ACKNOWLEGEMENT

Entrance, hard work, gradual progress and an exciting year, that’s how I have
reached this level and now as I stand at the aside world, I take a look of the past
year which I have spent in this college.Our performance with the devotion of
the professors, have moduled me into confident and aspiring student all
throughout the year.

Although bringing this project to its final form was along and arduous task,
there were many fine experiences on the way. A real artist never displays his
work until has a feel of it ton his soul. During the perseverance of this project
several people have supported this endeavor that belong to the galaxy of artist
and have put their art into every part of this project without their help I would
have not been able to complete this project up to that mark.

I would like to thank my guide for the project Prof.V.S.Kanan FOR his planned
and careful guidance’s. I do not have more words to describe the role of a
friend, philosopher and guide played by him and his unfailing sincerity.

I also owe sincere thanks to people who provided me with required information
any and every time which includes vanitha Esaimani.I Would also like to thank
all my friends who have supported me throughout my project.

My sincere thanks to all the above people for sharing keen interest in the project
and providing me with guidance from time to time.
 EXECUTIVE SUMMARY

Now a days banking is extremely important in the world’s economy. The

banking functions are the routine functions of one’s life. The emergence of
private sector banks has changed the whole scenario of the banking function in
the recent years.Banks in those days merely practiced the passive role of
accepting deposits from the public for routine conversion of loan assets, purely
for the sake of good profits.
OBJECTIVE OF THE STUDY

(1) To understand the awareness of banking among the customer.

(2) The subject matter or the scope of this research project is confined to the
comparison of the services provided by the different banks in the western
suburbs areas.

(3) To understand the basic banking services provided by the banks to the
customers.
 Table of contents

SR.NO. CONTENTS PAGE

NO.

1 Overview of Indian Banking

2 Awareness of Services offered by the
banks to the customers

3 Awareness of IT services provided by

the bank to the customers

4 Findings, Analysis and suggestion

5 Conclusion
CHAPTER 1: OVERVIEW
Introduction:

Indian banking system was not sound at the time of independence. The
development of banking is evolutionary in nature. A bank performs a multiple
of functions and services which cannot be put into a single definition. A bank
may mean different things to different people. For some it is a storehouse of
money, for others an institution of funding for finance and yet for many others
bank is a depository for their savings.

The origin of the word bank can be traced back to the German word Banck
which translated meant the heap or mound or joint stock fund. The Italian word
Banco was derived from this to mean heap of money.

In the French bancus or banque means a beach. Business was transacted by the
Jews in France on beaches in the market place. The beaches resembled banking
counters. If banker failed, his bench was broken up by the people, leading to the
word bankrupt which means one who has lost all his money, wealth or financial
resources.

Today in English bank is largely understood as an institution that accepts money

as a deposit to further lend it out for profit.

It may be explained in brief as “Banking is what a bank does.” But it is not clear
enough to understand the subject in full. The Oxford Dictionary defines a bank
as “an establish ment for the custody of money which it pays out on a
customer‘s order. “But this definition is also not enough, because it considers
the deposit accepting and repayment functions only. The meaning of the bank
can be understood only by its functions just as a tree is known by its fruits. As
any other subjects, it has its own origin, growth and development. There were
many small banks. In 1949, two major developments took place. One was
nationalization of reserve bank and the banking regulation act. Since, and then
Indian banking system developed in many respects. It grew geographically,
structurally and functionally. The number of scheduled banks was decreased
and the importance of non-scheduled commercial banks was also declined. The
banking regulation act provides extensive powers to the reserve bank of India.
Deposits of scheduled banks registered a spectacular increase. The state bank of
India was established in 1955.it created a group by nationalizing eight regional
banks in 1960, which allowed the scope for a new experiment in the Indian
banking. These banks opened new offices in semi-urban and rural areas and
approach the rural people. Let us briefly trace the evolution of banking.

Thus the origin of the word can be traced as follows.

Banck-German (joint stock fund)

BANCO-Italian (heap of money)

Bancus/Banque-French (bech/chest a place where valuables are kept)

Bank-English (common meaning prevalent today, i.e., as an institution

accepting money as deposit for lending)
EVOLUTION:

The banking system in India is based upon the British Banking System which is
largely branch banking. Commercial banks in India were started during the
latter half of the 19th century. Three presidency banks nominated the banking
sector i.e. bank of Bengal, bank of Bombay and bank of madras. These banks
were setup by a special charter of the British government.

The above three banks were later amalgamated to from one bank called, the
imperial bank of India under the imperial bank of India act,1920.the imperial
bank carried on the business of commercial banking as well as managed the
public debt office of the central and the state government. The government
continued to handle the issuance of currency notes and coins until the reserve
bank of India was set up in 1935.

The second half of the 19th century saw the establishment of a number of
private sector banks such as Bank of Baroda, Allahabad bank, and Punjab
national bank. At the time there was an indiscriminate growth of smaller banks
in the private sector. These banks were set up by merchants and traders who
combined trading with banking. These led to a series of failure of banks.

Some of the important causes of bank failures during the period were:

(1) Incompetent managers and directors.

(2) Cutthroat competition.

(3) Unplanned investments.

(4) Large proportion of deposit in industrial investment.

(5) Speculative dealings.

The strengthening of the banking system took place after the establishment of
the reserve bank of India in 1935,as it was empowered to regulate banking
money, issue of directives, inspection, mergers and amalgamations in terms of
the provisions of the banking companies act,1949 which later came to be known
as the banking regulation act,1949.

In India, the banking regulation act, 1949 under which banks are regulated by
the reserve bank of India defines banking company and banking.
OVERVIEW OF INDIAN BANKING SYSTEM:

Banking systems in India consist of commercial banks and co-operative banks

of which the former account for around 98 percent of the banking system assets.
Based on the ownership pattern, the commercial banks can be grouped into
three types.

(a) State owned banks or public sector banks,

(b) Private sector banks under India ownership, and

(c) Private sector banks under foreign ownership.

There are 27 public sector banks who dominate the commercial banking system
of India, accounting for more than 80 percent of commercial banking assets.
The macroeconomic, regulatory and supervisory frameworks under which
banks in India operate have undergone a major structural change since
1991.until 1991-92, all public sector banks were fully owned by the
government. Since the onset of reforms, several relevant acts were amended to
enable the state owned bank to raise capital unto 49 percent from the public. As
many as 12 state owned banks accessed the capital market and raised up to
around Rs.85 billion till march, 2009.

Deregulation of interest rate structure, lowering reserve ratios, increased

competition etc.have facilitated the lowering of interest rates on both sides of
the balance sheet and interest spread in line with international standards. In
general, and deregulation has introduced significant operational freedom in the
working of Indian banks.
MEANING AND DEFINITION OF BANKING

A Bank is an institution which deals in money and credit. Thus, bank is an

intermediary which handles other peoples’ money both for their advantage and
to its own profit. But bank is not merely a trader in money but also an important
manufacturer of money. In other words, a bank is a factory of credit.

Let us see the definition of bank and banking, given by various authorities.

Crowther defines a bank as, “one that collects money from those who have it to
spare or who are savings it out of their income and lends the money so collected
to those who require it.

Dr.L.Hart,says that the bankers are “one who in the ordinary course of
business honors cheques drawn upon him by persons from and for whom he
receives money on current accounts”

Sir Jhon Paget says that, “no person or body corporate otherwise can be a
baker who does not,

(i) Take deposit accounts

(ii) Issue and pay cheques, and

(iii) Collect cheques, for his customers”.

Sir kinely, “a bank is an establishment which makes to individuals such

advances of money as may be required and to which individuals entrust money
when not required by them for use.

Although the above definitions have described the meaning of bank, none of
them precisely defined, ‘banking’ incorporating its entire functions.However,an
attempt has been made in section 5(1)(b&c)of the Banking Regulation Act,
1949 to define ‘Banking’ and ‘Banking company’.
According to section 5(1)(b), “Banking means accepting for the purpose of
lending or investement,of deposit of money from the public, repayable on
demand or otherwise and withdraw able by cheques,draft,order or otherwise”

Section 5(1)(c)of the banking company as, “any company which transacts the
business of banking in India”.
TYPES OF BANKS:

In modern times different types of banks have grown up. They are given below:

(1)Central Bank:

Central bank is the bank of a country –a nation. Central bank is an apex

institution promoted by the Central government for monitoring, regulating,
controlling and promoting the destiny of Indian Financial System, since its
inception. Reserve bank of India is the central bank of our country. Its main
function is to issue currency known as ‘Bank Notes’. The aim of the central
bank is not to earn profit, but to maintain price stability and to strive economic
development with all-round growth of the country. In India, the RBI was
established in 1935 and this Bank has since been functioning as the central bank
of the country.

(2)Commercial banks:

Commercial banks are the oldest and fast growing financial intermediaries in
India. A bank which undertakes all kinds of ordinary banking business is called
a commercial bank. It is so called because it provides money and credit for
commercial and trade activities.Theire business mainly consist of receiving
deposits, giving loans and financing trade and industry in the country. The
importance of different types of commercial banks in terms of their business is
in the descending order: Indian scheduled banks, public sector Banks
(Nationalized), private Sector Banks, Foreign banks, Regional Rural Banks and
Non Scheduled banks.

(3) Co-operative Banks:

They are organized on co-operative principles of mutual help and assistance.

Co-operative Banks work on the principle of co-operation. They operates on no-
profit no-loss basis. They render banking services to their members and
customers. They grant short-term loans to the agriculturist for purchase of
seeds, harvesting and for other cultivation expenses. They are registered under
state co-operative Societies Act. There are many urban co-operative banks
operating efficiently in the big cities.

(4)SCHEDULED BANKS:

Scheduled banks are those banks which are listed in the second scheduled to the
Reserve Bank of India Act,1934.The Banks satisfying the following condition
are only included in the second scheduled.

(a) That the Bank’s paid up capital plus free reserves are not less than
Rs.5.00lakh, and

(b)That the affairs of the bank are not conducted to the detrimental interest of
the depositors.

The reserve bank also has power to deschedule a bank, when the
abovementioned conditions are not satisfied.

(5)Non scheduled Bank:

The commercial banks, not included in the second scheduled of the Reserve
Bank of India Act are known as Non scheduled Banks. They are not entitled to
facilities like refinance and rediscounting of bills; from RBI.They do not get
prestige as the scheduled banks. They are mainly engaged in lending money,
discounting and collecting bills and various agency services. They insist high
security for loans.
DEVELOPMENT OF BANKING IN INDIA:

Banking in India is indeed as old as Himalayas. But, the banking functions

became an effective force only after the first decade of 20th century. To
understand the history of modern banking in India, one has to refer to the
“English agency houses” established by the east India Company. These agency
houses were basically trading firms and carrying on banking as part of their
main business. Because of this dual function and lack of their own capital
(agency houses depend entirely on deposit entirely on deposits for their capital
requirements) they failed and vanished from the scene during the third decade
of 18th century.

The east India Company laid the foundations for modern banking in the first-
half of the 19th century with the establishment of the following three banks.

(a)Bank of Bengal in 1809

(b)Bank of Bombay in 1840

(c)Bank of madras in 1843

These banks are also known as “presidency Banks” and they function well as
independent units.

During the last part of 19th century and early phase of 20th century, the
‘swadeshi movement included the establishment of a number of banks with
Indian management.

For example, Punjab national bank Ltd.In 1895,the bank of India ltd.In 1906,the
Indian bank ltd in 1907,the bank of Baroda Ltd.In 1908,,the central bank of
India Ltd.in 1911 and many other bank established on the same line. But most
of the weak banks went bankrupt due to wrong policy decision taken by the
management and due to severe banking crisis during 1913-18,the period of
world War I.However,the stronger and well managed banks like those
mentioned above survived, the crisis.

In 1920, the “Imperial Bank of India Act” was passed for amalgamating the
three presidency Banks. As such, the ‘Imperial bank of India’ was established in
1921.It was given power to hold government funds and manage the public debt.
The branches of the bank were functioning as clearing houses (Agency for
effecting settlement of funds among banks).However; it was not authorized to
issue currency.

Even though the need for a central bank was felt in the 18th century, it could
materialize only in the 20th century. On the basis of the recommendation of the
Banking Enquiry committee, the Reserve Bank Of India Act was passed in
1934.accordingly the Reserve Bank of India was constituted in 1935 to regulate
the issue of bank notes, securing monetary stability in India and to operate the
currency and credit system of the country to its economic development.
Initially, it was constituted as a private shareholders ‘bank with a fully paid up
capital of Rs.5 crore. After independence, there was a general attitude towards
its nationalization.Thus,the ‘Reserve Bank of India’(transferred to public
ownership)Act was passed in 1948.Accordingly,the entire share capital of the
bank was acquired by the central Government from the private shareholders
against compensation and it was nationalized on January 1,1949.the total value
of compensation paid by government amounted to Rs.5.54 crore or RS.118.63
per share of Rs.100 paid up. It is interesting to note that the paid up capital of
Reserve Bank continues to remain at Rs.5.00 crore even now.

In 1955, the ‘state bank of India Act’ was passed. Accordingly the ‘Imperial
Bank’ was nationalized and ‘State Bank of India’ emerged with the objective of
extension of banking facilities on a large scale, specifically in the rural and
semi-urban areas and for various other public purposes.
In 1959, the ‘state Bank of India’ (subsidiary banks) Act was passed by which
the public sector banking was further extended. The following banks were made
the subsidiaries of State Bank of India.

(i) The state Bank of Bikaner

(ii) The state Bank of jaipur

(iii) The state Bank of Indore.

(iv) The state Bank of Mysore

(v) The state Bank of Patiala

(vi) The state Bank of Hyderabad

(vii) The state Bank Of saurashtra

(Viii)The state Bank of Travancore

In 1963, the first two banks were amalgamated under the name of “The State
Bank of Bikaner and Jaipur”.
BASIC CONCEPTS:

It is necessary to understand the basic concepts used in banking. These are as

under;

(a) Banker:

Banker is a person who accepts deposits, money on current accounts, issue and
pay cheques and collects cheques for his customers.

(b) Customer:

A customer is a person who has an account with the bank, performs, at least a
transaction of a banking activity nature.

(c) Banking company:

The banking regulation act, 1949 defines a banking company as a company

which transacts the business of banking in India [section 59(c)].A banking
company must perform both the essential function i.e. accepting deposits and
lending or investing the same .Any company which is engaged in the
manufacturing of goods and services or carries on any trade and accepts
deposits from the public for the purpose of financing its business shall not be
deemed to be a banking company. The word public implies that a banker
accepts deposits from anyone who offers money to the bank for such purpose.
Thus, acceptance of deposits should be main business of a banker.

The essential feature of banking business is that the banker does not refund
money on his own accord, even if the period for which it was deposited expires.
Thus, it is clear that the underlying principle of the business of banking is that
the resources mobilized through the acceptance of deposit must continue the
main stream of funds which are to be utilized for lending or investment purpose.
The law also provides that every company carrying on business of banking in
India should use as a part of its name at lease of the following words – Bank,
Banker, Banking or Banking Company.

(d) Banking:

Section 5(b) defines banking as accepting for the purpose of lending or

investment of deposits of money from the public, repayable on demand or
otherwise and withdrawable by cheque, draft, order, or otherwise. Section 49A
of the act prohibits any institution other than a banking company to accept
deposit money from the public withdrawable by cheque. It may be note that the
essence of banking business is the function of accepting deposit from the public
with the facility of withdrawal of money by cheque. In other words, the
combination of the function of acceptance of public deposit and withdrawable
of the money by cheques by any institution cannot be performed without the
approval of Reserve Bank.

The origin of modern banks is traced to three important sources. They are,

(a) The goldsmiths

(b) The moneylenders and

(c) The merchant bankers.

The goldsmith by virtue of dealing in gold, which is a very valuable item, had
Facilities for the safe keeping of valuables. He accepted for safe custody the
money, another important valuable item, belonging to his customers. The
goldsmiths began to lend the money knowing that all the depositors do not
withdraw their savings at a time. The moneylender lent his surplus funds to the
needy and earned the income by way of interest. The merchant bankers were
prilimarily trader and had to oblige his customers by accepting their money for
safe custody. He was doing the banking business as a side occupation. Modern
banks retain all the characteraristics of these three types of
institutions/functions.

Banking made its first appearance as a public enterprise in the year 1157 in Italy
with the establishment of ‘Bank of venice’.The bank of Barcelona was started in
1401.the bank of Genoa in 1407 and the bank of Amsterdam in 1609.after the
banking act was passed in 1833 in England, the growth of joint stock
commercial banking was accelerated. Foundations were laid for the growth of
modern commercial banking during the 19th century.
NEEDS FOR A BANKS:

We need bank in our day to day life. Banks Cater to the needs of farmers,
businessman, traders, industrialist and comman people in the society. Comman
people save money, which they put into the bank for safety, security and getting
some return out of it. Businessman, traders and industrialist open their account
in the bank and carry out their transaction for receipts and payments of money
through cash or cheque. They can also get loans from the bank for financing
their business activities. Farmers can borrow money from the banks for seeds,
irrigation, fertilizers etc.They can also save and invest the money in the Banks.
Thus, banks are needed every section of our society.

Banks are an indispensable part in a modern developing society. They act as an

agent of their customers in performing the function such as collection of
dividends, pensions, purchase and sale of securities and payment of salary and
other expenses. We cannot carry out all cash transaction in these days, because,
it is risky and time consuming. We cannot also keep large amount of cash in
hand. In this respect, banks help the businessmen and all other people by
accepting their deposit and allowing withdrawals by cheques and transfer of
money.

Bank act as an agent of their customers banks are also needed by the
government. Bank act as an agent as well as Banker of the government. They
collect money from the public, tax payers and businessman on behalf of the
government and payments are also made through the banks. Only a bank can
issue cheque books to the depositors because they are authorized by the
Banking Regulation Act.

Modern banks touch almost every sphere of economic activity. They have far
reaching consequences on economic development of a country. They collect
savings and other funds from the people and rechannalise these funds to
borrowers for financial investment. Thus; banks, by collecting saving, lending
money and by generating money, play an important role in the economic
development of a country. They have, now come out to fulfill the
responsibilities of the country.

A bank performs a multitude of functions and services which cannot be reached

into a single definition. A bank may mean different things for different people.
For some it is a storehouse of money, for others an institution of funding or
finance and yet to many others, a bank is a depository for their savings.
FEATURES OF BANKING:

The following basic characteristics of banking:

(i) Dealing in money:

The banks deal in money. They accept deposits from the public and advancing
them as loans to the needy people. The deposit may be of different types like
saving, current, fixed and recurring accounts. There are again different types of
advances such as cash credit, term loans, bill discounting, overdrafts, etc.The
deposits are accepted on various terms and conditions. Thus, the banks are
basically dealer in money.

(ii) Deposit must be withdrawable:

The deposits (other than fixed and recurring deposits) made by the general
public can be withdrawable by cheques, draft or otherwise, i.e., the bank issue
and pay cheques. The deposits are usually withdrawable on demand.

(iii) Dealing with credit:

The banks are the institution that can create credit i.e., creation of additional
money for lending. Thus, “creation of credit” is the unique feature of banking.

(iv) Commercial in nature:

Since all the banking function is carried on with the aim of making profit, it
is regarded as a commercial institution. They pay interest on deposits and these
deposits are advanced to the needy persons at a higher rate of interest.
Therefore, there is a fixed and minimum margin of profit in banking operations.
Besides, these banks also charge for the services rendered to the customers and
add the profit.
(v) Nature of agent:

Banks act as an agent of the customer. They provide variety of agency

services, besides the basic function of accepting deposits and lending money.
Fund transfer, credit cards, tele banking, cheque clearing, bills collection are
some of the services provided by the banks as an agent.
CHAPTER 2: SERVICES OR FACILITY PROVIDED BY
BANKS.
(2) Products and Services offered by banks

2.1 Types of deposits:

A bank normally accepts the following types of deposits.

(a) Saving Deposit:

The main objective of this deposit is to promote savings of the people. It is

intended primarily for small-savers. This is a restriction on withdrawals from
these deposits. Minimum Rs. 1000 can be deposited to open this account. A
cheque book facility is available only with higher minimum balance. It carries
low rate of interest i.e. 3.5% to 4% depending upon the type of a bank.
Overdraft facility is not available in this account.

Saving deposits are meant for the households of the lower and middle
income classes income to meet their future needs and earn an income from their
savings. The need of keeping cash reserves against such deposits is
comparatively larger than the fixed deposits because of the restrictions on the
number of withdrawals. There has been tremendous growth of saving deposits
of all scheduled commercial banks during the last few decades due to the
growth of banking habits and facilities.

(b)Current Deposits:

A current account is normally opened by businessmen for their convenience.

Money can be deposited and withdrawn at any number of times.Withdrawls are
made by cheques only. Usually, a bank does not allow any interest on this
account. The current account is opened because of two important privileges

(i) Overdraft facilities

(ii) Other facilities like collection of cheques, transfer of money and for other
services.

The current account holders have to keep certain minimum balance as per rules
of the bank. They are provided a statement of account instead of a Pass Book. A
current account is a running and active account that may be operated any
number of times during a working day.

Current accounts are suitable for the requirements of big businessmen,

companies, institution, public authorities whose banking transactions are
numerous on every working day. The primary objective of a current account is
meant for the convenience of customer who are relieved of the task of handling
cash themselves and to take the risk inherent therein.

(c)Fixed Deposit:

A fixed deposit is one, which is repayable after the expiry of a certain period
determined by the depositor. The period may be 30 days to 5 years or more. The
rate of interest depends upon the maturity period. Normally the deposit is not
refunded before the expiry of maturity. It is also known as Time Deposit. An
application form is filled up by the depositor for opening an account stating the
Name, address, amount of deposit, Period of deposit, Name of nominee and
his/her signature. Interest is paid as per the terms and conditions. Income tax
should be deducted from the interest paid if it is above the limit prescribed in
the Act. A fixed deposit account can be opened in the names of two or more
individuals, which is called joint account.

A fixed deposit is repayable on the expiry of a specific period, chosen by the

depositor to suit his purpose and to enable him to get back the money as and
when he needs it. As the date of repayment is determined in advance, the banker
need not keep more cash reserves against it. The banker can utilize such amount
more profitably.Therefor the rate of interest on fixed deposit is higher than other
kinds of deposits. Fixed deposits are more popular in India and constitute more
than 50% of the total bank deposit.

(d)Recurring Deposit:

It is one form of savings deposit. Depositor has to open an account with a fixed
amount with a fixed maturity period and then deposit the same amount every
month with the bank. It will enable the depositor to meet his target of expenses.
The amount gets accumulated together with interest. Normally, higher rate of
interest is paid depending upon the maturity period. The depositor gets a big
amount at maturity. Pre-maturity withdrawals are not allowed. But the depositor
can get a loan on the security of the deposit to the extent of 75% of the deposit
amount and the interest of 2% over the recurring deposit rate is charged by the
bank on this loan.

It is also called as cumulative deposit account. It is also called as cumulative

deposit account. It is intended to inculcate the habit of saving on a regular basis.
An inducement is offered in the form of higher rate of interest. Banks open such
accounts for periods ranging from one year to 10 years. The rate of interest is
normally equal to that of the fixed deposit account. A recurring deposit account
can be opened by any person, more than one person, jointly, or by a guardian in
the name of a minor. Accumulated amount with interest is paid after a month of
the payment of the last installments.

2.2 Opening a New Account:

A customer enters into relationship with a banker by opening an account with

the bank. The banker should be very careful in opening an account in the name
of the customer. Any person can apply in the prescribed form for opening an
account in his name. Banks provides separate application form for opening
saving and current accounts for individuals, partnerships, firms and companies.
The applicant is required to mention his/her name, occupation, full address and
specimen signature. The applicant is required to submit passport size
photograph and proof of residence.

(3) Advancing Loans:

The commercial banks provide loans and advances in various forms

to their customers. They are given bellows:

(a) Term Loans:

The bank advances a lump sum amount for a certain period, of an agreed rate
of interest. The entire amount is paid to the borrower or credited to his account.
The borrower can issue cheques to other parties out of the loan amount credited
to his current account. The interest is charged for the full amount of loan at
periodical intervals. The loan is repaid in installments together with interest.
Term loan may be medium term, or long term loan. Medium term loans are
granted for a period from one year to five years and long-term loans are granted
for more than five years.

(i) Short Term and Medium Term Loans:

Commercial banks in India provide only short-term credit to the business firms.
They have also started providing medium term finance to the businesses. Short
and medium term loans are advances, made by banks, with or without security.
The loan once repaid in full or in part can not be drawn again by the borrower
unless the banker sanctions a fresh loan. The rate of interest charged by a bank
in the case of the loan is normally lower than the interest on cash credits and
overdrafts, because it involves the lower cost of maintenance on account of not
frequent operation of the account and the bank gets interest on the total amount
sanctioned whether the borrower withdrawals the whole amount of loan or not.
The short and medium term loans are granted for meeting working capital
requirements.

(ii) Long Term Loans:

With effect from April, 1997, stipulations for borrowers with credit limits of
over Rs. 50 crores were withdrawn. Banks are now free to provide need based
finance required by borrowers on their own, subject to observance of exposure
norms or with other banks. They may also adopt syndication route as an
alternative to sole / multiple banking concept of consortium arrangement that
suits the borrower and the financing banks. The loan policy in respect of each
broad category of nature is to be laid down by every bank with the approval of
its board. The financial institutions and banks, while granting long term loans to
borrowers incorporate certain covenants in the loan agreement to protect their
interest.

(b) Overdraft:

This facility is given to holders of current accounts only. This is an arrangement

with the bankers thereby the customer is allowed to draw money over and above
balance in his /her account. This facility of overdrawing his account is generally
pre-arranged with the bank upto a certain limit. It is a short-term temporary fund
facility from bank and the bank will charge interest over the amount overdrawn.
This facility is generally available to business firms and companies.

(c) Cash Credit:

Cash credit is a form of working capital credit given to the business firms.
Under this arrangement, the customer opens an account and the sanctioned
amount is credited with that account. The customer can operate that account
within the sanctioned limit as and when required. It is made against security of
goods; personal security etc. on the basis of operation, the period of credit
facility may be extended further. One advantage under this method is that bank
charges interest only on the amount utilized and not on total amount sanctioned
or credited to the account. Reserve bank discourages this type of facility to
business firms as it imposes an uncertainty on money supply. Hence this
method of lending slowly phased out from banks and replaced by loan accounts.
Cash credit system is not use in developed countries.

(d) Discounting of Bills:

Discounting of Bills may be another form of bank credit. The bank may
purchase inland and foreign bills before these are due for payment by the
drawee debtors, at discounted values, i.e., values a litter lower than the face
values. The baker’s discount is generally the interest on the full amount for the
unexpired period of the bill. The bank reserves the right of debiting the accounts
of the customers in case the bills are ultimately not paid, i.e., dishonoured. The
bill passes to the banker after endorsement. Discounting of bills by banks
provide immediate finance to sellers of goods. This helps them to carry on their
business. Banks can discount only genuine commercial bills i.e., those drawn
against sale of goods on credit. Banks will not discount Accommodation Bills.

(4) Loans and Advances:

It includes both demand and term loans, direct loans and advances given to all
type of customer mainly to businessmen and investor against personal security
or goods of movable or immovable in nature. The loan amount paid in cash or
by credit to customer account which the customer can draw at any time. The
interest is charged for the full amount whether he withdraws the money from his
account or not. Short term loans are granted to meet the working capital
requirements where as long term loans are granted to meet the working capital
requirements where as long term loans are granted to meet capital expenditure.
VARIOUS TYPES OF LOANS PROVIDED BY BANKS:

(1)CONSUMER DURABLE LOANS:

Consumer durables loans cover purchase of durables such as refrigerators,

washing machines, air-conditioners, colour televisions, music system,
etc.Eligibility criteria for this kind of loan is 21 to 60 years of age and gross
salary of Rs 4,500 per month or annual business of self-employed income of Rs
45,000.the loan amounts are sanctioned in the range of rs.7, 500 to Rs
90,000.most of the financiers required a down payment to be made by the
borrowers. Repayment period is about 12 to 36 months. Usually no collateral
security is required. Interest rate is charged at a flat rate ranging between 7.5%
to 15%.

(2)HOME LOANS:

There are varieties of home loans provided by the banks. Home Purchase Loan,
Home Improvement Loan, Home Construction Loan, Home Extension or
conversions Loan are the examples of home loans. The primary concern of a
bank is to determine the loan amount that the borrower is comfortably able to
repay. The repayment capacity is determined by taking into account the factors
such as income, age, qualification, number of dependents, spouse’s income,
assets, liabilities and saving’s history of the borrower. The document required
includes Agreement to sell, title deeds, approved plans and clearance certificate.
Repayment period options are generally from 5 to 20 years. Repayment is
normally taken in Equated Monthly Installments (EMI) by way of post-dated
cheques. The security of the loan is a first mortgage of the house property to be
financed normally by way of deposit of title deeds. Rate of interest is charged is
fixed or floating to be decided by the borrower. Processing fees are charged is
fixed or floating to be decided by the borrower. Processing fees are charged by
the banks. The borrower has to pay documentation charges, stamp duty etc.
 Documents required

Salaried Self Employed Self Employed

professional Non professional

Application form Yes Yes Yes

with Photograph

Proof of identity Yes Yes Yes

Proof of residence Yes Yes Yes

Income documents Last 3 months salary Proof of Business Proof of Business

slips, from 16/ITR, existence, last 3 existence, last 3
last 6 months bank years P&L + years P&L +
statements. Balance Sheet + IT Balance Sheet + IT
Returns, Last 6 Returns (Self &
months bank business), Last 6
statements months bank
statements (Self and
business)

Processing Fee Yes Yes Yes

cheque

PAN Card Yes Yes Yes

(3)VEHICLE LOANS:

Banks provides loans to purchase car, scooter, motor, cycle, and auto rickshaw
and taxi etc.The age of the borrower should be between 21 and 58 years. The
size of the loan amount depends upon the cost of the vehicle but normally, 80 to
90% of the cost of vehicle is financed by the banks. The borrower has to submit
income certificate ,proof of residence, registration certificate of vehicle,
insurance policy of the vehicles etc.The R-C book is endorsed for
hypothecation to the bank which itself is an adequate security for the
financier. The interest rate is charged on monthly basis on reducing balance or
at a flat rate. The borrower has to pay processing fees, advanced EMIs, stamp
charges, Registration charges and Insurance. Self-employed persons can avail
tax benefits on depreciation as well as on the interest paid on the amount
borrowed for the purchase of the vehicle.

(4)PERSONAL LOANS:

Personal loan is an all-purpose loan for which the end-use can be to meet any
personal requirements of the borrower. Any person above 21 years of age but
below 58 years whether salaried or self-employed can get personal loan from
the bank. The amount of loan is determined on the basis of capacity to repay
and the EMI should not exceed 30 to 40% of the net salary. The repayment
period is 3 to 5 years and these loans are unsecured because security is taken by
the bank except one or two sureties. Interest rate varies from time to time. At
present interest rates are between 12 to 15% pa. There is a processing fee of 1 to
3% of the loan amount sanctioned. There are no tax benefits to salaried people
but self-employed can charge the interest amount to their profession or business.
(5)EDUCATIONAL LOANS:

Indian banks have started giving education loans to the students between the age
group of 16 to 26 years. The past academic track record of the student is
considered for sanctioning the loan. The maximum loan amount is Rs.15 Lakhs
for studies abroad. The repayment capacity of the student, and parents or
guardians is of utmost concern to the bank. Usually no margin money is
required for loans up to Rs. 4 Lakhs and thereafter 5 to 15% margin is to be
borne by the student. Proof of residence, photograph, and proof of residence,
photograph, and proof of income of parents / guardian and academic documents
are required for sanctioning the loan amount. Repayment starts six months after
completion of the course or on commencement of a job whichever is earlier.
Some banks require collateral security or insurance policy at the time of
disbursal of the loan. Interest rates are decided by the RBI from time to time but
the rates are normally lower than other consumer loans. Interest is also charged
on a simple basis during the study period or up to commencement of repayment
period. Processing fees are charged by the banks for sanctioning the loan.
Income tax deduction is allowed in respect of repayment of loan taken for
educational purpose subject to certain conditions.. This loan is available only
for students whose annual family income does not exceed Rs. 1, 00,000. The
loan has to rapid together with interest within five years from the date of
completion of the course. Studies in respect of the following subjects / areas are
covered under the scheme.

(i) Medical and dental course.

(ii) Engineering course

(iii) Chemical Technology

(iv) Management course like MBA

(V) Law Studies

(vi) Computer Science and Applications.

(6) Loans against Shares/Securities:

Commercial banks provide loans against the security of shares/ debentures of

reputed companies. Loans are usually given only upto 50% value (Market
Value) of the shares subject to a maximum amount permissible as per RBI
directives. Presently one can obtain a loan upto Rs. 10 Lakhs against the
physical shares and upto Rs. 20 Lakhs against dematerialized shares.

(7) Loan Against Savings Certificates:

Banks are also providing loans upto certain value of saving certificates like
National Saving Certificate, Fixed Deposit Receipt, Indira Vikas patra, etc. the
loan may be obtained for personal or business purposes.

(8) Securitizations of Loans:

Banks are recently trying to securtise a part of their part of loan portfolio and
sell it to another investor. Under this method, banks will convert their business
loans into a security or a document and sell it to some Investment or fund
Manager for cash to enhance their liquidity position. It is a process of
transferring credit risk from the banker to the buyer of securitized loans. It
involves a cost to the banker but it helps the bank to ensure proper recovery of
loan. Accordingly, securitizationss is the process of changing an illiquid asset
into a liquid asset.
(3) Agency Services:

(i) Collection of cheques, dividends, interest:

As an agent the bank collects cheques, drafts, promissory notes, interest,

dividends etc., on behalf of its customer and credit the amounts to their
accounts. Customers may furnish their bank details to corporate where
investment is made in shares, debentures, etc. as and when dividend, interest, is
due, the companies directly send the warrants/ cheques to the bank for credit to
customer account.

(ii) Payment of rent, insurance premiums:

The bank makes the payments such as rent, insurance premiums, subscription,
on standing instructions until further notice. Till the order is revoked, the bank
will continue to make such payments regularly by debiting the customer’s
account.

(iii) Dealing in foreign exchange:

As an agent the commercial banks purchase and sell foreign exchange as well
for customer as per RBI Exchange control Regulations.

(iv) Purchase and sale of securities:

Commercial banks undertake the purchase and sale of different securities such
as shares, debentures, bonds etc., on behalf of their customers. They run a
separate ‘Portfolio Management Scheme’ for their big customers.

(v) Act as trustee, executor, attorney, etc.:

The banks act as executors of will, trustees and attorneys. It is safe to appoint a
bank as a trustee than to appoint a bank as a trustee than to appoint an
individual. Acting as attorneys of their customers, they receive payments and
sign transfer deeds of the properties of their customers.

(vi) Act as correspondent:

The commercial banks act as a correspondent of their customers. small banks

even get travel tickets , book vehicles, receive letters etc. on behalf of the
customers.

(vii) Preparations of Income-Tax Returns:

They prepare income-tax returns and provide advices on tax matters for their
customers. For this purpose, they employ tax experts and make their services
available to their customers.

(4) General Utility Services:

The General utility services include the following:

(i) Safety Locker Facility:

Safekeeping of important documents, valuables like jewels are one of the oldest
services provided by commercial banks. ‘Lockers’ are small receptacles which
are fitted in steel racks and kept inside strong rooms known as vaults. These
lockers are available on half-yearly or annual rental basis. The bank merely
provides lockers and the key but the valuables are always under the control of
its users. Any customer cannot have access to vault. Only customers of safety
lockers after entering into a register his name, account number and time can
enter into the vault. Because the vault is holding important valuables of
customers in lockers, it is also known as ‘Strong Room’.
(ii) Payment Mechanism or Money Transfer:

Transfer of funds is one of the important functions performed by Commercial

banks. Cheques and credit cards are two important payment mechanisms
through banks. Despite an increase in financial transactions, banks are
managing the transfer of fund process very efficiently. Cheques are also cleared
through the banking system. Correspondent banking is another method of
transferring funds over long distance, usually from one country to another.
Banks, these days employ computers to speed up money transfer and to reduce
cost of transferring funds. Electronic Transfer of funds is also known as
‘chequeless banking’ where funds are transferred through computers and
sophisticated electronic system by using code words. They offer Mail Transfer,
Telegraphic Transfer (TT) facility also.

(iii) Traveller’s cheques:

Travellers cheques are used by domestic travellers as well as by international

travelers. However the use of travellers cheques is more comman by
international travellers because of their safety and convenience. These can be
also termed as a modified form of travellers letter of credit.

A bank issuing travelers cheques usually have banking arrangement with

many of the foreign banks abroad, known as correspondent banks. The
purchaser of travellers cheques can encash the cheques from all the overseas
banks with whom the issuing bank has such an arrangement. Thus travellers
cheques are not drawn on specific bank abroad. The cheques are issued in
foreign currency and in convenient denominations of ten, twenty, and fifty. One
hundred dollar, etc. The signature of the buyer / traveller is written on the face
of the cheques at any time of their purchase. The cheques also provide bank
space for the signature of the traveler to be signed at the time of encashment of
each cheque. A traveller has to sign in the blank space at the time of drawing
money and in the presence of the paying banker. The paying banker will pay the
money only when the signature of the traveller tallies with the signature already
available on the cheque.

A traveller should never sign the cheque except in the presence of paying
banker and only when the traveller desires to encash the cheque. Otherwise it
may be misused. The cheques are also accepted by hotels, restaurants, shops,
airlines companies for respectable persons. Encashment of a traveller cheque
abroad is tantamount to foreign exchange transactions as it involves conversion
of domestic currency in to a foreign currency.

When a traveler cheque is lost or stolen, the buyer of the cheques has to give
a notice to the issuing bank so that stop order can be issued against such lost /
stolen cheques to the banks where they are permitted to be encashed. It is also
difficult to the finder of the cheque to draw cash against it since the encasher
has to sign the cheque in the presence of the paying banker. Unused travellers
cheques can be surrendered to the issuing bank and balance of cash obtained.

The issuing bank levies certain commission depending upon the number and
value of the travelers cheques issued.

(iv) Circular Notes or Circular Letters of Credit:

Under circular Letters of Credit, the customer / traveller negotiates the drafts
with any of the various branches to which they are addressed. Thus the traveller
can obtain funds from many of the branches of banks instead only from a
particular branch. Circular Letters of Credit are therefore a more useful method
for obtaining funds while travelling to many countries.

It may be noted that travellers letter of credit are usually paid for in
advance. In other words, the traveller first makes payments to the issuing bank
before obtaining the Circular Notes.
(v) Issue of travellers cheques:

Banks issues travellers cheques to help carry money safely while travelling with
India or abroad. Thus, the customers can travel without fear, theft or loss of
money.

(vi)Letters of Credit:

Letter of Credit is a payment document provided by the buyer’s banker in

favour of seller. This document guarantees payment to the seller upon
production of document mentioned in the Letter of Credit evidencing dispatch
of goods to the buyer. The Letter of Credit is an assurance of payment upon
fulfilling conditions mentioned in the Letter of Credit. The Letter of Credit is an
important method of payment in international trade. There are primarily 4
parties to a letter of credit. The buyer or importer, the bank which issues the
letter of credit, known as opening bank, the person in whose favour the letter of
credit is issued or opened (The seller or exporter, known as ‘Beneficiary of
Letter of Credit’), and the credit receiving / advising bank. The Letter of Credit
is generally advised / sent through the seller’s bank, known as Negotiating or
advising bank. This is done because the conditions mentioned in the Letter of
Credit are, in the first instance; have to be verified by the Negotiating Bank. It is
mostly used in international trade.

(vii) Acting as Referees:

The banks act as referees and supply information about the business
transactions and financial standing of their customers on enquiries made by
third parties. This is done on the acceptance of the customer and helps to
increase the business activity in general.
(viii) Provide Trade Information:

The commercial banks collect information on business and financial conditions

etc., and make it available to their customer to help plan their strategy. Trade
information service is very useful for those customers going for cross-border
business. It will help traders to know the exact business conditions, payment
rules and buyers financial status in other countries.

(ix) ATM Facility:

The banks today have ATM facilities. Under this system the customers can
withdraw their money easily and quickly and 24 hours a day. This is also known
as ‘Any Time Money’. Customers under this system can withdraw funds i.e.,
currency notes with a help of certain magnetic card issued by the bank and
similarly deposit cash / cheque for credit to account.

(x) Gift Cheques:

The commercial banks offer Gift cheque facilities to general public. These
cheques received a wider acceptance in India. Under this system by paying
equivalent amount one can buy gift cheque for presentation on occasions like
wedding, Birthday.

(xi) Accepting Bills:

On behalf of their customers, the bank accepts bills drawn by third parties on its
customers. This resembles the letter of credit. While banks accept bills, they
provide a better security for payment to seller of goods or drawer of bills.

(xii) Merchant Banking:

The commercial bank provides valuable services through their merchant

banking divisions or through their subsidiaries to the traders. This is the
function of underwriting of securities. They underwrite a portion of the public
issue of shares, debentures and bonds of joint Stock Companies. Such
underwriting ensures the expected minimum subscription and also convey to the
investing public about the quality of the company issuing the securities.
Currently, this type of services can be provided only by separate subsidiaries,
known as Merchant Bankers as per SEBI regulations.

(xiii) Advice on Financial Matters:

The commercial banks also give advice to their customers on financial matters
particularly on investment decision such as expansion, diversification, new
ventures, raising of funds etc.

(xiv) Factoring Service:

Today the commercial banks provide factoring service to their customers. Its is
very much helpful in the development of trade and industry as immediate cash
flow and administration of debtors’ accounts are taken care of by factors. This
service is again provided only by a separate subsidiary as per RBI regulations.

BASIC ITEMS TO BE CONSIDERED:

To enhance the customer service the following aspects may be considered.

(many of the points are already under implementation by banks).they can be
classified under the following categories:

(1) Deposit accounts.

(2) Remittances.
(3) Other services

Let us discuss these items by one by one in detail

(1)Deposit Accounts:

(a) Introduction of Accounts:

All deposit accounts should be properly introduced. Passport and postal

identification cards are deemed to be adequate identification. In terms of RBI
instruction every account holder is required to produce two passport size recent
photographs to the bank for opening any type of account with a bank. Similarly,
as per Income Tax Regulations a depositor desirous of opening a Fixed Deposit
Account in excess of Rs.50, 000,needs to furnish his/her Income-Tax permanent
Account Number.(PAN)

(b) Transfer of Accounts:

The instruction of a customer for transfer of his deposit account from one
branch to another should be carried out immediately on receipt of and in
accordance with his instructions. It should be ensured that along with the
balance in the account, the relative papers, such as, the account opening form,
specimen signature cards, standing instructions, stop payment instructions, etc.
are also simultaneously transferred. After effecting the transfer the customer
should be informed of such transfer at his last and new address. On receipt of
instruction of the transfer from the transferor branch, the account should be
opened as per instructions of the transferer branch and this should be intimated
to the customer.

No charges should be collected fir transfer of accounts.

(c) Pass Books/Statements of Accounts:

Pass Books and statement of Accounts should be written accurately, neatly

and legibly.

Statements of accounts to current Account to Current Account Holders be sent

within 5 days from the due date. These due dates should be marked in the
relative ledger folios and statements of accounts should be prepared sufficiently
early to be sent to the customer on due dates. Entries in pass Books should be
done then and there and pass Books should be returned to the customers without
making them wait long.

(d) Standing Instruction:

Standing instructions refer to an authority given by the customer to the bank

to debit his accounts periodically for certain specified purposes like payment of
rent, telephone bills, electricity charges, etc.

(i)Standing Instructions are accepted on all types of Accounts.

(ii)Standing Instructions should be carried out on the due dates without

Fail
Whenever the standing Instruction could not be carried out for any reason,
the account –holder should be intimated in time so that the least inconvenience
and damage is caused to him.

(e) Advises of Credits and Debit made to Accounts:

Credit and debits made to the accounts of customers including those on

account of outstation cheques/bills realized, should be intimated to the
customers by post / Local delivery on the date of debit / credit or latest by the
next day.
 Cheques and bills returned unpaid should be dispatched along with the debit
advices by the local delivery or by registered post on the day on which the debit
is made or latest by the next day.

(f) Safe Custody of Deposit Receipts:

Customer may keep their Term Deposit Receipts in safe custody with the
bank free of charge.

(g) Cash payment After Normal Banking Hours:

To meet the urgent requirements of customer, in exceptional circumstances,

personal cheques for reasonable amounts presented by the drawer himself, may
be paid even after the normal banking hours, but within the working hours..

(h) Any Branch Transactions:

Many banks are now providing deposits and withdrawals facility through
any of the branches although the account is maintained in a particular branch.
This type of operations is usually restricted in metro Politian cities. Few banks
like Indian Overseas Bank have introduced this type of facility.

(i) Teller System:

Under this system tellers will pay against cheque drawn on savings bank as well
as current accounts up to certain amount. It is usually up to a maximum of
Rs.5,000 to Rs 10,000 per payment in an account, per day.

In branches where the average payments handled by the teller is less than 100
per day, tellers will also accept cash receipts up to certain limit and hand over
the relative counter folios to the customers after signing the chllans.
(2) Remittances:

Banks are financial intermediaries. Apart from mobilizing deposits from savers
and lending them to needy borrowers, banks help the savers and borrowers to
transfer funds from one place to another in secured way without physically
moving the funds.

(a) Issue of demand drafts:

Demand drafts should be issued to any person who applies for it, irrespective of
whether he has an account with the bank or not. Banks will not accept more
than Rs.20000 in cash for issue of drafts as per income tax regulation. The bank
levies a charge for issue of every demand draft. Drafts are basically bill of
exchange. As in the case of Bill of Exchange, a draft is drawn by one party on
another party and made payable to the drawer himself or someone else. Demand
drafts are drafts drawn by a bank on its own branches at different at different
places and made payable to third parties or purchaser of the draft. The drafts can
be crossed “Account Payee” to restrict its transfer.

(b) Mail Transfer:

Under Mail Transfer system, the remitter of funds is required to deposit the
amount required to be remitted together with a challan detailing the particulars
of remittance. This information will relate to the value of funds to be
transferred, the bank account number and address of the receiver of funds,
particulars of remitter and purpose of remittance etc. under this system it is
necessary that both the parties to the remittance maintain bank accounts with the
same bank, albeit with different branches / places. This method of transfer of
fund is called Mail Transfer since the advice of remittance is sent by mail / post
by the remitting bank to the branch where the beneficiary has his accounts. On
receipt of remittance information, the receiving branch will credit the account of
the beneficiary. Thus it is an intra bank fund transfer.

The banks do not accept large cash (usually restricted to Rs.20,000/-) for
remittances. If the required remittance is large, bank will ask the remitter to
draw a cheque on his accounts for the purpose of remitting funds. Banks also
charges fees for these types of services. This facility of fund transfer is usually
provided to their own customers. Funds can be transfer only between branches
of the same bank and not between one bank to another bank. It is also necessary
that both the parties to the transfer maintain account with the same bank. It is
however a slow method for transfer of funds as advice regarding remittance is
forwarded only through post. The paying branch will credit the account of the
beneficiary only on receipt of the advice received from the remitting bank.

(c) Pay Order:

Pay Orders are drafts issued by an office / branch of a bank on itself. In other
words the issuing branch / office and paying branch / office are one and the
same. Pay orders are issued by banks only against receipt of funds first.
Suppose, a candidate desires to remit certain examination / admission fees to a
particular education authority. In case both the candidate and the education
authority happen to maintain accounts with the same branch, then the candidate
may remit the fees by obtaining a Pay Order instead of a demand draft can be
obtained. Thus, the main difference between pay order and a demand draft is
that whereas a demand draft is issued by a bank on any of its branches, a pay
order is issued on itself. In both the cases the bank will issues the instruments
only after receipt of funds first.
(d) Electronic Funds Transfer:

Normally remittance or transfers of funds between banks get originated by a

paper instruments. For example, under Mail Transfer, the remitter has to fill up
necessary challan and give it to the bank along with a cheque or cash for
transfer of funds. Under Electronic Funds Transfer the transaction of funds
transfer is initiated through electronic equipment and system or telephone or
computer devices, etc.

In India, the Reserve Bank Of India has introduced Electronic Funds Transfer
(EFT) Scheme to assist banks in providing their customers fund transfer facility
from one account to another either with the same bank or with different banks.

Under this system a customer desiring to remit certain amount to another place
fills in the prescribed EFT application form together with the details like,
beneficiary’s name, bank account number, name of the bank and branch,
location of the branch, etc. and hands over the form and a cheque drawn on his
account. The remitting bank through one of its designated branches for this
purpose transmits the details of transfer to the Reserve Bank of India. The
Reserve Banks at the transaction originating centers consolidates all such
transfer advice and transmit information of transfer to its various centers for
advising the concerned banks for providing the requisite credit to the
beneficiaries. Thus, it acts as an intermediary between the remitting bank and
receiving bank and effects the transfer. The reserve bank allows up to Rs. 2.00
crore per transactions to be transferred in this way. Further it charges only Rs.
5.00 per transaction to banks. The bank will charge separately fees on their
customers for availing of this facility. However, fees charged by banks for
transfer of funds under EFT systems will be smaller as compared to remittance
facilities under Money Transfer and demand drafts. Fund transfer under EFT is
possible from any branch to branch with the same bank or with other banks.
(3) Other Services:

(a) Nomination facility:

All banks have been directed by RBI to provide nomination facilities in respect
of personal accounts like saving bank accounts. These facilities should be
incorporated in the opening form itself. This facility should be extended even
without asking for by the customer. In the unfortunate event of death of the
customer, the bank will be obliged to pay the outstanding balance in the account
by the nominee of the account holder. This quickens the pace of settlement of
funds after the death of the account holder without involving any hassles. The
nomination facility is also available for deposits made with registered NBFCs.

(b)Exchange of soiled notes:

Many times we come across badly soiled currency notes or torn notes. As per
RBI instructions all branches of public sector banks must accept soiled notes
and torn notes (not exceeding two pieces and subject to certain other conditions)
for exchange against good currency notes without any charges. The RBI from
time to time issues advertisement in this regard for the knowledge of public.
These notes can also be given along with good notes while depositing money
into the accounts.

(c) Mutilated Currency Notes:

Supposing we happened to have mutilated currency notes with more than two
pieces or the note is cut through a number panel on the currency notes. The RBI
has prepared a guideline known as “RBI Note Refund Rules” for paying value
against mutilated notes. Public sector and private sector bank branches having
currency chests have been directed to accept the mutilated notes and give good
notes in exchange subject to fulfillment of certain conditions.
(d) Custodial Services:

Apart from offering safety Locker Facility, banks also provides custodial
services for holding valuable financial instruments, important legal deeds and
document of customers against payment of periodic fees. It should be
remembered that under Locker Facility the banks make available Lockers on
rental basis for safe keeping of valuables at customer risk.
CHAPTER 3: IT SERVICES PROVIDED BY THE BANKS

3.1 Electronic banking

3.2 Automated Teller Machine

3.3 Tele Banking

3.4 Credit Cards

(3) IT. SERVICES PROVIDED BY THE BENKS.

3.1.Electronic banking:
Electronic banking means using electronic devices for carrying out banking
transaction. It is conduct of banking electronically. It calls for elimination of
paper-based transaction and radical change in the banking operations. The
transactions are carried out through internet, extra-net and intra-net.Therfore, it
is banking on the information super high-ways on the frontier of internet.

Electronic banking enables the customers to perform the basic banking

transaction by sitting at their office or at homes through PC or LAPTOP. The
customer can access the banks web site for viewing their account details and
perform the transaction on accounts as per their requirements. Bank provides
additional delivery channels to their customers which are more convenient to
customers. They are also cost effective to the banks. These delivery channels
are –tele-banking internet banking, mobile banking, and ATM.E-banking
facilities banking transactions round the clock globally.

Electronic banking is basically Internet based. Banking services such as

remittances, credit cards, deposit, etc.and other banking information can be
made available with easy access to customers on internet. Customer can use
these services with no restricted office hours, no queues, and no tellers and
without waiting. Several network innovation for E-banking can be visualized
such as Smart card, Electronic data interchange,etc.however,banking operation
have to be guarded against unauthorized access by intruders.

Today most of the basic banking transaction can be performed conveniently

through internet banking. The following are some of the basic functions:

(1) Account enquiry.

(2) Fund transfer.

(3) Payment of bills.

(4) Request for issue of cheque book and draft.

(5) Statement of accounts.

(6) Access to latest schemes.

(7) Access to rates of interest.

(8) Access to other service charges.

Thus, electronic banking has the following advantage.

(1) Round the clock banking.

(2) Convenient banking.

(3) Low cost banking.

(4) Quality banking.

(5) Speed banking.

(6) Service banking.

3.2 AUTOMATED TELLER MACHINE:

The trend in banking has evolved from a cash economy to cheque economy and
there on to the plastic card economy. One of the channels of banking service
delivery is the ATM or the automated teller machine, whose traditional and
primary use is to dispense cash upon insertion of a plastic card and its PIN or
personal identification number.

Bank offer this card as a free service to its deposit holders.ATM cards are used
to withdraw cash from bank accounts when bank customers are closed or even
when counters are open-to save on time. Current and saving account holders of
a bank who hold a certain minimum balance in the account are issued an ATM
card. The card is a plastic card with a magnetic strip with the account number of
the individual. When the card is inserted into ATM, the machines sensing
equipment identifies the account holder and asks for his or her identification
code number. Usually this is referred to, as the PIN and is issued by the bank’s
computers.

The advantages of an ATM over personal teller are as follows:

(1) ATM’s can be accessed round-the-clock.

(2) No employee interface is necessary.

(3) Cash and cheques can be deposited and statement of accounts requirement,
transfer of funds etc.can be effected.

(4) It offers a cost-effective solution alternative to labour costs.

(5) Automatic and instantaneous accounting is possible.

(6) To depositors who do not have a credit card, ATM Offers cash availability
when necessary.

(7) Scope for frauds, robberies and misappropriations is reduced considerably if

the PIN is maintained.

(8) ATM eliminates the need for customers to travel to the branch where his or
her account is maintained, if the ATMs are conveniently located and networked.

3.3 TELE BANKING:

Phone Banking or tele banking is a banking service offered by banks to enable

customer to access their account for information or transactions.similer to the
ATM pin (T-Pin) is provided to each account holder. The customer can call the
exclusive tele banking numbers and provide the details to identify himself or
herself to the automated voice. Typically, the bank account number and the T-
PIN are asked for.

The customer is given access to his account or transacts on his account or

transact on his account when the respective number matches the computerized
system. Though cash withdrawal and deposit are not enabled through this
service, many banks offer cash delivery or collection service to ascertain classes
of customers.

3.4 Credit Cards:

The credit card can be defined as a small plastic card that allows the holder to
buy goods and services on credit and to pay at fixed intervals through the card
issuing agency. The credit card realses the customer from botheration of
carrying cash and ensures safety. We can say that credit card is a passport to
safety, convenience, prestige, and credit. A person who earns a salary of Rs
60,000 per annum is eligible for card.
Operation of the credit card:

Credit cards operate quite differently from cheque cards. A cheque card
guarantees payment of a cheque, whereas credit card guarantees against a sales
voucher signed by the credit card holder.

Each credit card bears a specimen signature of its holder and it’s embossed by
the issuing bank with the holder’s name and number. When goods and services
are supplied, the holder gives his card to the supplier who has agreed to join the
scheme. The supplier places the card in a special imprinter machine, which
records the holder’s name and number on a sales voucher. The particulars of the
transactions are added on the voucher. The holder signs the voucher and the
supplier compares the signature with that of the card.

He then sends the voucher to the issuing bank which pays the amount claimed
less a service charge(normally between three per cent to seven per cent).At the
end of the month, the bank sends a fully itemized statement to its card holder
who must remit his cheque for the total amount.

The credit card customers are typically extended an unsecured credit for at least
30 days. Beyond this period, the bank charges interest on outstanding bills.
However, some cardholders may prefer to pay off their dues before the free
credit period. Such cardholders are called convenience users.
Benefits to the cardholders:

The credit card provides following advantages to the cardholders:

(1) The card holder can purchase goods and services at a large number of outlets
without cash or cheque. The card is useful in emergency and can save
embarrassment.

(2) The risk factor of carrying cash and storing cash is avoided. It is convenient
for him to carry a credit card and he has trouble free travel and makes purchases
without carrying cash or cheque

(3) A month’s purchase can be settled with a single remittance, thus, tending to
reduce bank and handling charges.

(4) The cardholder has a period of free credit usually between 30 to 50 days of
purchase.

(5)Credit can be availed with minimum formality.

(6) The credit card saves trouble and paperwork to travelling businessmen.

(7) The cardholder has the option of taking extended credit up to a prearranged
limit without reference to anyone, in addition to an initial credit and interest-
free period. Further revolving credit becomes automatically available as the
outstanding balance is reduced.

(8) It gives them exposure to banking operations since systematic accounting

for spending and payment is routed through banking channels.
(9) The cardholder has the convenience for making a single systematic
accounting for spending and payment for the purchases made during the month
rather than many payments by various means.

(10) It also extends additional facilities like free insurance coverage, discount
on purchases, free travel booking.

(11) Credit card is considered as a status symbol.

Other Types of cards:

Debit Cards:

Debit cards will offer direct withdrawal of funds from a customer’s bank
account. The spending limit is determined by the user’s bank depending upon
available balance in the account of the user. It is a special plastic card connected
with electromagnetic identification that one can use to pay for things purchased
directly from its bank account. Under the system, cardholder’s accounts are
immediately debited against purchase or services to the computer network.
Hence, under debit card the card holder must have adequate balance in his
account. The system is intended to replace cheque system of payment.

Cheque Cards:

It is a card given to the customer by the bank that he must show when he writes
a cheque which promises that the bank will pay out the money written on the
cheque. Under cheque card system, the card holder is given a card and a cheque
book. Under cheque card system, the card holder is given a card and a cheque
book. He has to use the cheque while purchases are made and the trader gets
guaranteed payment. The customer does not get free credit, he has to keep
sufficient balance in his account or the bank will provide overdraft upto a
specified limit, on interest payment basis.
Charge Cards:

A small, usually plastic card provided by an organization with which one may
buy goods from various shops, etc.The full amount owed must then be paid on
demand. In credit cards, the cardholder gets credit or loan for payment of
periodical bill when sufficient balance is not available in their accounts. In a
charge card such credit facilities are not available. The periodical bill amount is
paid off by charging it to customer account. A fee is also payable by the
cardholder to the card issuing institution.

Smart Cards:

A smartcard enables the customer to perform various other banking functions

apart from the credit purchases. For an example, with, smart cards, we can draw
cash from ATM’s, we can verify entries in our accounts, seek information to
our accounts, and etc.This is possible because the card has an integrated circuit
with microprocessor chip embedded in the card for identification purposes. The
card can also perform calculations and maintained records.
CHAPTER =5 Findings, Analysis, and suggestion.

5.1 Introduction
5.2 Methodology of the Study
5.3 Analysis and Interpretation of Data
5.4 Findings
5.5 Suggestions
Banking Awareness:

Now a days banking is extremely important in the world’s economy. The

banking functions are the routine functions of one’s life. The emergence of
private sector banks has changed the whole scenario of the banking function in
the recent years.

Banks now a day play to greater stress on consumer banking in the coming
years, with a view to achieve higher market penetration and profitability. In the
pre-liberalization days, banking was considered as a chore you would like to
finish off as quickly as possible. Today, the scenario is totally different. The
busy business executive needs cash at any time, at all places and is willing to
pay extra for this service. New breed of financial services brand viz.
convenience banking, anywhere banking, tele-banking and on-line banking have
appeared on the banking landscape.

Thus, now all the banks have realized that technology is at the foundation
of all its functions and operations and to have end-to-end integrated paperless
systems and process. It is not only for convenience, but also to control the risk
and fraud better. Also, it gives improved tools for decision making planning,
managing expenses and increasing business. Even the productivity gains have
increased to major an extent. It also helps to give new and better innovative
products to the consumer. The main objective of this topic is to find out the
services provided by all the banks, which provide the customer the best
services.
METHODOLOGY OF THE STUDY

Statement of problem

All the banks in the city are providing different services to their account
holders. They have different services charged and different types of account to
cater to the need of their customer. The reason for selecting this topic is thus to
compare all the different services provided by different banks to give the
suggestion to improve the product in order to make it more competitive and
customer friendly.

OBJECTIVE OF THE STUDY

The subject matter or the scope of this research project is confined to the
comparison of the services provided by the different banks in the western
suburb area. The study also attempts to know the customer’s awareness about
the services provided how often they utilize these services.

SOURCES OF DATA

The study is based on primary data .primary data has been collected from
person having their account in different bank in western suburb area by filling
up well-structured questionnaire.

RESEARCH INSTRUMENT:

For the collection of primary data, properly structured questionnaire was used.
The questionnaire comprises different questions.

Sampling Process:

It is not feasible to go for a population surveys due to this numerous consumers

and their scattered location. Hence, marketers go for intelligent sampling.In this
research,30 respondents who were having their current account with private
banks and nationalized banks in western area of Mumbai. In this research
stratified and conveniences sampling method has been used for sampling
procedure.
Analysis and Interpretation of Data

Table 1: Account Holders in Different Banks

Particulars No. of respondent Percentage

National Banks 15 50
Centurion Banks 10 33
HDFC Banks 3 10
Any Other 2 7
Total 30 100
From the above table it is inferred that out of 30 respondent 15 (30%) having an
account with National Bank, 10 (33%) have an account with centurion Banks, 3
(10%) have an account with HDFC Bank and 2 (7%) have an account with other
banks.

7%

10%

National Banks
Centurion Banks
50%
HDFC Banks
Any Othe

33%
 Table 2: Services offered by the Banks
Services No. of Respondent Percentage

Net Banking 5 17

ATM 13 43

Bill Paid 3 10

Inter Branch 7 23

Any Other 2 7

Total 30 100

It is clear from the table-2 that the major banks provide facility of the net
banking. ATM bill paid and Inter Branch services to the customers.

7%
17%

23%
Net Banking
ATM
bill paid
inter branch
Any other

10%
43%

Table 3: Service Availed by Customer

 Services No. of Respondent Percentage

Net Banking 04 17

ATM 11 46

Bill Paid 02 8

Inter Branch 06 25

Any Other 1 4

Total 24 100

From the above table it can be observed that out of various services offered
17%, 46%, 8%, 23%, and 2% respondent are using the facility of Net Banking,
ATM, Bill Paid, Inter Branch, and other services respectively.

2%

20%
22%

net banking
atm
bill paid
inter branch
any other
13%

43%

Table 4: Customer Satisfaction of Different Services

 Services Fully Satisfied Average Unsatisfied
1 % 2 % 3 %

Net Banking 5 18 2 10 1 50
ATM 13 46 8 40 - -
Bill Paid 3 11 4 20 1 50
Inter Branch 6 21 5 25 - -
Any Other 1 4 1 5 - -
Total 28 100 20 100 2 100

Where 1 = Fully Satisfied, 2 = Average, 3 = Unsatisfied

The Level of customer satisfaction in the different banks is as follows:

It is clear from the data that the choice for opening account 57% and 21%
respondents give preference to National and Centurion Bank respectively. 23%
respondents prefer HDFC Bank while only 7% respondents prefer any other
bank.
 14%

35%
1
%
18%
2
%
3
%

1% 13%

19%

Table 5: Choice of Customer for Opening Account

 Bank No. of respondent percentage
National bank 17 57
Centurion bank 4 13
HDFC bank 7 23
Any other 2 7
Total 30 100

It is clear from the data that the choice for opening account 57% and 21%
respondents give preference to National and Centurion Bank respectively. 23%
respondents prefer HDFC Bank while only 7% respondents prefer any other
bank.

7%

23%

National Banks
Centurion Banks
HDFC Bank
Any Other
57%

13%

Table 6: Trust Towards Different Banks

 No. of respondent Percentage
Convenience 9 30
status 4 13
Services 5 17
Interest rate 2 7
Safety 10 33
Any other - -
Total 30 100

Table 6 provided the details of trust of people towards different banks. 33%
respondents have faith in the banking services of their solid safety measures. It
also shows that people want banks at their beck and call and provide them
convenient services at their door step.

30%
33%
convenience
status
services
interest rate
safety

7% 13%

17%

FINDINGS
(1) Still majority of people preferred to open an account in nationalized banks
of their long-standing trust in the above said banks.

(2) Amongst the services offered by banks in Western area, ATM takes the lead
So far as the concept of modern days services is concerned.

(3) People find the operation of ATM preferable to the other services provided
by the banks.

(4) A large majority of respondents found the modern day banking services

quite Satisfactory. There was only a small no. of respondents who still feel that

more in yet to come.

(5) Earlier national banks were considered time tested ones, so people had
deep-rooted faith in services offered by them but now they are tilting towards
the private sector banks and this is of the healthy competition given by the
latter.

(6) People of this Western area belt specially people belonging to Mumbai
district feel increase of its being a border town so they prefer to but their hard
earn money in a bank as a safety measures and secondly they feel that making
action in the banks of this area is quite convenient of the cooperative nature of
the staff.

SUGGESTIONS
(1)The use of e-banking services is still not up to the mark as expected by the
banks. This requires awareness among the customer about benefits of these
services. The customers should be educated about the benefit of these services.
This would help the bank in a long run.

(2) The machine, which was earlier used, as a tool for adding customer service
is now considered as a revenue earner. The maximum use of ATM is usually
done only for the purpose of cash withdrawal and balance inquiry, but in
Rajkot, it is just a mini bank where one can access most of its functions, which
would help the bank to reduce its burden at the branches. Moreover, there is an
need to increase the number of ATMs.

(3) The debit card is used only as a substitute for ATM. The customers do not
have faith in this facility. This requires awareness among the customers so that
they can make efficient use of the card and the facility. This in turn, will
Increase the flow of funds in the bank.

(4) The bank should also take necessary actions to promote their products
through proper media. Extensive and aggressive advertising is a must to survive
in the global scenario.

(5) Moreover, private banks should start the facility of cash credit and overdraft
to some of the preferred customers. This helps them to convert a substantial
Customer base of nationalized banks. They should also provide loans for
Purchase of premises, machinery etc.

(6) The fundamental thing that banks need to do is to built up an IT savy

customer base. In India due to various factors like illiteracy, the IT awareness of
the people is still very low. It is clear that the disposable income of the people is
growing, but many still have a mental block towards using IT related services,
due to various reasons like security apprehensions. Thus, the banks need to put
in major efforts towards educating the customer on this aspect.
Chapter = 5 Conclusion

5 Conclusion.

This study is conducted in order to get information about the western suburbs
area customers and their usage and awareness of the different products and
services of the Indian banking system and to know about the customer
satisfaction level towards the Indian banking system. Study shows that most of
the customers of the western area are highly educated. Secondly the trend of the
customer in the sense of age, majority of the customer are in the age of 21 to 40
years and most Of the customers are of the middle income level. Our findings
suggest that most of the Indian banking customers have adopted both banking
System, as about 57% of the customers have account in National Banks and
others Banks.. This shows that IBS is lacking many of the feature and the
requirement that their customer wants. Our study indicates that the customer’s
awareness level towards Indian banking products is good in some of the general
products such as current accounts, time deposit account. But most of the
Customers are unaware of the different Indian Financial products such as
Merchant Banking, Mutual Funds scheme etc.Regarding the Indian banking
selection criteria. Most of the customers have adopted Indian banking due to the
religious reasons, but there are some other factors that motivate the customers
for the adoption of the Indian banking system such as, bank efficiency in the
transaction, their Confidentiality to its customers, its working hours etc.They
results suggest that over all IBS customers are mostly satisfied with the Indian
banking Services been provided to them and the banking efficiency in their
transactions. The preceding discussion makes it clear that Indian banking is not
a negligible or merely temporary phenomenon. Indian banks are here to stay
and there are signs that they will continue to grow and expand. Even if one does
not subscribe to the Indian injunction against the institution of interest, one may
find in Indian banking some innovative ideas which could add more variety to
the existing financial network.
BIBLIOGRAPHY

Source:
IBA Bulletin special Issue, March.03

Indian Journal of Marketing

IBA Bulleting Aug 2004

Money Banking and International trade

-R.R.Paul

Monetary Economics
-Suraj.p.Gupta

WIBLIOGRAPHY.

www.yahoo.com
www.google.com
www.wikipedia.com