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REVA INSTITUTION OF SCIENCE AND MANAGAMENT Page 1

1.1 INTRODUCTION TO FINANCE

FINANCE

Finance is that business activity that is concerned with the organization and conversion ofcapital funds in meeting financial needs and overall objectives of a business enterprise.

Financial Analysis can be defined as a study of relationship between many factors as disclosed

by the statement and study of the trend of these factors.

The basis for financial planning, analysis and Decision-making is the financial information.

Financial information is needed to predict, compare and evaluate the firms earning ability. It is

also required to aid in economic decision-making investment and financial statement or

accounting reports.

In the modern environment, finance occupies a key position; value of the company represents

financial stamina that it got over the long run. Finance is well defined only when the source is

obtained from profitable funds and scope, the employment of finance, how best it can install in

the business. Broad scope of finance function is concerned with almost all aspects of business

operations. Although it is difficult to set limits to finance function, there are many number of

business decisions, which do not involve finance.

SCOPE OF FINANCE

What is finance? What are a firms financial activities? How are they related to the firm other

activities? Firms create manufacturing capacities for production of goods; some provide

services to customers. They sell their goods or services to earn profit. They raise funds to

acquire manufacturing and other facilities. Thus, the three most important activities of a

business firm are:

Production.

Marketing.

Finance.


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A firm secures whatever capital it needs and employs it in activities, which generate return on

invested capital.

FINANCE FUCTIONS

It may be difficult to separate the finance functions from production, marketing and other

functions, but the functions themselves can be readily identified. The functions of raising

funds, investing them in assets and distributing returns earned from assets to shareholders are

respectively known as financing decision, investment decision and dividend decision. A firm

attempts to balance cash inflows and outflows while performing these functions. This is

liquidity decision, and we may add it to the list of important finance decision or functions.

Thus finance functions include:

Long-term asset-mix or investment decision.

Capital-mix or financing decision.

Profit allocation or dividend decision.

Short-term asset-mix or liquidity decision.

A firm performs finance functions simultaneously and continuously in the normal course of the

business. They do not necessarily occur in a sequence. Finance functions call for skilful

planning, control and execution of a firms activities.

1.2 BANKING AN OVERVIEW

BANKING IN INDIA

India, the largest democracy of the world, is all set to become a major economic power. The

growth in the Indian Banking Industry has been more qualitative than quantitative and it is

expected to remain the same in the coming years.

The banking industry plays a very important role in the development of national economies.

Moreover, since borders between the economies of separate countries are progressively

losing importance, banks are gradually being incorporated into the global economy. Their role

and importance is steadily increasing and today, they represent major players on the market

both at domestic and international level.


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Banking in one form or another was in existence even in ancient times. The writings of Manu

(the maker of old Hindu Law) and Kautilya (the Minister of Chandragupta Maurya) contained

references to banking.

Banking business has a history over 200 years. From the times of the Bank of Bengal (1806)

the sector has been witnessing qualitative and quantitative changes. Main players during the

pre-independence period were Credit Lyonnais, Allahabad Bank, Punjab National Bank and

Bank of India. With 1935 regulation the Reserve Bank of India was proclaimed the Central

Bank of India and was vested with controlling powers over the commercial banks. The

drastic development taken place during the first 25 years since independence was

Nationalization of many private banks. With this, the central government became major

policy maker for these nationalized banks.

With economic liberalization measures many private and foreign banking companies were

allowed to operate in the country. Favourable economic climate and a variety of other factors

such as demand for wide range of financial products from various sections of the society led to

mutually beneficial growth to the banking sector and economic growth process. This was

coincided by technology development in the banking operations. Today most of the Indian

cities have networked banking facility as well as Internet banking facility. A customer is

empowered to operate his account from any part of the country. UTI Bank, ICICI, HDFC Bankand Bank of Punjab are the main winners of the race.


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DEFINITION OF BANKING BUSINESS

Banking as defined in the Section 5 (b) of the Banking Regulations Act, 1949 is the business

of "Accepting deposits of money from the public for the purpose of lending or investment".

These deposits are repayable on demand or otherwise, and withdrawal by a cheque, draft, order

or otherwise

SCHEDULE BANKING STRUCTURE IN INDIA

Scheduled Banks in India

Scheduled

Commeraal Banks

Scheduled

co-operative Banks

Public Sectorbanks (27)

Private Sectorbanks (30)

Foreign Banksin India (36)

Regional RuralBanks (196)

Scheduled Urban

Co-operative

Banks 57

Scheduled State

Co-operative

Banks (16)

Nationalized

Banks (19)

SBI & its

Subsidiaries

banks (21)

Old Private Sector

Banks (21)

New Private Sector

Banks (9)


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HISTORY & EVOLUTION OF INDIAN BANKING SYSTEM:

The history of Indian Banking can be identified in three distinct phases:

Early phase from 1786 to 1969Nationalization of Banks and up to 1991 prior to banking sector Reforms

New phase of Indian Banking with the advent of Financial & Banking Sector Reforms after

1991

PHASE I:

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and

Bank of Bengal. The East India Company established Bank of Bengal (1809), Bank of Bombay(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These

three banks were amalgamated in 1920 and Imperial Bank of India was established which

started as private shareholders banks, mostly European shareholders.

In 1865 Allahabad bank was established and first time exclusively by Indians, Punjab National

Bank ltd was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of

India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore

were set up. Reserve Bank of India came in 1935.

PHASE II:

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19 thJuly

1969, major process of nationalization was carried out. It was the effort of the then Prime

Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were

Nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out

in 1980 with seven more banks. This step brought 80% of the banking segment in India under

Government Ownership.


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The following are the steps taken by the Government of India to Regulate Banking Institutions

in the country:

1949: Enactment of Banking Regulation Act.

1955: Nationalization of State Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalization of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalization of seven banks with deposits over 200 crores

Banking in the sunshine of Government ownership gave the public implicit faith and immenseconfidence about the sustainability of these institutions.

PHASE III:

This phase has introduced many more products and facilities in the banking sector in its

reforms measures. In 1991, under the chairmanship of M Narasimhan, a committee was set up

by his name which worked for the liberalization of banking practices.

PUBLIC SECTOR BANKS:

State Bank of India and its 7 associate Banks

Nationalized Banks (20 in number)

Regional Rural Banks sponsored by Public sector Banks

PRIVATE SECTOR BANKS:

Old Generation Private Banks

New Generation Private Banks

Foreign Banks in India

Scheduled Co-operative Banks

Non Scheduled Banks


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RETAIL BANKING AN INTRODUCTION

The Retail Banking environment today is changing fast. The changing customer demographics

demands to create a differentiated application based on scalable technology, improved serviceand banking convenience. Higher penetration of technology and increase in global literacy

levels has set up the expectations of the customer higher than never before. Increasing use of

modern technology has further enhanced reach and accessibility.

The market today gives us a challenge to provide multiple and innovative contemporary

services to the customer through a consolidated window as so to ensure that the banks

customer gets Uniformity and Consistency of service delivery across time and at every touch

point across all channels. The pace of innovation is accelerating and security threat has become

prime of all electronic transactions. High cost structure rendering mass-market servicing is

prohibitively expensive.

Present day tech-savvy bankers are now more looking at reduction in their operating costs by

adopting scalable and secure technology thereby reducing the response time to their customers

so as to improve their client base and economies of scale.

The solution lies to market demands and challenges lies in innovation of new offering with

minimum dependence on branchesa multi-channel bank and to eliminate the disadvantage of

an inadequate branch network. Generation of leads to cross sell and creating additional

revenues with utmost customer satisfaction has become focal point worldwide for the success

of a Bank.

Retail banking is, however, quite broad in nature - it refers to the dealing of commercial bankswith individual customers, both on liabilities and assets sides of the balance sheet. Fixed,

current / savings accounts on the liabilities side; and mortgages, loans (e.g., personal, housing,

auto, and educational) on the assets side, are the more important of the products offered by

banks. Related ancillary services include credit cards, or depository services. Retail banking

refers to provision of banking services to individuals and small business where the financial


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institutions are dealing with large number of low value transactions. This is in contrast to

wholesale banking where the customers are large, often multinational companies, governments

and government enterprise, and the financial institution deal in small numbers of high value

transactions.

The concept is not new to banks but is now viewed as an important and attractive market

segment that offers opportunities for growth and profits. Retail banking and retail lending are

often used as synonyms but in fact, the later is just the part of retail banking. In retail banking

all the needs of individual customers are taken care of in a well-integrated manner.


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2. 1 INDUSTRY PROFILE

ORIGIN OF THE BANKING

There are different opinions regarding the origin of the term bank. According to some it is

derived from Italian word Banco'. Latin word 'BANCUS' French word 'Banque' which means

"a bench". In olden days European bankers using bench to transact their banking activities but

according to others. The word "Bank" is derived from German word 'Bank which means

'Common fund raised form a large number of public ".

The Banking begins with the first prototype banks of merchants of the ancient world, which

made grain loans to farmers and traders who carried goods between cities. This began around

2000 BC in Assyria and Babylonia. Later, in ancient Greece and during the Roman Empire,lenders based in temples made loans and added two important innovations: they accepted

deposits and changed money. Archaeology from this period in ancient China andIndia, also

shows evidence of money lending activity.

Banking, in the modern sense of the word, can be traced to medieval and

early Renaissance Italy, to the rich cities in the north such as Florence, Venice andGenoa.

The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing

branches in many other parts of Europe. Perhaps the most famous Italian bank wasthe Medici bank, established by Giovanni Medici in 1397

The development of banking spread from northern Italy through Europe and a number of

important innovations took place in Amsterdam during the Dutch Republic in the 16th century,

and in London in the 17th century. During the 20th century, developments in

telecommunications and computing caused major changes to banks operations and let banks

dramatically increase in size and geographic spread. The Late-2000s financial crisis caused

many bank failures, including of some of the world's largest banks, and much debate

about bank regulation.

In ancient India there is evidence of loans from the Vedic period (beginning 1750 BC). Later

during theMaurya dynasty (321 to 185 BC), an instrument called adesha was in use, which

was an order on a banker desiring him to pay the money of the note to a third person, which

corresponds to the definition of a bill of exchange as we understand it today. During the
http://en.wikipedia.org/wiki/Vedic_periodhttp://en.wikipedia.org/wiki/Maurya_dynastyhttp://en.wikipedia.org/wiki/Maurya_dynastyhttp://en.wikipedia.org/wiki/Vedic_period


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Buddhist period, there was considerable use of these instruments. Merchants in large towns

gave letters of credit to one another.

GROWTH OF THE BANKING:

Banking India originated in the first decade of eighteenth century with the general bank of

India coming into existence in 1786. this was followed by bank of Hindustan both these banks

are defunct. the oldest bank in existence in India is the state bank of India being established as

the bank of Bengal in Kolkata in June 1806. a couple of decades later, foreign banks like credit

Lyonnais started their Kolkata operations in the 1850s. at the point of time, Kolkata was the

most active trading port mainly due to the trade of the British empire and due to which banking

activity took routes there and prospered. The first fully Indian owned bank was the Allahabad

bank, which was established in 1865 by the1900s. the market expanded with establishment ofbanks such as Punjab national bank, in 1895 in Lahore and bank of India in 1906, in Mumbai

both of which were founded under private ownership . the reserve bank of India formally took

on the responsibility of regulating Indian banking sector from 1935 after the India's

independence in 1947 the reserve bank was nationalized and given broader power.

The Indian banking industry which is governed by the banking regulation act of India, in 1949

can be broadly classified into two major categories, non scheduled and scheduled banks.

Scheduled banks comprise commercial banks and the cooperative banks. in terms ofownership, commercial banks can be further grouped into nationalized banks, the state bank of

India and its group banks, regional rural banks and private sector banks. These banks have over

67000 braches spread across the country.

Stages of growth of banks in India

Early history

during the war

post independence

Nationalization

current scenario

Early history


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At the end of late-18th century there were hardly any bank in India in the modern sense of the

term. at the time of the American civil war a void was created as the supply of cotton to

Lancashire stopped from the Americans. some banks were opened at that time which

functioned as entities to finance industry, including speculative trades in cotton. with large

exposure to speculative ventures, most of the banks opened in Indian during that period could

not survive and failed. The depositors lost money and lost interest in keeping deposits with

banks. Subsequently, banking in India remained the exclusive domain of Europeans for next

several decades until the beginning of the 20th century.

At the beginning of the 20 thcentury, Indian economy was passing through a relative period of

stability. Around five decades have elapsed since the India's first war of independence, and the

social, industrial and other infrastructure have developed. at that time there were very small

banks operated by Indians, and most of them were owned and operated by particular

communities. The baking in India was controlled and dominated by the presidency banks,

namely, the bank of Bombay, the bank of Bengal, and the bank of madras - which later on

merged to form the imperial bank of India, and imperial bank of India, upon India's

independence, was renamed the state bank of India. There were also some exchanges banks, as

also a number of Indian joint stock banks. All these banks operated in different segments of

the economy. the presidency banks were like the central banks and discharged most of the

functions of central banks. They were established under charters from the British east India

Company. The exchange banks, mostly owned by the Europeans, concentrated on financing of

foreign trade. Indian joint stock banks were generally undercapitalized and lacked the

experience and maturity to compete with presidency banks, and the exchange banks. There was

potential for many new banks as the economy was growing.

Under these circumstances, many Indians came forward to set up banks, and many banks were

set up at that time, and a number of them set up around that time continued to survive and

prosper even now like bank of India and corporation bank, Indian bank, bank of Baroda,

syndicate bank and canara bank.


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During the wars

the period during the first world war (1914-1918)through the end of the second world war

(1939-1945), and two years thereafter until the independence of India were challenging for

the Indian banking. The years of the First World War were turbulent, and it took toll of

many banks which simply collapsed despite the Indian economy gaining indirect boost due

to war-related economic activities. At least 94 banks in India failed during the years 1913

to 1918.

Post-independence

The partition of India in 1947 had adversely impacted the economies of Punjab and West

Bengal, and banking activities had remained paralyzed for months. India's independencemarked the end of a regime of the laissez-faire for the Indian banking. The government of

India initiated measures to play an active role in the economic life of the nation, and the

industrial policy resolution adopted by the government in 1948 envisaged a mixed

economy. This resulted into greater involvement of the state in different segments of the

economy including banking and finance. The manor steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized,

and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank

of India "to regulate, control, and inspect the banks in India."

The banking Regulation Act also provided that no new bank or branch of an existing bank may

be opened without a license from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in India except the State

Bank of India, continued to be owned and operated by private persons. This changed with the

nationalization of major banks in India on 19th July, 1969.


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Nationalization

The nationalization of 14 major banks with deposits of Rs. 50 crores or more in July

1969 was a "historic" and momentous event in the history of India. Small industrial and

business units are continuously and consistently ignored and starved of funds, even

though the Government policy was to encourage small, tiny and cottage and village

industries. Agricultural credit was never seriously considered by banks. Public funds

were used to support anti-social and illegal activities against the interest of the general

public. It was for these reasons that the Government took over 14 top commercial banks

in July 1969. In 1980 again the Government took over another 6 commercial to the

State Bank of India Group which were taken over in 1955.

Branch ExpansionInitially, the banks were conservative and opened braches mainly in metropolitan cities

and other major cities. Brach expansion gained momentum after the nationalization of

major commercial banks and the introduction of the Lead Bank Scheme.

Deposit Mobilization

Planned economic development, deficit financing and increase in currency issue have

led to increase in bank deposits. At the same time, banks have contributed greatly to the

development of banking habit among people through sustained publicity, extensivebranch banking and relatively prompt service to the deposit mobilization, due partly to

the expansion of a network of bank branches and partly to the incentives given to

savers. The trend of increase in deposits and credit of scheduled banks.

Current scenario

Currently, overall, banking in India is considered as fairly mature in terms of supply,

product range and reach-even though reach in rural India still remains a challenge for

the private sector and foreign banks. Even in terms of quality of assests and capital

adequacy, Indian banks are considered to have clean, strong and transparent balance

sheets-as compared to other in comparable economies in its region. The Reserve Bank

of India is an autonomous body, with minimal pressure from the government. The


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stated policy of the Bank on the Indian Rupee is to manage volatility-without any stated

exchange rate and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-

especially in its services sector, the demand for banking services-especially retail

banking, mortgagees and investment services are expected to be strong.

Currently, India has 88 scheduled commercial banks - 28 public sector banks, 29

private banks and 31 foreign banks. They have a combined network of over 53,000

branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency,

the public sector banks hold over 75 percent of total assets of the banking industry, with

the private and foreign banks holding 18.2% and 6.5% respectively.

As far as the present scenario is concerned the banking industry in India is in atransition phase. The Public Sector Banks, which are the foundation of the Indian

banking system account for more than 78 percent of total banking industry assets.

Unfortunately they are burdened with excessive nonperforming assets, massive

manpower and lack of modern technology. On the other hand the private sector banks

are witnessing immense progress. They are leaders in Internet banking, mobile banking,

phone banking, ATMs. On the other hand the public sector banks are still facing the

problem of unhappy employees. There has been a decrease of 20 percent in the

employee strength of the private sector in the wake of the Voluntary Retirement

Schemes. As far as foreign banks are concerned they are likely to succeed in India.

Indusland bank was the first private bank to be set up in India. IDBI, ING Vyasa Bank,

SBI commercial and Industrial bank Ltd, Dhanalakshmi Bank Ltd, Karur Vysya Bank

Ltd, Bank of Rajasthan Ltd, etc, are some Private Sector Banks. Banks from the Public

Sector include Punjab National Bank, Vijay Bank, UCO Bank, Oriental Bank,

Allahabad Bank, Andhra Bank etc.


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MAJOR PLAYERS OF INDIAN BANKING SECTOR:

Since the beginning, due to huge market potential, a number of banking companies have come

up in India, which include both, public sector as well as private sector banks. However, the list

of top 10 banking companies in India has mostly been dominated by the State Bank of India

(SBI).

Major players in the Indian Banking sector

State Bank Of India.

Allahabad Bank.

HDFC.

Uco Bank.

Punjab National Bank.

Bank of Maharashtra.

HSBC Bank.

Citibank

Axis Bank.

Canara Bank

ICICI Bank

Bank of Baroda

Bank of India

IDBI Bank

Central Bank of India

CHALLENGES FACED BY THE BANKING:

Developing countries like India, still has a huge number of people who do not have access to

Banking services due to scattered and fragmented locations. The people who are availing

banking services, their expectations are rising as the levels of services are increasing due to the

emergence of Information Technology and competition. Since, foreign banks are playing in

Indian market, the number of services offered has increased and banks have laid emphasis on

meeting the customer expectations.


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Now, the existing situation has created various challenges and opportunity for Indian

Commercial Banks. In order to encounter the general scenario of banking industry it is required

need to understand the challenges lying with banking industry of India.

Rural Market

Banking in India is generally fairly mature in terms of supply, product range and reach, even

Though reach in rural India still remains a challenge for the private sector and foreign banks. In

terms of quality of assets and capital adequacy, Indian banks are considered to have

clean,strong and transparent balance sheets relative to other banks in comparable economies in

its region. Consequently, we have seen some examples of inorganic growth strategy adopted

by some nationalized and private sector banks to face upcoming challenges in banking industry

of India. For example recently, ICICI Bank Ltd. merged the Bank of Rajasthan Ltd. in order to

increase its reach in rural market and market share significantly. State Bank of India (SBI), the

largest public sector bank in India has also adopted the same strategy to retain its position. It is

in the process of acquiring its associates. Recently, SBI has merged State Bank of Indore in

2010.

Management of Risks

The growing competition increases the competitiveness among banks. But, existing global

Banking scenario is seriously posing threats for Indian banking industry. We have alreadywitnessed the bankruptcy of some foreign banks.

According to Shrieves (1992), there is a positive association between changes in risk and

capital. Research studied the large sample of banks and results reveal that regulation was

partially effective during the period covered. Moreover, it was concluded that changes in bank

capital over the period studied was risk-based .

Wolgast, (2001) studied the Merger and acquisition activity among financial firms. The author

focused bank supervisors in context with success of mergers, risk management, financial

system stability and market liquidity. The study concluded that large institutions are able to

maintain a superior level of risk management .

Al-Tamimi and Al-Mazrooei (2007) examined the risk management practices and techniques

in dealing with different types of risk. Moreover, they compared risk management practices


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between the two sets of banks. The study found the three most important types of risk i.e.

commercial banks foreign exchange risk, followed by credit risk, and operating risk. Sensarma

and Jayadev (2009) used selected accounting ratios as risk management variables and

attempted to gauge the overall risk management capability of banks. They used

multivariatestatistical techniques to summarize these accounting ratios. Moreover, the paper

also analyzed the impact of these risk management scores on stock returns through regression

analysis. Researchers found that Indian banks' risk management capabilities have been

improving overtime. Returns on the banks' stocks appeared to be sensitive to risk management

capability of banks. The study suggest that banks want to enhance shareholder wealth will have

to focus onsuccessfully managing various risks.

Growth of BankingThe Indian banking industry experienced sustained productivity growth, which was driven

mainly by technological progress. Banks' ownership structure does not seem to matter as much

as increased competition in TFP growth. Foreign banks appear to have acted as technological

innovators when competition increased, which added to the competitive pressure in the

banking market. Finally, our results also indicate an increase in risk-taking behaviour, along

with the whole deregulation process.

It was found in the study of Goyal and Joshi (2011a) that small and local banks face difficultyin bearing the impact of global economy therefore, they need support and it is one of the

reasons for merger. Some private banks used mergers as a strategic tool for expanding their

horizons. There is huge potential in rural markets of India, which is not yet explored by the

major banks. Therefore ICICI Bank Ltd. has used mergers as their expansion strategy in rural

market. They are successful in making their presence in rural India. It strengthens their network

across geochartical boundary, improves customer base and market share.

Market Discipline and Transparency

According to Fernando (2011) transparency and disclosure norms as part of internationally

accepted corporate governance practices are assuming greater importance in the emerging

environment. Banks are expected to be more responsive and accountable to the investors.

Banks have to disclose in their balance sheets a plethora of information on the maturity profiles


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of assets and liabilities, lending to sensitive sectors, movements in NPAs, capital, provisions,

shareholdings of the government, value of investment in India and abroad, operating and

profitability indicators, the total investments made in the equity share, units of mutual funds,

bonds, debentures, aggregate advances against shares and so on .

Global Banking

It is practically and fundamentally impossible for any nation to exclude itself from world

economy. Therefore, for sustainable development, one has to adopt integration process in the

form of liberalization and globalization as India spread the red carpet for foreign firms in 1991.

The impact of globalization becomes challenges for the domestic enterprises as they are bound

to compete with global players. If we look at the Indian Banking Industry, then we find that

there are 36 foreign banks operating in India, which becomes a major challenge for

Nationalized and private sector banks. These foreign banks are large in size, technically

advanced and having presence in global market, which gives more and better options and

services to Indian traders.

Financial Inclusion

Financial inclusion has become a necess ity in todays business environment. Whatever is

Produced by business houses, that has to be under the check from various perspectives like

Environmental concerns, corporate governance, social and ethical issues. Apart from it tobridge the gap between rich and poor, the poor people of the country should be given proper

attention to improve their economic condition. Dev (2006) stated that financial inclusion is

significant from the point of view of living conditions of poor people, farmers, rural non-farm

enterprises and other vulnerable groups. Financial inclusion, in terms of access to credit from

formal institutions to various social groups. Apart from formal banking institutions, which

should look at inclusion both as a business opportunity and social responsibility, the author

conclude that role of the self-help group movement and microfinance institutions is important

to improve financial inclusion. The study study suggested that this requires new regulatory

procedures and de-politicisation of the financial system.


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Employees Retention

The banking industry has transformed rapidly in the last ten years, shifting from transactional

and customer service-oriented to an increasingly aggressive environment, where competition

for revenue is on top priority. The diminishing employee morale results in decreased revenue.

Due to the intrinsically close ties between staff and clients, losing those employees completely

can mean the loss of valuable customer relationships. The retail banking industry is concerned

about employee retention from all levels: from tellers to executives to customer service

representatives because competition is always moving in to hire them away.

The competition to retain key employees is intense. Top-level executives and HR departments

spend large amounts of time, effort, and money trying to figure out how to keep their people

from leaving. Sekaran, U. (1989) studied a sample of 267 bank employees, this study traced the

paths to the job satisfaction of employees at the workplace through the quality of life factors of

job involvementand sense of competence. Results indicated that personal, job, and

organizational climate factors influenced the ego investment or job involvement of people in

their jobs, which in turn influenced the intra-psychic reward of sense of competence that they

experienced, which then directly influenced employees' job satisfaction .

Mitchell, Holtom, Lee and Graske (2001) asserted in their study that people often leave for

reasons unrelated to their jobs. In many cases, unexpected events or shocks are the cause.Employees also often stay because of attachments and their sense of fit, both on the job and in

their community . Saxena and Monika (2010) studied a case of 5 companies out of 1000

organizations and 8752 respondents surveyed across 800 cities in India by Business Today.

The survey was on nine basic parameters like career and personal growth, company prestige,

training, financial compensation and benefits and merit based performance evaluation. It was

concluded that the biggest challenge for organizations is that when new employees appointed,

it is difficult to merge them in organizational culture. Each organization has its own unique

culture and most often, when brought together, these cultures clash. When there is no retention,

employees point to issues such as identity, communication problems, human resources

problems, ego clashes, and intergroup conflicts, which all fall under the category of cultural

differences .


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Customer Retention

Levesque and McDougall (1996) investigated the major determinants of customer satisfaction

and future intentions in the retail bank sector. They identified the determinants which include

service quality dimensions (e.g. getting it right the first time), service features (e.g.

competitiveinterest rates), service problems, service recovery and products used. It was found,

in particular, that service problems and the banks service recovery ability have a major impact

on customer satisfaction and intentions to switch .

Clark (1997) studied the impact of customer-employee relationships on customer retention

rates in a major UK retail bank. He revealed that employee and customer perceptions of service

quality are related to customer retention rates and that employee and customer perceptions of

service quality are related to each other .

Clark (2002) examined the relationship between employees perceptions of organizational

climate and customer retention in a specific service setting, viz. a major UK retail bank.

Employees perceptions of the practices and procedures in relation to customer care at their

branch were investigated using a case study approach. The findings revealed that there is a

relationship between employees perceptions of organizational climate and customer retention

at a micro organizational level. He suggested that organizational climate can be subdivided into

five climate themes and that, within each climate theme, there are several dimensions that arecritical to customer retention . Hansemark and Albinsson (2004) explored how the employees

of a company experience the concepts of customer satisfaction and retention. They used

phenomenological method, allowing the informants own interpretations to be discovered.

Satisfaction was discussed from three perspectives: definition of the concept, how to recognise

when a customer is satisfied, and how to enhance satisfaction. The informants experience

pertaining to these three categories varied, and a total of seven ways to define, recognise or

enhance satisfaction were discovered. These were: service, feeling, chemistry, relationship and

confidence, dialogue, complaints and retention. All except the first two of these categories of

experience were found to enhance retention, implying that the informants have found that

strategies for enhancing both satisfaction and retention are similar . The strongest connection

between retention and satisfaction strategies turned out to be in terms of relationship and

confidence.


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Environmental Concerns

It is quite clear from the recently formed Copenhagen Climate Council (CCC) that there is a

severe need for environmental awareness among all the countries of the world. CCC published

Thought Leadership Series on Climate Change which is a collection of inspirational, concise

and clearly argued pieces from some of the world's most renowned thinkers and business

leaders on climate change. The objective of the pieces is to assist in enhancing the public and

political awareness of the actions that could have a significant impact on global emissions

growth and to disseminate the message that it is time to act. The Thought Leadership Series

was aimed at explaining and spreading awareness of the key elements in the business and

policy response to the climate problem. The rationale for the Thought Leadership Series was to

change the focus of people.

Social and Ethical Aspects

There are some banks, which proactively undertake the responsibility to bear the social and

ethical aspects of banking. This is a challenge for commercial banks to consider the these

aspects in their working. Apart from profit maximization, commercial banks are supposed to

support those organizations, which have some social concerns. Benedikter (2011) defines

Social Banks as banks with a conscience. They focus on investing in community, providing

opportunities to the disadvantaged, and supporting social, environmental, and ethical agendas.

Social banks try to invest their money only in endeavours that promote the greater good of

society, instead of those, which generate private profit just for a few. He has also explained the

main difference between mainstream banks and social banks that mainstream banks are in most

cases focused solely on the principle of profit maximization whereas, social banking

implements the triple principle of profit-people-planet .


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2.2 COMAPANY PROFILE OF INDUSIND BANK

HISTORY OF INDUSIND BANK

INDUSIND BANK LTD was incorporated in August 1994 in the name of 'INDUSIND Bank

Limited',with its registered office in Mumbai, India. INDUSIND Bank commenced operations

as a Scheduled Commercial Bank in January 1995.

If ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and

Chairman-Emeritus, of INDUSIND Group.INDUSIND BANK LTD was amongst the first

to set up a bank in the private sector. The bank was incorporated on 30th August 1994 in the

name of INDUSIND Bank Limited, with its registered office in Mumbai.It commenced

operations as a Scheduled Commercial Bank on 16th January 1995. The bank has grownconsistently and is now amongst the leading players in the industry

.

INDUSIND is India's premier housing finance company and enjoys an impeccable track record

inIndia as well as in international markets. Since its inception in 1977, the Corporation

hasmaintained a consistent and healthy growth in its operations to remain the market leader

inmortgages. Its outstanding loan portfolio covers well over a million dwelling units.

INDUSIND has developed significant expertise in retail mortgage loans to different market

segments and also has a large corporate client base for its housing related credit facilities. With

its experience in the financial markets, a strong market reputation, large shareholder base and

unique consumer franchise, INDUSIND was ideally positioned to promote a bank in the Indian

environment In a milestone transaction in the Indian banking industry, Times Bank was

merged with INDUSIND Bank Ltd., effective February 26, 2000.


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VISION, MISSION, QUALITY POLICY

Vision:

A relevant business and banking partner to its clients

Customer Responsive, striving at all times to collaborate with clients in providing

solutions for their Banking needs

A forerunner in the market place in terms of profitability, productivity and efficiency

Engaged with all our stakeholders and will deliver sustainable and compliant returns

Mission

We will consistently add value to all our stakeholders and emerge as the Best in class in the

chosen parameters amongst the comity of banks, by doubling our profits, clients and branches

within the next three years.

Quality Policy

Increasing market share in Indias expanding banking

Delivering high quality customer service

Maintaining current high standards for asset quality through disciplined credit risk

management

Develop innovative products and services that attract targeted customers and address

inefficiencies in the Indian financial sector.

NATURE OF BUSINESS:

INDUSIND Bank offers a wide range of commercial and transactional banking services and

treasury products to wholesale and retail customers. The bank has three key business segments:

Wholesale Banking Services:

The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian

corporate to small & mid-sized corporate and agri-based businesses. For these customers, the

Bank provides a wide range of commercial and transactional banking services, including


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working capital finance, trade services, transactional services, cash management, etc. The bank

is also a leading provider of structured solutions, which combine cash management services

with vendor and distributor finance for facilitating superior supply chain management for its

corporate customers. Based on its superior product delivery / service levels and strong

customer orientation, the Bank has made significant inroads into the banking consortia of a

number of leading Indian corporate including multinationals, companies from the domestic

business houses and prime public sector companies. It is recognized as a leading provider of

cash management and transactional banking solutions to corporate customers, mutual funds,

stock exchange members and banks.

Retail Banking Services:

The objective of the Retail Bank is to provide its target market customers a full range of

financial products and banking services, giving the customer a one-stop window for all his/her

banking requirements. The products are backed by world-class service and delivered to the

customers through the growing branch network, as well as through alternative delivery

channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

The INDUSIND Bank Preferred program for high net worth individuals, the INDUSIND Bank

Plus and the Investment Advisory Services programs have been designed keeping in mind

needs of customers who seek distinct financial solutions, information and advice on various

investment avenues. The Bank also has a wide array of retail loan products including Auto

Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is

also a leading provider of Depository Participant (DP) services for retail customers, providing

customers the facility to hold their investments in electronic form.

INDUSIND Bank was the first bank in India to launch an International Debit Card in

association with VISA (VISA Electron) and issues the Master card Maestro debit card as well.

The Bank launched its credit card business in late 2001. By September 30, 2005, the bank had

a total card base (debit and credit cards) of 5.2 million cards. The Bank is also one of the

leading players in the "merchant acquiring" business with over 50,000 Point-of-sale (POS)

terminals for debit / credit cards acceptance at merchant establishments.


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Treasury:

Within this business, the bank has three main product areas - Foreign Exchange and

Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the

liberalization of the financial markets in India, corporate need more sophisticated risk

management information, advice and product structures. These and fine pricing on various

treasury products are provided through the bank's Treasury team. To comply with statutory

reserve requirements, the bank is required to hold 25% of its deposits in government securities.

The Treasury business is responsible for managing the returns and market risk on this

investment portfolio.


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3. REVIEW OF LITERATURE AND RESEARCH DESIGN

3.1 REVIEW OF LITERATURE

Bill Stephenson and Julia Kiely (1991) researched into the key issues facing banks in order to

become better at selling in the personal banking market. The results indicate that the radical

change in management style, training, motivation and recognition of branch sales personnel is

called for. Developing a true sales culture requires major alterations to management structure

and style, and is most likely to be successfully achieved by 'top-down' target setting based on

corporate business objective.

James F Devlin (1995) studied the developments in the distribution of retail banking services in

the UK, using the case study of First Direct, a subsidiary of Midland Bank that successfullyintroduced telephone-banking service. It was found that in an increasingly competitive and

deregulated environment, superior distribution strategies concerned with how to communicate

with, and deliver products to the consumer could provide institutions with significant

competitive advantage in the marketplace."

Retail banking aims to be the one-stop shop for as many financial services as possible on

behalf of retail clients. Some retail banks have even made a push into investment services such

as wealth management, brokerage accounts, private banking and retirement planning.

Wholesome of these ancillary services are outsourced to third parties (often for regulatory

reasons),they often intertwine with core retail banking accounts like checking and savings to

allow for easier transfers and maintenance.

Dr.Chaisomphol Chaoprasert The paper analyzes past studies regarding service quality

improvement in the retail banking industry. The continuing trend to a model of service quality

improvement, from personnel counter services to electronic services, is demonstrated.

Improved service quality should be adopted to maintain the core competence and this paper

contributes knowledge and background for banks to apply these findings to better shape and

focus their positions in the market and also to provide service quality to customers.


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Frances X.Frei Patrick T. Harker Larry W. Hunter Reviews about, how does a retail bank

innovate? Traditional innovation literature would suggest that organizations innovate by

getting new and/or improved products to market. However, in a service, the product is the

process. Thus, innovation in banking lies more in process and organizational changes than in

new product development in a traditional sense. This paper reviews a multi-year research effort

on innovation and efficiency in retail banking, and discusses both the means by which

innovation occurs along with the factors that make one institution better than another in

innovation.

3.2 STATEMENT OF THE PROBLEM :

Major source of the income to the bank is through various lending opportunities offered by the

bank. Therefore this study has been done to compare all the lending schemes and to analyses

the performance. This in turn helps to increase the performance of poor performing lending

schemes.

3.3 SCOPE OF THE STUDY

The study is to understand the analytical frame work of retail lending and analysis of existing

retail lending system at the bank.

3.4 OBJECTIVES OF THE STUDY :

1. To study the various retail lending schemes and to understand the Various lending schemes

provided by INDUSIND BANK LTD

2. To find out the growth and performance of various schemes.

3. To identify the awareness of the various lending schemes offered by INDUSIND BANK

LTD

3.5 OPERATIONAL DEFINITIONS OF RETAIL BANKING:

Retail banking is typical mass-market banking where individual customers use local branches

of larger commercial banks. Services offered include: savings and checking accounts,

mortgages, personal loans, debit cards, credit cards, and so


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3.6 METHODOLOGY:

Data collection method-

1.

Primary data

2. Secondary data

Primary data-

The data which is collected especially for the study and is not found in any form before is

called primary data. Information is obtained from branch manager and through general

discussion and observation the help of questionnaire.

Secondary data-

The Secondary data is collected through annual reports, circulars, management reports and

internet.

3.7 LIMITATIONS OF THE STUDY:

It is not compared with other banks.

The study has only been conducted in INDUSIND BANK LTD

The study was extensive due to time constraint.

3.8 CHAPTER SCHEME

Chapter 1: Introduction

Chapter 2: Industry Profile And Company Profile

Chapter 3: Review Of Literature And Research Design

Chapter 4: Results, Analysis And Discussion

Chapter 5: Findings, Conclusions And Suggestions


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4. ANALYSIS AND INTERPRETATION OF DATA

INDUSIND BANK LTD offers a wide range of retail loans to meet various customer needs.

Whether the need is for a new house, childrenseducation, and purchase of a new car or home

appliances and need specific loans will enable customer to convert their dreams to realities.

Housing Loans Priority.

Housing Non Priority.

Education Loans.

Personal Loans.

Vehicle Loans.

Mortgage Loan.

Staff Loan.

Home Loan is available for:

Purchase of new / old dwelling unit.

Construction of house.

Purchase of plot of land for construction of a house.

Repaying a loan already taken from other Housing Finance Company / Bank.

Repayment period up to 25 years (floating rate option)

Representing Net Annual Income EMI / NMI Ratio In Bank

Table-4.1 Source:Annual Report

Net Annual Income EMI / NMI Ratio

Up to Rs. 60000/- 20%

Above Rs. 60000 to less than Rs.1,20,000/- 25%

Above Rs. 1,20,000/- to less than Rs.2,00,000/- 30%

Above Rs. 2,00,000 to less than Rs.5,00,000/- 50%

Above Rs. 5,00,000 to less than Rs.10,00,000/- 55%

Above Rs. 10 lacks 65%


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Maximum Repayment Period in bank

Table-4.2

Age Repayment period

For persons below 35 years of age 25 years

For persons below 45 years of age 20 years

For persons above 45 years of age 15 years

Source: Annual Report

Margin in bank

Table-4.3


Margin for Purchase of New houses which are ready for possession (Applicable to First

sale only)

Margin (%) in bank

Table-4.4

Amount Margin (%)

Upto Rs. 75 lakhs 15

Above Rs.75 laks to 1 crore 20

Above Rs 1.00 crore 30


Amount Margin (%)

Up to Rs. 30 lakhs 20

Above Rs. 30 laks to 75 lakhs 20

Above Rs75 lakhs to 1.00 Crore 25

Above Rs 1.00 crore 40


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Interest:

Penal interest of 1% in case of default of three or more consecutive instalments.

Educational Loan:

Purpose:

To enable students with academic brilliance to meet tuition and other fees / maintenance costs

/ books and equipment and cost of passage for studies abroad etc., for pursuing studies at

recognised school / college / institution.

Courses Eligible- Higher Studies:

Diploma / Graduate / Post-graduate courses in the faculties of Engineering Technology,

Architecture, Medicine, Dental Science, Agricultural Science, Veterinary Science and

Computer Certificate courses of reputed institutes accredited to department of electronics or

affiliated to university

Educational Loan Limit

Table-4.5

Amount of loan (in Indian Rupees) MIN(Rs.) MAX(Rs.)

Higher Education- In India 10000 10.00 lacs

Higher Education- Abroad 10000 20.00 lacs


Educational Loan Margin

Table-4.6


Upto Rs. 4.00 lacs Nil

Above Rs. 4.00 lacs -

For studies in India 5%

For studies abroad 15%


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INTEREST RATES IN BANK:

Schemes and interest rates are subject to changes from time to time.

Table-4.7 Domestic / NRO-w.e.f. November 30 2012

MATURITY PERIOD EXISTING RATE OF INTEREST (%)

Below Rs.15 lacs Rs.15 lacs To Rs.

100 lacs

7 Days to 14 days 3.50 4.00

15 days to 30 days 4.50 5.00

31 days to 45 days 5.00 5.50

46 days to 60 days 5.50 6.00

61 days to 90 days 6.00 6.50

91 days to 180 days 6.50 7.00

181 days to 269 days 7.75 8.00

270 days or below 1 year 8.50 8.50

1 year to below 1 year 2 months 9.25 9.25

1 year to 2 months to below 2 year 9.00 9.00

2 years to below 2 years 6 month 8.75 8.75

2 years 6 months to below 2 years 9 months 9.25 9.25

2 years 9 months to below 3 years 8.75 8.75

3 years to below 61 month 8.75 8.75

61 months and above 8.50 8.50



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The above deposit rates are applicable for deposits of below Rs1.00 Crore. For deposits of

Rs.1.00 crore and above branches have to refer to Finance & Accounts department for rates.

The revised rates are applicable for fresh deposits and renewal of maturing deposits.

Resident Senior Citizens would be offered 0.50% p.a additional rates for all tenures. The rates

of interest offered to staff and retired staff will be 1% above the applicable rate. The rate

applicable to retired staff (senior citizen) will be 1.00% above the rate payable to resident

Indian senior citizens The rate of interest under the INDUSIND TAX SAVER" Scheme is

8.75%. Staff and retired staff will get an additional interest as prescribed in point no.4. The

revised rates are also applicable to deposits accepted under Capital Gains Scheme,, Deposits

from Cooperative banks and NRO Deposits. MYBANK SURAKSHANA Deposit will also

carry an interest rate of 9.25%

For premature payments of existing deposits 1% of penalty to be levied on the rates applicable

to the period for which the deposit has run.

Secondary Educational Loan:

To enable the students for taking higher education provided the student secures 60% marks in

existing course. The second loan is to be availed only from the branch where the first

educational loan has been sanctioned.

RepaymentTechnical / Professional Higher studies in India / Abroad:

Repayment of loan to commence immediately after disbursal, by the parent / guardian, out of

his / her income. Instalments may be nominal (to cover interest portion, at least) during the

period the student is undertaking the studies. The instalments will be stepped up one year after

the completion of the course or after the student gets a job, whichever is earlier, so that the loan

gets repaid together with interest within a period of 60 to 84 months thereafter.


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Security and Guarantee in bank

Table 4.8

Amount. Security

Upto Rs. 4.00 lacs NIL

Above Rs. 4.00 lacs and

up to Rs. 7.50 lacs

Collateral in the form of a suitable 3rd party guarantee

Above Rs. 7.50 lacs and

upto Rs. 10.00 lacs

Collateral security by way of immovable property or equal to the

loan amount in the form of Government securities / NSCs / Units of

UTI

Guarantee of parents / guardians (in the case of minors, the parent /

guardian will execute the documents on behalf of the minor and

also in his capacity as co-borrower) / third party guarantee where

sufficient collateral security is not available


Insurance:

An insurance policy will be taken on the life of the student borrower for an amount equivalent

to the loan amount and the policy should be convertible whole-life one for 25 / 30 years,convertible after 5 years into one with endowment benefits. The Bank will pay the insurance

premium on the policy by debiting it to the loan account. On liquidation of the loan, the policy

will be reassigned and delivered to the borrower.

Repayment:

Completion of course + 1 year or 6 months after getting a job, whichever is earlier? The

interest to be debited monthly on simple basis during the repayment holiday / moratorium

period. Penal interest @2% will be charged for amount above Rs. 2 lakhs for the overdue

amount and overdue period. Interest concession of 1% per annum is available, provided the

interest is repaid during moratorium period as and when the interest is applied.


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Personal Loans

Eligibility:

Individuals, Employees of State / Central Government, Public Sector Undertakings, reputed

profit making Public Limited Companies, Multinational Companies with a minimum service of

two years and drawing a net salary of Rs. 6,000/- or above.

Purpose:

To meet personal expenses like marriage, family functions, medical expenses, travel etc.

Loan Amount:

Up to Rs. 1.50 lacks depending on repayment capacity of the individuals.

Security:

Third party guarantee of equal means, Securities like LIC policies, NSC, KVIP, Shares etc.,

Period of Repayment:

12 months to 36 months.

Type of Loan:

Demand loan.

Processing Fee:

1% of loan amount (one time).

Key Benefits:

Helps customer to take care of all kinds of expenses at a short notice.

The Loan may be availed to meet expenses related to marriage, travel, honeymoon, holiday and

medical expenditure or for any other personal use.

The loan is also available to Pensioners/Defence Pensioners

Loan is also available for Earnest Money Deposits for buyers of home/flat/plot.


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TOTAL RETAIL LOAN DISBURSED

Table 4.9: Showing retail loan disbursed for 3 years in bank

(Amount in 000s)

Year 2009-10 2010-11 2011-12 Total

No. of A/cs 29 43 90 162

Amount 7055 21557 55717 84329

Percentage (%) 8 26 66 100

Source:Annual Report

Analysis:

The retail loans lend by INDUSIND BANK LTD, the amount has increased from one year to

another which can be analysed from above table. And number of A/c holders also increased

from year to another.

In the year 2009-10 the amount lend was Rs.7,055 thousands and no. Of a/c holders was 29

members. In year 2010-11 the amount lend was Rs.21, 557 thousands and no. Of a/c holders

was 43 members. And in year 2011-12 the amount lend was Rs.55,717 thousands and no. Of

a/c holders was 90 members. So from year 2009-10 to 2010-11 the amount lend by bank for

retail loan was increased by Rs.14,502 thousands. From year 2010-11 to 2011-12 the amount

increased by Rs.34,160 thousands. So from one year to another year there is increase in the

retail loan amount.


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Chart No. 4.1: Showing no. Of A/c holders for 3 years in bank

Sources: Table no.4.9

Interpretation:

From the above chart it can be clearly stated that in 3 years the total retail loan lend by the

bank was Rs.84,329 thousands, the amount lend in year 2000-10 was only 8% of total amount

that is only Rs.7,055 thousands. In 2010-11 it is increased from 8% to 26%. And in year 2011-

11 it is again increased from 26% to 66%. So there is a continuous increase in retail amount

lend by the bank.

0

10

20

30

40

50

60

70

80

90

100

2009-2010 2010-2011 2011-2012

No. of A/c Holders

No. of A/c Holders


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Table4.10: Showing the Housing Loan Priority for 3 years in bank

(Amount in 000s)

Year 2009-10 2010-11 2011-12 Total

No. of A/cs 3 12 35 50

Amount 2830 9466 29902 42198

Percentage (%) 7 22 71 100


Analysis:

The housing loans lend by INDUSIND BANK LTD, the amount has increased from one year

to another which can be analysed from above table. And number of account holders also

increased from one year to another. In year 2009-10 the amounts lend was Rs 2830 and number

of account holders was 3 members. In year 2010-11 the amounts lend was Rs. 9466, and the

number of account in that year was 12 members. And in year 2011-12 the amount was Rs

29902 and the account holders was 35 members. So from year 2009-10 to year 2010-11 the

amount lend by Bank for loans was increased by Rs 6636, and from year 2010-11 to 2011-12

it was increased by Rs. 20436. So from one year to another there is an increase in the retail

loan amount.


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Chart No.4.2: Showing no. Of A/c holders for 3 years in bank


Interpretation:

The housing loan lend by the bank in 2009-10 is around 7% of the Rs.2830 by 3 a/c holders. In

year 2010-11 the amount lend was in that the portion of housing loan priority is Rs.9,466 that

is around 22%. And in year 2011-12 the total retail loan lend was In that the portion of housing

loan was Rs.29,902 that is around 35 members. So there is a variation in percentage of home

loan lend from one year to another.

0

20

40

60

80

100

2009-2010 2010-2011 2011-2012

No. of A/cs

No. of A/cs


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Table 4.11: Showing the Education Loan for 3 years in bank

(Amount in 000s)

Year 2009-2010 2010-2011 2011-2012 Total

No. of A/c - 1 3 4

Amount - 49 273 322

Percentage (%) - 15 85 100


Analysis:

The number of customer was more i.e. 3 in 2011-12 but the amount disbursed was high in the

year 20011-12 with Rs 273 it is mainly due to increase in the cost in various sector. There was

no student who availed loan during the year 2009-10 and amount disbursed stood at nil. The

total amount lend in corp.the total education loan is Rs. 322 with 4 customers who availed this

loan facility.


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Chart no 4.3: Showing no of A/c holders for 3 years in bank


Interpretation:

There was no education loans issued in 2009-10. In year 2010-11 the percentage of education

loan is only 15% of the total retail loans issued. That is the education loan issued amounted to

Rs.49 thousands. In year 2011-12 there is almost more than 4 times increase in the education

loan. That is increased to Rs.273 thousands. There is higher percentage of increase from 2010-

11 to 2011-12

0

0.5

1

1.5

2

2.5

3

3.5

2009-2010 2010-2011 2011-2012

No. of A/cs

No. of A/cs


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Table 4.12: Showing the Personal Loan details for 3 years in bank

(Amount in 000s)

Year 2009-2010 2010-2011 2011-2012 Total

No. of A/cs 2 11 22 35

Amount 96 1121 1615 2832

Percentage (%) 3 40 57 100


Analysis:

In the year 2009-10 numbers of customers is 2 and lending amount is 96. But, there has been a

considerable increase in the number of customer who have availed personal loan except during

the year 2010-11 due to recession and increase in interest rate. The number of customer who

availed personal loan was high during the year 20011-12 along with the amount disbursed of

Rs 1615. The total amount disbursed towards personal loan is Rs 2832 with 35 customers who

availed loan facility


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Chart no 4.4: Showing no of A/c holders for 3 years in bank


Interpretation:

In the year 2009-10 the personal loan lends was around 3% of the total retail loan lend by the

bank. In year 2010-11 there is personal loan increase to 40%, In the year 2011-12 the portion

of personal loan was 57% of the total retail loan lend by the bank. So there is an increase in the

personal loan from one year to another.

0

5

10

15

20

25

2009-2010 2010-2011 2011-2012

No. of A/cs

No. of A/cs


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Table4.13: Showing the Vehicle Loan for 3 years in bank

(Amount in 000s)

Year 2009-2010 2010-2011 2011-2012 Total

No. of A/cs 2 13 19 34

Amount 468 2494 3971 6933

Percentage (%) 8 35 57 100


Analysis:

Among the entire 3 years maximum amount was lend during the year 20011-12 of Rs 3971 for

19 customers. The amount comes to 57% of the total amount disbursed towards vehicle loan.

There was a 2 customer in the year 2009-10 of Rs 468, due to increase in cost of living and

cost of vehicle. Under state INDUSIND BANK LTD Vehicle loan scheme bank was able to

lend Rs 6933 for 34 customers for purchasing two and four wheeler vehicle.


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Chart no. 4.5: Showing no. Of A/c holders for 3 years in bank


Interpretation:

In year 2009-10 the vehicle loan lend by the bank amounted to Rs.468 thousands that is nearly

8% of the total retail loan lend by the bank. In year 2010-11 the portion of vehicle loan lend by

the bank is 35% of the total retail loan lend in the year, there is more than 4 times increase in

vehicle loan lend from the year 2009-10 to 2010-11. In 2011-12 the portion of vehicle loan

lend was nearly 57% of the retail loan lend by the bank. So there is increase in vehicle loan

issued by the bank from one year to another. Demand for having own vehicles is rapidly

increasing by the young generation.

0

2

4

6

8

10

12

14

16

18

20

2009-2010 2010-2011 2011-2012

No. of A/cs

No. of A/cs


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Table 4.14: Showing the Mortgage Loan for 3 years in bank

(Amount in 000s)

Year 2009-2010 2010-2011 2011-2012 Total

No. of A/cs 1 5 7 13

Amount 1169 3151 4815 9135

Percentage (%) 13 34 53 100


Analysis:

The number of customer was more i.e. 7 in 2011-12 but the amount disbursed was high in the

year 2011-12 with Rs 4815.There was only 1 customer, who availed loan during the year

2009-10 and amount disbursed 1169. .The total amount lend in mortgage loan is Rs. 9135 with

13 customers who availed this loan facility.


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Chart no. 4.6: Showing no. of A/c holders for 3 years in bank


Interpretation:

In year 2009-10 the mortgage loan lends by the bank is 13% of the total retail loan lend by the

bank. In 2010-11 the mortgage loan issued by the bank 34%. In the year 2011-12 mortgage

loan lends by the bank is 53%.

0

1

2

3

4

5

6

7

8

2009-2010 2010-2011 2011-2012

No. of A/cs

No. of A/cs


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Table 4.15: Showing the Staff Loan for 3 years in bank

(Amount in 000s)

Year 2009-2010 2010-2011 2011-2012Total

No. of A/cs 21 - - 21

Amount 2492 - - 2492

Percentage (%) 100 - -100


Analysis:

In the year of 2009-10 numbers of customers 21, the amount disbursed 2492.There was no

account holder in 2010-11 & 2011-12. The total amount lend in staff loan is Rs. 2492 with the

21 customers who availed this loan facility.


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Chart no. 4.7: Showing no. of A/c holders for 3 years in bank


Interpretation:

In the year 2009-10 the amount of staff loan lends by the bank was 100% of the total retail loan

lend by the bank. There was no account holder in 2010-11 & 2011-12.

0

5

10

15

20

25

2009-2010 2010-2011 2011-2012

No. of A/cs

No. of A/cs


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Table 4.16: Showing the Housing Loan Non Priority for 3 years in bank

(Amount in 000s)

Year 2009-2010 2010-2011 2011-2012 Total

No. of A/cs 0 1 4 5

Amount 0 2508 12135 14643

Percentage (%) 0 17 83 100


Analysis:

In the year of 2009-2010 There was no account holder . In 2010-11 but the amount disbursed in

2010-11 is Rs. 2508 and 2011-2012 is Rs. 12135. The total amount lend in Housing Loan is

Rs. 14643 with the 5 customers who availed this loan facility.


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Chart No. 4.8: Showing no. of A/c holders for 3 years in bank


Interpretation:

There was no housing loan (non priority) issued in the year 2009-10 by the bank. In the year

2010-11 housing loan (non priority) lend by the bank was nearly 17% of the retail loan lend by

the bank. In the year 2011-12 the amount of housing loan (non priority) was nearly 83% of the

retail loan lend by the bank.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2009-2010 2010-2011 2011-2012

No. of A/cs

No. of A/cs


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5. FINDINGS, SUGGESTIONS AND CONCLUSIONS

FINDINGS:

The total loan disbursed was at increasing level and also account holders were also

increased from year to year. There was no decrease level in total amount lent and account

holders for all 3 years.

It is generally observed that there is an increase in Home loan disbursement that is in the

year 2011-12 it has increased to 71% from 21%in the year 2010-11.

The Education loan was from year 2009-10 (nil) to year 2010-11(15.%), but in the year

20011-12(85%).

In Personal loan the amount lent for loan purpose and the account holders was at increasing

level. There was no decrease level found in personal loan.

The Mortgage loan also increased from the year 2009-10(13%) to the year 2010-11

(34%).but in the year 20010-11(53%) it increased.

Bank provided loan for purchasing two, three or four wheeler vehicle. In these 3 years bank

had lended about Rs.468 for 2 customers which is 8% in the year 2009-10. The vehicle loan

also increased from the year 20010-11 (35%) to but in the year2011-12 (57.28%) it

increased.

In staff loan the amount lent for loan purpose and the account holders was at increasing

level.


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SUGGESTIONS:

As part of the marketing strategy, banks could organize special exhibitions, trade shows in

strategic locations at times of festival celebrations/events, etc. to create awareness among

people.

Small pamphlets (containing specific retail loan products, features, EMI structure both on

floating and fixed interest basis, repayment periods, required documentations, etc.) can be

distributed while customers visit to the branches to avoid delay in the processing of loans as

well as to educate them on the importance of retail loan schemes.

Depending up on the quantum of loan and credit rating of customer, softer repayment

terms/schedule, especially for availing various schemes, could be thought of.

Tie ups between manufacturer and banks, and communicating the finance options, as part of

the product communications to the customer to drive volumes and increase the retail lending

penetrations.

Before the lending method was quite rigid, security oriented, but now it has become need

based.

To increase the number of customers and to maintain a good customer relationship i would

like to suggest the bank to make the minimum balance maintenance as ZERO.

To liberalise the stringent norms in respect of documents, at the same time to give moreimportance to valid documents, so that the bank can increase its transactions through the

existing customers and the new customers as well.

By educating the illiterate customers through training programmes before granting them

loan will attracts more customers towards the bank.


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CONCLUSIONS:

Lending to individuals for consumption or investment will be inflationary. Till a decade this

was the maxim driving the banks. Globalization and the resulting opening up of domestic

markets to FIIS and the permission to the Indian corporate to tab global financial markets have

all dramatically changed the current market scenario.

Recently RBI has increased the CRR rate. It has increased to 75 basis points against 50 basis

points expected by various analysts. Due to the increase in CRR rate the lending among the

banks reduces as they have to keep a large amount with RBI. As CRR rate has increased RBI

has also increased BPLR (Basis Points for Lending Rate). Due to increase in BPLR the interest

rate on loan will also increase.

Under the new system, a base rate will be fixed on the basis of the cost of funds and other

expenses to service the customers. However, RBI, it is learnt, agreed to exempt there kinds of

loans- staff loans, loans against fixed deposits and loans under the differential rate of interest

scheme- from the base rates ambit. Except these three categories, no loan will be offered at

lower than the base rate. Base rate will be revised by the banks every three months.

By the analysis made of Indusind bank ltd it can be concluded that the performance of The

bank is satisfactory as the branch was placed from past 3 years.

Retail banking indusind bank

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