A Comparative study of Private Sector & Public Sector Banks in India

REPORT ON WINTER PROJECT BY NILOJJAL BHAUMIK

In partial fulfillment ofthe requirement of

EASTERN INSTITUTE OF MANAGEMENT, KOLKATA For the award of MASTERS IN BUSINESS ADMINISTRATION

Of the University of Kalyani

DECLARATION

I declare that the project titled A Comparative study of Private Sector & Public Sector Bank in India has been done by me and has been submitted in part or full to any authority for award of any Degree/Diploma.

(Signature) NILOJJAL BHAUMIK Date:

Certificate

This is to certify that the project entitled A Comparative study of Private Sector & Public Sector Banks in India done by Nilojjal Bhaumik is an authentic work carried out by him at Eastern Institute of Management under my guidance. The matter embodied in this project work has not been submitted earlier for the award of any degree or diploma to the best of my knowledge and belief.

Date: Signature of the guide Dr. Syamaprasad Datta Eastern Institute of Management

ACKNOWLEDGEMENT

I would like to express my deep sense of gratitude towards my Faculty Guide, Prof. Dr. Shyamaprasad Dutta, Eastern Institute of Management, Kolkata, for keeping motivated and task focused, and helping me with valuable and timely suggestions. Working on this project is a rich learning experience for me, which I think will be a valuable asset in my future pursuits. I thank you all once again for providing me with this opportunity.

NILLOJJAL BHAUMIK Eastern Institute of Management

India's Growing Banking Sector

India's banking sector is booming at a great pace in spite of its relatively small size in comparison of its counterparts in other leading economies. Indian banking sector has been found lucrative by eminent players from the international world. For e.g., In India, Citibank and Standard Chartered Bank has more than half of all credit card receivables and personal loans, which has generated more than Rs. 200 crore of profit for both banks. In 2003, Oriental Bank of Commerce was listed by Forbes magazine in its 'Global 200 Best Companies' list. In 1990s, after a long gap of more than 20 years, the apex bank, Reserve Bank of India (RBI) has issued licenses to 9 new private banks. In this, Times Bank got merged with the HDFC Bank. The RBI also allowed Kotak Mahindra Finance Company to become a bank. These banks have shown their edge over each others with the introduction of new products and technologies. Most of the banks paid their focus on the retail sector and provide internet banking, phone banking and mobile banking services to their customers and have cornered one of the largest segments of the India's banking sector by targeting the India's growing middle income class. The Indian banking sector has seen a proliferation of new services which has shown an improvement in customer service. What is a Bank? A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money. In other words, an institution where one can place and borrow money and take care of financial affairs. Function of Banks Lending money to public(loans) Transferring money from one place to another (Remittances) Acting as trustees Keeping valuables in safe custody Government business

History of Indian Banking Sector in Brief

The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Early phase from 1786 to 1969 of Indian Banks. Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. 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 crore.

In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practice. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money.

Reserve Bank of India

The Indian banking system has The Reserve Bank of India (RBI) as the apex body from all matters relating to the banking system. It is the Central Bank of India and act as the banker to all other banks.

Functions of RBI
Currency issuing authority Banker to the government. Banker to other Bank. Framing of monetary policy. Exchange control. Custodian to foreign exchange and gold reserves. Development activities. Research and development in the banking sector.

Classification of Bank on the basis of Ownership

Public Sector Banks Private Sector Banks

Public Sector Banks

Nationalized banks or public banks dominate banking System in India. The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. The major objective behind nationalization was to spread banking infrastructure in rural areas and make available cheap finance to Indian farmers. Before 1969, State Bank of India (SBI) was the only public sector bank in India. Despite the entry of many new domestic and foreign private banks since liberalization, public sector banks continue to dominate the commercial banking industry.

The following are the list of Public Sector Banks in India

Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank

Private Sector Banks

Private sector banking in India received a flip in 1994 when Reserve Bank of India encouraged setting up of private banks as part of its policy of liberalization of the Indian Banking Industry. Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. Private Banks have played a major role in the development of Indian banking industry. They have made banking more

efficient and customer friendly. In the process they have jolted public sector banks out of complacency and forced them to become more competitive. India has a better banking system in place of other developing countries.

The following are the list of Private Sector Banks in India

Bank of Punjab Bank of Rajasthan Catholic Syrian Bank Centurion Bank City Union Bank Dhanalakshmi Bank Development Credit Bank Federal Bank HDFC Bank ICICI Bank IDBI Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank Karnataka Bank Karur Vysya Bank Laxmi Vilas Bank South Indian Bank United Western Bank Axis Bank

Objective of the Study:

To understand the importance of banking sector. To study the Indian bank scenario and its structure. To study the role of bank in Indian Market. Different types of services provided by the banks. To study various types of banking, Corporate and Commercial.

 To study the Indian bank scenario and its scope. The study aims at learning the techniques involved to manage the various types of Banks, various methodologies undertaken. To offer suggestions based upon the findings.

Research Methodology
Products & Services offered by Private and Public Sector are analyzed, for this purpose 2 top banks form each sector is taken & various data or information available about their products & services are analyzed. For the purpose of analysis only secondary data is collected. Secondary data is the data which is available in readymade form and which is already used by people for some purposes. There may be various sources of secondary data such as-newspapers, magazines, journals, books, reports, documents and other published information.

BANKS ANNUAL REPORTS:-Banks issues there annual reports to get the people informed with
the profitability and growth of the bank. These annual reports helps us a lot to get the latest data and other related information for our research. It tells us about the increase or decrease in profits and other facilities.

JOURNALS AND PUBLICATIONS OF DIFFERENT BANKS:-Also take into consideration

the journals and publications issued by the bank at different times to know about the Branches, ATM, locations and other useful information.

MANUALS AND BROACHERS OF DIFFERENT BANKS:-Take the help of bank staff and
other people who give us deep information anddata which may not be available at anywhere. They give us there full co-operation.

INTERNET:-Also take into consideration the internet facility with which we collect lot of latest
information.

Limitation of the Study

The study is limited to SBI and ICICI bank only. Since the time is less only secondary data are taken from various sources for analysis. State Bank of India

Company Profile of SBI: State Bank of India (SBI) is India's largest commercial bank. SBI has a vast domestic network of over 9000 branches (approximately 14% of all bank branches) and commands one-fifth of deposits and loans of all scheduled commercial banks in India. The State Bank Group includes a network of eight banking subsidiaries and several non-banking subsidiaries offering merchant banking services, fund management, factoring services, primary dealership in government securities, credit cards and insurance.

The eight banking subsidiaries are:

State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of India (SBI) State Bank of Indore (SBIR) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT)

Products & Services offered by SBI:

PERSONAL BANKING: State Bank of India offers a wide range of services in the Personal Banking Segment which are indexed here. SBI Term Deposits, SBI Loan for Pensioners, SBI Recurring Deposits, Loan against Mortgage of Property, SBI Housing Loan, Loan against Shares & Debentures, SBI Car Loan, Rent plus Scheme, SBI Educational Loan, Medi-Plus Scheme, SBI Personal Loan, e-Invest (ASBA) IPO AGRICULTURE / RURAL: State Bank of India Caters to the needs of agriculturists and landless agricultural laborers through a network of 8750 rural and semi-urban branches. Apart from the branches, there are 428 Agricultural Development Branches (ADBs) which also cater to agriculturists. Agricultural banking, Micro credit, Regional rural banks, State level bankers' committee (slbc), Uttarakhand agri debt waiver/relief scheme. INTERNATIONAL BANKING: International banking services of State Bank of India are delivered for the benefit of its Indian customers, non-resident Indians, foreign entities and banks through a network of 131 offices/branches in 32 countries as on 31 July 2009, spread over all time zones. The network is augmented by a cluster of Overseas and NRI branches within India and correspondent links with over 522 banks. The services include corporate lending, loan syndications, merchant banking, handling Letters of Credit and Guarantees, short-term financing, collection of clean and documentary credits and remittances. CORPORATE BANKING: SBI is a one shop providing financial products / services of a wide range for large, medium and small customers both domestic and international.

Various Services provide under this belt are Working Capital Financing, Term Loans, Deferred Payment Guarantees, Corporate Loans, Export Credit, Strategic Business Units [Corporate Accounts Group (CAG),Lease Finance]. GOVERNMENT BUSINESS: State Bank of India's linkage with Government business are widespread. No wonder that out of 9315 branches in India, about 7000 branches are conducting Government Business. The large network of our branches provides easy access to the common man to deposit the following Government dues and pension payments. Government business includes Centralized Pension Processing, e-Tax, e-Freight, Government Accounts, PPF, Senior Citizens Savings Scheme. SME: State Bank of India has been playing a vital role in the development of small scale industries since 1956.The Bank has financed over 8 lakhs SSI units in the country. It has 55 specialized SSI branches, 99 branches in industrial estates and more than 400 branches with SIB divisions. Services under SME are SME Cash Credit Loan, SME Smart score Loan, SME Traders Easy Loan. NRI BANKING: SBI a pioneer in NRI banking and have a presence in 30 countries across all timezones. With 73 foreign offices and correspondent banking relations with over 520 global banks, SBI serve the largest number of NRIs. SBI remittance products are unique and customized to suit the needs of NRIs wishing to send money home, quickly and safely. More than 3500 branches handling the NRI business. If anyone intends to domicile his/her account or buy a property back home, they are not far from an SBI branch. As NRIs, one can also enjoy Internet banking facilities and operate his/her accounts across the country under "anywhere banking facility" through any of the networked branches / ATMs.

ICICI Bank
Company Profile of ICICI: ICICI Bank is India's largest private sector bank with total assets of Rs. 3,849.70 billion. The Bank has a network of about 2,500 branches and 6400 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and

representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Products & Services offered by ICICI Bank: PERSONAL BANKING: ICICI Bank offers a wide range of services in the Personal Banking Segment which are indexed here. Savings Account, Salary Account, Fixed Deposit, Recurring Deposits, Home Loan, Personal Loans, Car Loans, Debit Cards, Credit Cards, ICICI Bank Bonds, GOI Bonds, Mutual Funds, Mutual Funds, ICICI Bank Pure Gold, General Insurance, Demat, Wealth Management, Retail Institutions. CORPORATE BANKING: Various corporate banking service provided by ICICI Bank are Cash Management Services, Global Trade Services, Forex Desk, Derivatives Desk, Mergers and Acquisitions Advisory, Structured finance for corporate clients, Project Finance, VOSTRO Accounts. BUSINESS BANKING: Business banking sector consist of Club Elite Ivy Program, Roaming Current Account, Elite Current Account, Prepaid Current Account etc. NRI BANKING: Various facilities offered to Non resident Indian are Money Transfer, Bank Accounts, Investments, Property Solutions, Insurance, Loans. AGRICULTURE / RURAL: ICICI Bank's Rural, Micro banking and Agribusiness group caters to the financial needs of those involved in the commodities business, such as farmers, traders, processors and aggregators. A credit line of up to Rs. 200 million is offered for agricultural operations with agricultural commodities as securities. Various services under this belt are: Midcap Credit, Agri Investment Banking Solutions, Factoring, Loan against Warehouse Receipt, Micro Credit, Micro Savings, Self-Help Group.

IT Initiative at State Bank of India A. Online SBI

Online SBI is the Internet banking portal for State Bank of India. The portal provides anywhere, anytime, online access to accounts for State Bank's Retail and Corporate customers. The application is developed using the latest cutting edge technology and tools. The infrastructure supports unified, secure access to banking services for accounts in over 13,000 branches across India. The Retail banking application is an integration of several functional areas, and enables customers to: Issue Demand Drafts online.

Transfer funds to own and third party accounts. Credit beneficiary accounts using the VISA Money Transfer, RTGS/NEFT feature. Generate account statements. Setup Standing Instructions. Configure profile settings. Use eTax for online tax payment. Use ePay for automatic bill payments. Interface with merchants for railway and airline reservations. Avail DEMAT and IPO services.

In addition to the above the Internet banking application also provides the following value added services: Tax payments to central and state governments through site to site integration. Supply Chain Finance( e-VFS- Electronic Vendor Finance Scheme) Direct Debit Facility Core Banking Transactions Inter Bank Transactions for incoming RTGS/NEFT Transactions Internet Banking Transactions for SBI & Associate Banks Direct Debit facility where suppliers can directly debit their customers account through Internet Banking

B. State Bank FreedoM Your Mobile Your Bank 1. Mobile Banking Service over Application/ Wireless Application Protocol (WAP)
The service is available on java enabled mobile phones (with or without GPRS) where the user is required to download the application on to the mobile handset. The service can also be availed via WAP on all phones (java/non java) with GPRS connection. The following functionalities are available: Funds transfer (within and outside the bank) Interbank Mobile Payment Services (IMPS): Click here for details. Enquiry services (Balance enquiry/ Mini statement)

Cheque book request Demat Enquiry Service Bill Payment (Utility bills, credit cards, Insurance premium), Donations, Subscriptions Mobile Top up M Commerce (Top up of Tatasky, BigTV, SunDirect, DishTV connections and receive recharge pins for DigitalTV/Videocon d2h, SBI life insurance premium)

2. Mobile Banking Service over SMS:

The service is available on all phones (java/non java) with/without GPRS connection. No need to download the application. Ordinary SMS charges are applicable. The following functionalities are available: Balance Enquiry/Mini Statement Mobile Top up DTH Top up/ recharge IMPS- Mobile to Mobile Transfer Change MPIN

3. Mobile Banking Service over USSD (Unstructured Supplementary Service Data)

The service is available on all phones (java/non java) with/without GPRS connection. No need to download the application. Available functions are Balance Enquiry, Mobile Top up, Fund transfer etc.

IT Initiative at ICICI Bank A. ICICI Online

ICICIBank.com offers a variety of features to make banking a pleasure. Various Banking related online services provided by ICICI are Balance Enquiry and Statement. Transaction History. Transfer Funds Online. Link your Bank/Card/Demat Accounts. Use your Debit Card Online. Pre-paid Mobile Recharge. Pay your Utility Bills.

Send a Smart Money Order. Open Fixed Deposits and Recurring Deposits. Subscribe for Mobile Banking. Renewal / Premature Closure of FD/RD. Request a Cheque Book, change of address, Debit Card, Duplicate Physical Bank Statement.

One can view and manage your ICICI Bank Credit Card online at ICICIBank.com. Redeem Reward Points. Payment Due Dates. Credit Card Statements by online/ e-mail. Subscribe for Credit Card alerts. Dial-A-Draft. Request an add-on card. Place Service Requests Online.

One can view ICICI Bank Demat account online at ICICIBank.com. E-instruction Holding Statement ISIN Look-up. Settlement Calendar.

One can keep track of ICICI Bank loan account online at ICICIBank.com. Loan Details. Profile Information. Disbursement Details. Amortization Schedule. Repayment Details. Place Service Requests Online.

B. ICICI iMobile

Data Analysis & Interpretation

Inference: In terms of customer service & transaction cost SBI is more suitable to customers, on the other hand in terms of quality of service, accessibility both are closely matched.

Inference: SBI has a vast network of ATMs in comparison to ICICI,where as ICICI is better in providing new age services like Internet Banking, Mobile Banking etc. Both banks are almost at par in providing core banking facilities.

Inference: The above chart depicts that its easier for poor or middle class people to maintain an account in SBI on the other hand ICICI targets wealthy customers.

Inference: SBI is far ahead in number of branches & ATMs in comparison to ICICI.

Inference: The major difference the above chart depicts that SBI scores over ICICI in terms of International lending & auto loans whereas ICICI is frontrunner in giving housing loans.

SWOT Analysis of State Bank if India:

SWOT Analysis of ICICI Bank:

Findings of the Study: People choose the SBI bank is because the bank is providing better ATM facility to the customers.
eople are not aware of the many services rendered by the ICICI bank. The few are deposit of cash in P ATM, request for cheque book in ATM, end of the day balance in mobile, etc. Some people choose the SBI because the bank is more reliable to the customers.

And many of the customers are saying the reason to choose the services of the ICICI bank is because they are good in efficient customer service and efficient complaint handling. Income level of the customers who are having an account in ICICI bank falling under the High Income group where as a SBI Account Holder can be a very low income base customer. The Mid-age group private sector employees are mostly having an account in ICICI bank.

Recommendation: Since many of the customers are not aware of their key services. The bank has to take some initiatives.
SBI can post a list of services that they are rendered to the customers inside the bank premises and also can approach customer directly to use their services. ICICI Bank can concentrate more on the customers falling under the low income group. SBI can concentrate on customer complaints handling. The ICICI bank can concentrate on reduction of interest rates and bank charges on various products. ICICI bank can reduce minimum balance to be kept for opening an account because it is too high than SBI. SBI can improve its Mobile Banking and Net Banking facility to make it at par with ICICI. SBI can target more and more private sector employees mostly in recently grownup IT sectors in India.

CONCLUSION:

The gap between SBI and the rest of the bank is so wide that SBI comes out as number one on almost all counts. This includes assets, branch network, ATM network, number of employees, and size of profits. The only place that ICICI Bank has been able to upset the monolith is the area of market capitalization.

One reason why SBI has lagged in market cap despite its size has been its inability to unlock value from its various businesses. However, there are signs that this is changing and the bank is making attempts to realize the value of its investments in the life insurance and asset management business. SBI and ICICI are both Indias largest banks in Public & Private sector respectively. Their growth means Indias growth. And by this competition customers will be benefited and Indian economy will get a boost.

Bibliography
Websites: http://www.statebankofindia.com http://www.icicibank.com https://www.onlinesbi.com

http://www.icicibank.com/Personal-Banking/onlineservice/mobile-banking/mobile.html http://www.icicibank.com/Personal-Banking/insta-banking/internet-banking http://www.google.com http://en.wikipedia.org