemes. As SBI

card is an integral part of SBF (small business financing). So the due

weightage is given to SBI card. This study has been conducted by classifying

customers into two categories.

SBI Card holders

Non SBI Card holders

Objective of the Study

To find out the market potential of SBI card in Bhiwani.

To know customers perceptions about various credit schemes of

different banks.

To compare the credit schemes of different banks.

To find out main obstacles while getting finance under various credit

schemes.


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Limitations of the study

The time was very limited as for requirement of study.

Taking Sample has carried out the study. Therefore, all the limitations

associated with sampling.

Sometimes the respondent does not want to disclose some relevant

information.

The information provided by the respondent may not be authentic.

The sample size was restricted to Bhiwani only.

CHAPTERISATIONThe Chapterisation of the project report is as following :

Chapter1 :

I have discussed about the relevance and importance about the

project. I have explained the topic with ATM facilities. Why this study

is required? What are the limitations? What are the objectives and

what are the steps I have adopted for doing this project.

Chapter2 :


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This study consists of the whole research methodology about the

project. It means what are the steps have been taken for doing this

study. How much the sample size and what are the variables? So this

study consist the complete research methodology. In this chapter the

profile of organisation has been also covered.

Chapter3 :

It consists the detail descriptions about the raw data. Here the

complete analysis of the data, which is collected from the primarysources. For tabulation the data is converted into the percentage and

after that it is tabulated. On the basis of this data the graph are

inserted. At last the conclusion is drawn on the basis of this data.

Chapter4 :

It consists the appendices part of the project report in this part I have

mentioned the names of all those books, magazines, journals and

web-sites from where I have collected the material comes under the

head of bibliography. It also consists the questionnaire, which is used

for collecting the data.


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Universe or survey population

All the customers availing credit schemes in Bhiwani is our universe while

the sample size is 50. The sample unit is individuals.

Criteria of selecting sample :

We are taking the sample on our convenience.

Sampling techniques :

Sampling techniques may be divided into two categories :

(1) Probability sampling :

Probability samples are characterized by the fact hat each element of

the population has known, non-zero chance of being included in the

sample.

(2) Non-probability sampling :

Non-probability sampling involves personal judgement somewhere in

the process. For the present study, convenient technique of sampling

(non-probability) was used.

Research Design

A research design is simply a plan for study in collection and analyzing the

data. It helps the researcher to conduct the study and ensure that economical

procedures are employed and probing is relevant to the problem. Depending

upon the objective of the study there is three-research design available : .


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Exploratory Research

Descriptive Research

Casual or Experimental Research

Data Collection :

There are two sorts of data available :

1. Primary Data :

Primary Data are those data which are collected to solve a problem or take

advantage of any opportunity on which a decision is depending. These data

are basically observe and recorded by the researcher for the first time used

primary data for my project work.

2. Secondary Data :

Secondary data are those data which are primarily collected by other person

for his own purpose.

Methods of Data Collection :

Observation Method

Questionnaire Method

Identified Independent and Dependent variables :

Independent variables :

All the external factors are independent variables :


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Govt. policy of RBI

Environmental factors

War

Technology

Natural Calamities

Dependent variables :

All the internal factors of organization are dependent variables :

Company policy

Infrastructure

Credit Schemes of SBI Bank and other

Banks

Table No. 1

Awareness level about various credit facilities

YES NO

46 04


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Most of the respondent are well awared about the credit facilities of

different Banks

Table No. 2

No. of respondents availing the credit facilities

YES NO

44 06

Most of the respondent are availing credit facilities from Banks.

Table No. 3

Distribution of Respondents availing the credit facilities from banks.

SBI PNB UCO IOB Others

18 14 04 06 02

Nearly 40% of the Respondents are availing credit facilities from SBI

followed by PNB.


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Table No. 4

Time since customers are availing credit facilities

More than 3 2 to 3 1 to 2 Less than One

10 16 14 04

Most of the respondents are availing the credit facilities ranging from 1 to 3

years.

Table No. 5

No. of satisfied customers

Yes No

32 12

Customers are highly satisfied with their banks.

Table No. 6


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Awareness level about various credit facilities of different banks

SBI PNB IOB UCO CANARA OBC

42 40 22 14 12 08

The credit facilities of SBI and PNB are well known to every respondent.

Table No. 7 (a)

Ranking of banks on the basis of interest rate


30 27 08 13 08 14

SBI and PNB are the most preferred banks in regard of interest rates.

Table No. 7 (b)

Ranking of banks on the basis of collateral security requirement


26 30 16 10 06 12


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Respondents are very much satisfied with SBI and PNB in respect of

collateral security requirement.

Table No. 7 (c)

Ranking of banks on the basis of attitude of the employees


28 27 20 8 10 07

Respondents appreciate the attitude of employees of the SBI, PNB and IOB.

Table No. 7 (d)

Ranking of banks on the basis of services


26 32 26 06 06 04

Respondents appreciate the level of services provided by SBI, PNB and IOB.

Table No. 7 (e)


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Ranking of banks on the basis of documents required


28 24 18 12 08 10

Customers are happy with the document requirement of SBI and PNB.

Table No. 7 (f)

Ranking of banks on the basis of renewal process


38 22 16 08 08 08

Customers are very much satisfied with the renewal process of SBI and tanks to SBI

card.


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Table No. 8

Main obstacle while getting finance

(a) (b) (c) (d) (e)

Security Document Red Guarantee Attidute of

Requirements Tapisam requirement Bank Employees

24 08 04 08 06

Security requirements are the main obstacle while availing any credit facility.

Table No. 9

Preference order of different parameters

(a) (b) (c) (d) (e) (f)

Interest Collateral Attitude of Services Document Validity

Rate Security Bank Emp. requirement

42 12 08 16 14 08

Customer prefer low interest rates followed by services.


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Table No. 10

Preference level of banks


56 24 10 04 04 02

More than half of the respondents prefer SBI followed by PNB.

Table No. 11

Awareness level of SBI Card

Yes No

38 12

A good awareness level is exist about SBI cards.

Table No. 12

Sources of information about SBI card

Friends Bank Employees Advertisement Publicity

06 22 04 06


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Most of the respondents gets information about SBI card from bank employees.


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Objective No. 1 :To find out the Market Potential of SBI card.

Most of the respondents covered in the survey know about the SBI card and feel that this

facility is beneficial to them as they can fix the limit for three years.

Respondents even require further guidance related to few things.

Customers feel very enthusiastic about the launch of SBI card in Bhiwani and very sure about

its success.

Most of the respondents want an increase in existing limit i.e. 5.00 lacs.

Objective No. 2 :To know customers perceptions about various credit schemes of different banks.

Most of the respondents like the credit facilities provided by SBI and PNB.

According to most of respondents, PNB is the fastest service provider. It takes only 15 days

to disburse the sanctioned loans whereas other banks including SBI takes 40 to 45 days.

PNB is offering the lowest PLR i.e. 11.25% whereas other banks are offering 11.5%.

Objective No. 3 :To find out main obstacle while getting finance under various credit schemes.

According to most of respondents, security and document requirement are the main

obstacles while getting finance under various credit schemes.

Suggestions

On the basis of data analysis and interpretations, the following suggestions can be made.


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RBI Should reduce the SLR and CRR to increase the credit creation capacity of the banks.

All the nationalized banks should try to improve their service level to face the stiff

competition given by private banks..

Banks should reduce the time length between sanction and disbursement of loan.

SBI should increase the limit under SBI card to fulfill the growing requirement of the

customers.

Bank employees should bring more professionalism in their attitude while dealing with

customers to retain and attract more customers.

Banks should narrow down the spread between PLR and deposit rates.

Banks should advertise and conduct special awareness programs to make SBI cards more

popular among customers.

Questionnaire

Name Age .

Income... Occupation...Q1. Are you aware of various credit facilities of banks ?

Yes No

Q2. Are you availing credit facility from any bank ?


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Yes No

Q3. If yes, from which bank you are availing credit facility ?

Q4. Since when you are availing this facility.

a) More than 3 year b) 2-3 years

c) 1-2 years d) Less than 1 year

Q5. Are you satisfied with your existing bank ?

Yes No

Q6. If no, then why .

..

Q.7 Tick the name of banks whose credit facilities are known to you ?

a) SBI b) PNB c) IOB

d) CANARA e) UCO f) OBC

Q8. Rate the banks on the basis of following parameters :

Factors Interest

Rate

Collatarel

Security

Attitude

of Field

Services Document

required

Renewal

process


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Banks officer

SBI

PNB

UCO

OBC

CANARA

IOB

Q9. According to you what is the main obstacle while getting finance under various

credit facilities?

a) Security b) Document Requirement

c) Red Tapism d) Guarantee requirement

e) Attitude of bank employees

Q10. According to you arrange the parameters in the descending order of their

preference?

a) Interest Rate b) Collateral Security

c) Services d) Attitude of field Officer

e) Document required f) Validity period


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Q11. Which banks name comes to your mind first while availing credit facility and

why?

..

..

Q12. Have you heard about SBI card?

Yes No

Q13. If yes, from where?

a) Friends b) Bank Employees

c) Advertisement d) Publicity

Q14. Do you want to give any suggestions to banks?

.

Project Report Banking System in India

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