A GLOBAL / COUNTRY STUDY AND REPORT On

BANKING INDUSTRY OF ISRAEL

Submitted to
(N. R. Institute of Business Management, Ahmedabad) IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION

In

Gujarat Technological University

UNDER THE GUIDANCE OF

Dr. Kavita Kshatriya Prof. Rajsee Joshi Prof. Amish Soni Prof. Kevlesh Rathod Submitted by Kanchan Bachani Himani Dosi Roopraj Jadeja Jenil Choksi Dhruvin Shah Roshni Nair 117350592157 117350592142 117350592048 117350592070 117350592046 117350592026

[Batch: 2011-13] MBA SEMESTER IV

(N.R. Institute of Business Management) MBA PROGRAMME

Affiliated to Gujarat Technological University

Declaration

We, Kanchan Bachani, Himani Dosi, Roopraj Jadeja, Roshni Nair, Dhruvin Shah & Jenil Choksi hereby declare that the report for Global/ Country Study Report entitled BANKING INDUSTRY OF ISRAEL is a result of our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged.

Place: Ahmedabad Date:

NAME

SIGNATURE

Roshni Nair Dhruvin Shah Roopraj Jadeja Jenil Choksi Himani Dosi Kanchan Bachani

117350592026 117350592046 117350592048 117350592070 117350592142 117350592157

TABLE OF CONTENTS

Serial No. 1

Title

Page No.

INDUSTRY OVERVIEW 1.1 General information about the performance of banking industry of Israel 1.1.1 Introduction 1.1.2 Forces for change in the Israeli banking system 1.1.3 Current Performance Scenario 1.1.4 Main Developments in the Balance-sheet activity 1.1.5 Credit Quality 1.1.6 Borrower Concentration 1.1.7 Securities Portfolio 1.2 Major Players in the Banking Industry of Israel 1.3 Overall products/services offered by the Banking Industry of Israel 1.4 Present trade with quantity and amount of the banks in Israel 1.4.1 Volume of trade in Foreign Currency Market 1.5 Technological Advancement in Israel 1.6 Requirements of resources for the industrial operations of Israel 1.7 WTO-Israel 1.8 Legal aspects and barriers in Israeli banking industry 1.9 Overall products/services offered by the Banking Industry of India 1.10 Barriers to Indian Banking Sector 1.11 Present trade with quantity and amount of the banks in India 1.12 Technological Advancement in India 1.13 Requirements of Resources in India 1.14 Comparison of Banking Industry of Israel and India 1 2 4 6 6 8 8 9 10 12 12 16 18 20 25 32 38 39 40 49 50 52 52 60 65 1

2 2.1 Bank Hapoalim

COMPARISON OF BANKS

2.2 Mizrahi Tefahot Bank 2.3 Israel Discount Bank

2.4 Bank Leumi 2.5 State Bank of India 2.6 ICICI Bank 2.7 Bank of Baroda 2.8 HDFC Bank 3 3.1 Overall 3.2 Indias opportunities and challenges in Israel banking industry 4 5 CONCLUSION BIBLIOGRAPHY FINDINGS

69 72 78 88 90 98 98 100 104 105

CHAPTER-1

INDUSTRY OVERVIEW

1.1 GENERAL INFORMATION ABOUT THE PERFORMANCE OF THE INDUSTRY OF ISRAEL 1.1.1 Introduction In its sixty-first year of independence, Israel had a strong, stable, and profitable banking system. The favorable macroeconomic fundamentals that have cushioned the banks operations in the recent years are clearly reflected in the banks performance, financial results, and exposure to risks. The combination of rapid growth of business-sector product and a buoyant domestic capital market was reflected in the achievements of the banking system, which reported improvements in its capital adequacy ratio, its quality of credit, and its profits. The shocks experienced by the global and domestic financial markets in late 2007 did not overlook Israels banking system, mainly due to the banks holdings of asset-backed securities. Nevertheless, their effect was relatively subdued and did not undermine system stability. The banking sector risk assessment includes a top-down balance sheet stress test and single factor tests carried out by the BSD and a contingent claims analysis The five major banks are covered, with results projected to end-2014 in order to capture the full effects of shocks. The bank solvency tests are based on three scenarios which reflect key macroeconomic and financial risks, particularly a domestic slowdown and the potential impact on the Israeli economy and banks of a European crisis and U.S. slowdown: The Base scenario is based on BOI staffs forecasted path of the economy, which relies on the BOI macro-model; it is more conservative than the IMF WEO October 2011 forecast. Adverse scenario 1 assumes a domestic recession, caused by geopolitical concerns leading to economic disruption, declining demand (especially in real estate), an increase in unemployment, and a rising risk premium. Adverse scenario 2 reflects a global recession and difficulties in Europe, which affect the Israeli economy sharply. Real GDP declines relative to the baseline by about 2 standard deviations.

Non-banking financial institutions, the Israeli capital market and banks abroad serve as a substitute source for local banking intermediation and therefore constitute a competitive threat to the banking system in Israel.

1.1.2 Forces for change in Israeli Banking System Deregulation and opening-up to foreign competition

Banking in the emerging economies was traditionally a highly protected industry, living off good spreads achieved on regulated deposit and lending rates and pervasive restrictions on domestic and foreign entry.

For many years, there was little pressure to disturb this cozy and wasteful world. However, global market and technology developments, macroeconomic pressures and banking crises in the 1990s have forced the banking industry and the regulators to change the old way of doing business, and to deregulate the banking industry at the national level and open up financial markets to foreign competition.

As a result, borders between financial products, banks and non-bank financial institutions and the geographical locations of financial institutions have started to break down. These changes have significantly increased competitive pressures on banks in the emerging economies and have led to deep changes in the structure of the banking industry.

One of the main catalysts for increased competition at the domestic level has been the removal of ceilings on deposit rates and the lifting of prohibitions on interest payments on current accounts.

These deregulation measures have reduced sources of cheap funding for many banks and put pressure on their profits. Intensified competition has made it harder for banks to cross-subsidize different activities and has forced them to price risks more realistically and to charge explicitly for previously free services.

Technology

The major issue about new IT is its impact on the processing of information, which is the very essence of the banking business. Perhaps the most significant innovation has been the development of financial instruments such as derivatives that enable risk to be reallocated to the parties most willing and able to bear that risk, thereby inducing more investment in real assets and fostering the development of banking and financial markets in general. More fundamentally, banks are increasingly losing their privileged access to information about investment opportunities, and are thus under pressure to merge or build alliances with domestic or foreign-owned banks and technology companies in order to share the costs and exploit the benefits of the development of new IT applications. One source of concern related to new banking technology is the emergence of a digital divide in the access to banking services. According to this view, better educated and more affluent customers will be able to obtain improved service from banks through the internet over the medium term, while the services provided to poorer and older customers will deteriorate as branches are closed, particularly in remote areas.

Changes in Corporate Behavior

The spread of information technology has affected the banking industry both directly, through IT applications in risk management and marketing of financial products, and indirectly, through its impact on corporate behavior and the development of financial markets, especially in the area of financing new capital investments. Another implication of these developments is that commercial banks in bank-centered financial systems can no longer maintain their traditional, close relationships with corporate customers. Because of pressure from alternative funding sources and other domestic and foreign banks, there is growing emphasis on shareholder value as the sole commercial objective of banks.

Banking Crises

There were many banking crises during the 1990s, often occurring shortly after the external and banking systems were deregulated. Despite all the attention given to the complicated derivative products that have led to the high-profile collapses of some individual banks, most systemic banking crises are still caused by poor lending.

1.1.3 Current Performance Scenario During the first half of 2012, the banking system continued to maintain its resilience and stability, against the background of uncertainty in the global and domestic economies, regional geopolitical developments, and the low interest rate environment. Negative developments in the capital markets and the slowdown in domestic activity also influenced corporate risk, which remains high, although it is lower than it was during the height of the crisis (200809). Balance-sheet credit increased by 3 percent, similar to the GDP growth rate. Retail credit continued to expand, particularly housing credit, the growth rate of which accelerated beginning in the second quarter as a result of the resurgence in the housing market. Credit to the business sector did not grow, particularly in light of the reduction in credit to the financial services industry. During the reviewed period, there was a decline in borrower concentration in the credit portfolio, but it remains high.

The core tier 1 capital ratio of the five banking groups increased from 7.9 percent to 8.3 percent as a result of the new capital targets, and as of June 2012, the core capital ratio in all of the banking groups was not less than 8.0 percent. The increase in the ratio is the result not only of the accumulation of profits and the non-distribution of dividends, but also the halt in growth of business sector credit.

The profitability of the banking groups in the first half of 2012 was similar to the long-term average, and was characterized by relatively high variance between the groups.

PRINCIPAL BANKING SYSTEM INDICES (five major banking groups)

Year

Ratio Market Value Book Value

of Avg.

Ratio

Loan loss provisio n total balance sheet credit to the public (%)

Ratio of Ratio of Total liquid credit to capital ratio (%)

Core tier

ROE 1 (%)

yield gap of to between credit

assets to deposits

capital ratio (%)

bonds of to the GDP

to liquid liabilities

(MV/BV)

banks & (%) govt. bonds

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0.8 0.6 0.8 1 1.4 1.3 1.2 0.6 1.1 1.1 0.7 0.7

0.8 0.8 0.7 0.8 0.7 0.6 1.1 1.9 1.7 1.7 1.5 1.6

102.3 107.5 104.0 100.0 97.5 94.8 97.0 101.6 94.7 95.1 91.9 90.3

0.9 1.3 1.1 0.9 0.7 0.5 0.3 0.7 0.7 0.4 0.4 0.4 0.34 0.40 0.40

0.81 0.83 0.82 0.80 0.82 0.80 0.85 0.90 0.86 0.91 0.89 0.89

9.4 9.9 10.3 10.7 10.7 10.8 11.0 11.2 13.7 14.0 14.0 14.4 7.9 8.0 7.9 8.3

5.8 2.8 8.4 13.2 13.9 17.3 15.6 0.3 8.8 9.8 10.2 9.0

Liquid assets include cash as well as deposits at the Bank of Israel and at other banks with up to 1 month to maturity, and government bonds. Liquid liabilities include total deposits with up to 1 month to maturity. The ratio of market value to book value (MV/BV) and the average yield gap between bonds of the banks and government bonds are as of October 18, 2012.
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1.1.4 Main Development in balance-sheet activity Assets The total aggregate balance sheet of the five major banking groups increased slightly in the first half of the year at a moderate annual rate of 1.9 percent (about NIS 11 billion), to a total of about NIS 1.2 trillion Two main developments characterized the banks' asset portfolio during the reviewed period: (1) a slight increase in total net credit to the public (2.7 percent), which was driven mainly by demand for housing credit in light of a freeze in business credit, and (2) a change in the composition of the balance sheet and a significant increase in the securities portfolio (30 percent), mainly due to the purchase of government bonds, mostly at the expense of cash and deposits at banks.

Liabilities Deposits from the public increased in the first six months of 2012, by a slight rate of 1.5 percent (about NIS 16 billion). The most marked decline was in the households segment (8.8 percent). Bonds and subordinated debt notes increased by about 7 percent (some NIS 3 billion).

1.1.5 Credit Quality During the first half of 2012, the risk level of companies in the economy remained high compared to the economic boom years, although it is lower than during the height of the crisis in 200809. This development is also noticeable in the banks' internal ratings and in the ratio of loan loss provisions to total credit which was 0.4 percent in June 2012. The ratio of net write-offs to balance-sheet credit reached 0.48 percent in June 2012, and is slightly higher than the ratio of loan loss provisions to balance-sheet credit. The ratio of the allowance for credit losses to impaired debt to the publicwhich reflects the bank's estimation of expected credit losses relative to the size of the credit portfolio that they have classified as impaired, was 44 percent.

INDICES OF CREDIT PORTFOLIO QUALITY OF THE FIVE MAJOR BANKING GROUPS (December 2006 to June 2012) (in percent)

Year

Leumi

Hapoalim Discount

Mizrahi First Tefahot International 61.3 58.8 59.1 54.4 61.0 60.0 59.1 0.42 0.33 0.39 0.44 0.17 0.14 0.15 0.15 0.19

Five Groups 66.9 68.0 68.3 64.1 66.4 64.6 64.8 0.52 0.28 0.72 0.75 0.39 0.39 0.40 0.71 0.48

Ratio of total risk weighted assets to total assets

2006 2007 2008 2009 2010 2011 2012

67.0 69.0 69.5 64.2 68.3 67.7 68.3 0.51 0.21 1.01 0.74 0.25 0.30 0.46 0.84 0.59

72.2 72.8 72.3 67.9 68.7 67.3 66.8 0.53 0.25 0.68 0.93 0.44 0.48 0.51 0.84 0.57

59.8 61.9 64.8 60.6 67.2 60.4 61.8 0.63 0.44 0.67 0.87 0.66 0.66 0.40 0.72 0.52

66.6 68.2 66.9 67.1 58.7 58.3 58.8 0.44 0.31 0.44 0.39 0.43 0.28 0.18 0.44 0.18

Loan loss provision to total balance sheet credit to the public

2006 2007 2008 2009 2010 2011 2012

Net write-offs to 2011 total gross balance sheet credit to the public Allowance for credit losses to total balance sheet credit to the public Impaired loans to total balance sheet credit 2010 2011 2012 2010 2011 2012 2012

2.3 1.6 1.6

2.1 1.6 1.6

1.7 1.7 1.6

1.6 1.4 1.3

1.3 1.3 1.3

2.0 1.6 1.5

3.8 2.8 2.9

4.7 3.4 3.4

7

4.7 4.7 4.3

1.5 1.3 1.2

1.9 1.6 1.5

3.7 3.0 2.9

Allowance for credit losses to impaired loans to the public Impaired loans net of provision to capital

2010 2011 2012

53.5 50.9 47.7

41.7 43.1 42.2

31.2 31.1 32.6

52.1 48.1 53.7

62.6 74.5 75.1

44.8 44.2 43.9

2010 2011 2012

24.2 21.4 22.7

35.9 29.0 28.1

48.3 46.6 41.9

17.6 17.5 14.0

14.3 11.4 10.6

30.2 26.4 25.4

1.1.6 Borrower Concentration During the first half of the year, there was a decline in borrower concentration. Total net indebtedness of the largest borrower groups declined during this period at most banks, and the net indebtedness of the largest group of borrowers decreased at all banks, and as of June 2012, its weight in the capital basis ranges from 16 percent to 23 percent. An analysis of the credit portfolio of the entire banking system indicates that the largest borrowers in the banking system who borrowed from the capital market as well comprise about 15 percent of the banks' balance-sheet and off-balance-sheet business credit risk (NIS 98 billion), of which about NIS 7 billion is from borrowers whose bonds were traded in September 2012 at yields above 12 percent.

1.1.7 Securities Portfolio The securities portfolio of the five banking groups totaled NIS 168 billion in June 2012, constituting 14 percent of total assets (Figure 10). During the first half of the year, there has been an increase of NIS 22 billion in the securities portfolio, resulting from the purchase of Israel government bonds (reflecting an annualized growth rate of 30 percent). The increase encompassed four of the five banking groups, and in some of the groups, the increase in the securities portfolio was accompanied by a decline in the cash and bank deposits item.

1.2 MAJOR PLAYERS IN THE BANKING INDUSTRY OF ISRAEL

The major players in the banking industry of Israel are as follows: Banking Group Established Number of Branches Total Assets (NIS billion) Share of total banking system assets Hapoalim group Bank Leumi group Discount Bank group MizrahiTefahot Bank group First International Bank group 1975 103 71.9 7.9 7.3 8.4 1923 123 86.3 9.5 10.9 9.7 1935 195 154.8 17.0 14.2 17.7 1902 232 272.8 29.9 29.9 30.2 1921 320 273.3 30.0 Share of total banking system credit 31.3 Share of total banking system deposits 29.1

1.3 OVERALL PRODUCTS/SERVICES OFFERED BY THE BANKING INDUSTRY OF ISRAEL

Most of the major banks have branches all over the country, but whereas city branches are likely to offer extensive services, local branches may have restricted opening hours and offer limited services. Most banks in Israel offer both telephone and internet banking, and also internet-only banking, with most of these services available in English. Most banks will provide bank statements and other related paperwork in English. You are required by law to keep bank statements for a period of seven years. Many Israeli banks provide dedicated foreign currency exchange services, although you will also find specialist local money exchange services throughout Israel, typically in the main shopping areas of larger towns and cities. Israeli banks offer a wide variety of accounts, including: Current accounts - typically used for everyday banking, but offering low interest rates. Savings accounts - more competitive interest rates (possibly a variable rate), with higher rates of interest on longer-term accounts, with limited short-term access to funds. Fixed-term accounts - a defined rate of interest for a fixed term - typically ranging from a month to several years. They may offer little or no access to funds until account maturity.

Credit cards (Visa and MasterCard) are widely used and accepted in Israel, and credit cards can be used to withdraw cash from ATMs. However, cash withdrawals are likely to incur a fee. There are two main types of credit card in Israel: Credit cards that can be used for transactions in Israel using local currency only. Credit cards that can be used worldwide, in foreign currencies.

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Cheques are widely used and accepted in Israel as a form of payment, and you can post-date cheques for up to a year ahead, and even deposit post-dated cheques (which will be credited to your account when the due date is reached). Bouncing more than 10 cheques in a month will lead to suspension of the account and all future banking privileges at any bank in Israel for a year. If this happens three times in a 12month period, the suspension extends to five years. ATMs are widespread, with services available 24 hours a day. Using an ATM card is typically cheaper than using a credit card to withdraw cash. ATMs are normally located outside bank branches, and standard daily limits allow you to withdraw up to 01,000 ILS (shekels) a day - approximately 170 GBP (pound sterling).

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1.4 PRESENT TRADE WITH QUANTITY AND AMOUNT OF THE BANKS IN ISRAEL

Israeli banks offer a wide variety of accounts, including current accounts, savings accounts and fixed-term accounts. Current accounts are typically used for everyday banking needs, but offering low interest rates. Savings accounts will offer more competitive interest rates, with higher rates of interest being offered to longer-term accounts with restricted short-term access to funds. Interest rates may be variable or fixed. Fixed-term accounts offer a defined rate of interest for a fixed term typically ranging from a month to several years. Fixed-term accounts may offer little or no access to funds until the account matures. When the account matures (i.e., the fixed period expires), customers have the option to re-invest the capital and the interest earned.

Most banks also provide these accounts in a range of major currencies, including GBP (pounds sterling) and $ US (US dollars). It is worth assessing whether a foreign currency account will be useful for meeting everyday banking needs, such as making regular transactions in shekels for services such as utilities.

1.4.1 The Volume of Trade in the Foreign Currency Market

There was a decline in average daily trading volume, in contrast to an increase in nonresidents' share of trading volume The total volume of trade in foreign currency in January was about $102 billion, compared with $100 billion in December. Average daily trading volume declined by about 3 percent in January, and reached about $4.8 billion.

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The volume of trade in spot and forward transactions (conversions) was about $40 billion in January, compared with $44 billion in December. The average daily trading volume in those transactions declined in January by about 12 percent, compared with December, to about $1.9 billion.

The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $13.3 billion in January, compared with $8.8 billion in December. The average daily trading volume in those options in January was $635 million, an increase of 44 percent from December.

The trading volume of swap transactions was about $48 billion in January, compared with $47 billion in December. Average daily turnover declined by about 3 percent, to $2.3 billion in January.

Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased in January to 44 percent, compared with 41 percent in December. The increase derived primarily from an increase in nonresidents' volume of activity in spot and forward transactions, and options.

Figure 4: International comparison of implied volatility of shekel/dollar options

32% 28% 24% 20% 16% 12% 8% 4%
01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 07/10 09/10 11/10 01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12 05/12 07/12 09/12 11/12 01/13

Average of emerging markets Average of advanced economies Israel

Emerging markets: Chile, Hungary, Mexico, the Philippines, Poland, Singapore, South Africa, South Korea, Thailand and Turkey. Advanced economies: Australia, Canada, the eurozone, Japan, UK, Switzerland.

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Options & Conversions Swap Transactions

Figure 5: Nonresidents' share of total trading volume

70%

60%

50%

40%

30%

20%

10%

0%
01/10 02/10 03/10 04/10 05/10 06/10 07/10 08/10 09/10 10/10 11/10 12/10 01/11 02/11 03/11 04/11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 03/12 04/12 05/12 06/12 07/12 08/12 09/12 10/12 11/12 12/12 01/13

Bank Hapoalim Number of Branches: 320 Total Assets (NIS billion): 273.3 Share of total banking system assets: 30.0 Share of total banking system credit: 31.3 Share of total banking system deposits: 29.1 Mizrahi Tefahot Bank Number of Branches: 123 Total Assets (NIS billion): 86.3 Share of total banking system assets: 9.5 Share of total banking system credit: 10.9 Share of total banking system deposits: 9.7
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Discount Bank Number of Branches: 195 Total Assets (NIS billion): 154.8 Share of total banking system assets: 17 Share of total banking system credit: 14.2 Share of total banking system deposits: 17.7

Bank Leumi Number of Branches: 232 Total Assets (NIS billion): 272.8 Share of total banking system assets: 29.9 Share of total banking system credit: 29.9 Share of total banking system deposits: 30.2

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1.5 TECHNOLOGICAL ADVANCEMENT IN ISRAEL

Technology has been a boon to many industries and especially to the banking industry. With the help of technology banks are able to reach out to more customers and provide better services to them. Also, it helps them function in an organized and secure way.

As for us (the customers) we have ATMs, Cash deposit machines, online banking, phone banking etc which are all fruits of technological advances which have made our banking experience much easier. Imagine having to run to the bank every time you wanted to check your balance or make a deposit or withdrawal. According to conventional wisdom, new information technology is not at present likely to impinge much on the development of the banking industry in the emerging economies, which remain technologically behind the industrial countries. For example, the low level of penetration in most emerging economies means that the internet is not seen as a threat to traditional banks. Given the signs of a possible bursting of the e-banking bubble in the United States and Europe, some have also argued that the issue of electronic banking may go away before the emerging markets need to worry about it.

This conventional view can be challenged on several grounds. As noted above, the major issue about new IT is its impact on the processing of information, which is the very essence of the banking business. Perhaps the most significant innovation has been the development of financial instruments such as derivatives that enable risk to be reallocated to the parties most willing and able to bear that risk, thereby inducing more investment in real assets and fostering the development of banking and financial markets in general.

The use of such instruments is not the preserve of industrial countries: with their increasingly sophisticated IT applications, banks in the emerging economies use new financial instruments daily in their transactions. Their banking systems and financial markets are thus in a position to advance much more rapidly from a rudimentary to a fairly advanced stage of development of risk management and other commercial banking functions.

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Such potential skipping of financial development stages would not have been possible in the past, when information processing technology was not readily available, and when the development of futures markets and other domestic financial institutions that enable unbundling and shifting of risks on a large scale was much more time-consuming and costly.

Likewise, the potential for rapid development of commercial banking functions offered by alternative delivery channels such as ATMs, debit cards, telephone, internet and electronic banking should not be underestimated.

Despite the still low level of usage of such channels (with the exception of ATMs, which are now very widespread), the vast majority of banks in the emerging economies see such channels as a must for their industry. Banks fighting for some important part of the retail market believe that they have to offer such services as an essential marketing tool, although the true demand for them has so far been limited.

As in advanced economies, new technology is affecting the structure and performance of the banking industry in the emerging markets mainly through its impact on the costs and the determination of optimal scale. Branch-based transactions are much more expensive than alternative delivery channels. This cost advantage would seem to favor smaller institutions, as investments needed to attract deposits or provide banking services via the internet are in principle lower than the costs of setting up a traditional branch network.

At the same time, investments needed to develop adequate back office and risk assessment systems are very high, creating considerable cost advantages for larger institutions. Moreover, branch networks are not expected to shrink as a result of the development of alternative delivery channels, although branches are generally expected to become smaller.

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1.6 REQUIREMENTS OF RESOURCES FOR THE INDUSTRIAL OPERATIONS OF ISRAEL

Channels Channels are the vehicles through which customers can interact with a bank. These channels may be used for either sales or service interactions. Customer Relationship Management Customers tend to have products and services from multiple product areas across a Bank. It is important to bridge these divisions both from the Bank's perspective - so that a group wide view of customer risk can be assembled - and from a customer perspective - so that a single customer isn't faced with myriad service personnel. Given these requirements CRM is a vital part of Banking Operations. We have disaggregated this operational area into three key units. 1. Customer Risk 2. Customer Static 3. Contact Management Banking Product Engines Banks offer a variety of products each of which requires a combination of back office staff and complex computer systems to set up and maintain. It is these systems, staff and processes that we refer to here as 'Engines'. We have identified eight key banking engines that are referred: 1. Core Banking 2. Insurance 3. Asset Finance 4. Capital Markets
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5. Fund Management 6. Cards 7. Mortgages 8. Stock Broking Management Information Management Information is all about deriving information from a Bank's other activities. Financial Services companies are heavily regulated. In addition to the statutory reporting of all companies, they have to provide regulatory information to: Government Tax Authorities - Information on customer tax withheld and the country of residence of customers. Government Security Services - Information on Suspected Terrorists, Money Laundering and Fraud. Central Bank and Financial Services Regulators - Information on credit exposures, capital adequacy and liquidity Finally, since the raw material, work in progress and finished goods of financial services groups is information, it lends itself to the production of management accounting information. As a consequence, financial services groups have very large databases for analyzing assets, liabilities, costs and income as well as non-financial data for a variety of marketing and other management needs.

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1.7 WTO-ISRAEL Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries' trade and related policies are examined and evaluated at regular intervals. Significant developments that may have an impact on the global trading system are also monitored. All WTO members are subject to review, with the frequency of review depending on the country's size. 1. Israel has not been spared the effects of the global economic crisis, but its financial system has weathered the crisis comparatively well. Since its last TPR, in 2006, real GDP growth has averaged around 5% per year, only interrupted by a sharp decline in growth in 2009. Recently, there are again signs of slowing economic activity. The resilience and stability of the financial system has been attributed, inter alia, to cautious lending and limited exposure to "toxic" assets by Israeli banks, and a conservative supervisory approach by the Bank of Israel. There was no need for any bank bailout or major stimulus programme, although the Government has substantially increased its exposure to credit guarantees in order to stimulate exports. Public debt as a percentage of GDP has been reduced (74% in 2011). 2. Israel is a high-income country with a GDP per capita of US$31,000 in 2011, up from US$17,700 ten years earlier. Its GDP of about US$240 billion is roughly equal to the size of Singapore's. Some of Israel's main economic challenges lie in the high burden of defence spending, low labour-market participation among certain communities, and resulting income inequality. Israel has been largely dependent on imports for its energy needs, but major discoveries of offshore natural gas may change its economic prospects. 3. The Israeli economy is dominated by high-tech goods and services. The main high-tech (non defence) activities are in the area of computer components manufacturing, software engineering, medical technologies, and pharmaceuticals. important role in the world's diamond industry. 4. One of the core strengths of the Israeli economy is its capacity for innovation, be it in agriculture or the high-tech sector. Expenditure on civilian R&D amounted to about 4.4% of GDP in 2010, the highest share in the world. Israeli businesses also play an

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Israel's innovation policy encourages domestic R&D in generic and applied technologies, including the development and acquisition of intellectual property rights, through a range of incentive schemes. The availability of domestic and foreign venture capital further

encourages start-up companies. 5. A significant share of foreign direct investment is made in Israeli start-up companies. Investments in the industrial sector benefit from export-contingent incentives. Israel

maintains foreign ownership restrictions in a few sectors, including air and maritime transport, telecommunications and broadcasting, energy, and tourism, mainly for public interest, (energy) security and cultural reasons. There is no special approval or screening process for investments by foreigners. 6. Israel is a relatively export-oriented economy. Its trade continues to be affected by the geopolitical situation that prevails in the Middle East, which seriously impedes trade between Israel and its neighbours. The European Union and the United States remain Israel's main trading partners, although Israel's trade with Asia continued to increase over the review period. The current account has been in surplus since 2003. 7. Israel pursues trade liberalization through active participation in the DDA negotiations, bilaterally through reciprocal preferential agreements, and unilaterally through autonomous initiatives. Israel's network of FTAs covers some of its main trading partners (EU, United States, EFTA, and Turkey), although none of its FTAs currently includes services provisions. Since its last TPR, Israel has concluded a free-trade agreement with MERCOSUR, and Israel and the European Union have further liberalized their bilateral trade in agricultural products. FTA negotiations have been launched WT/TPR/S/272 Trade Policy Review Page viii with India and Colombia. Nonetheless, the relative importance of trade via free-trade agreements has steadily declined due to the rising importance of trade with Asian countries. 8. In the summer of 2011, Israel experienced unprecedented popular protests against the high cost of living, triggered by consumer complaints about high prices of some dairy products ("cottage cheese uprising"). In response, and as part of a package of reforms, the

Government has unilaterally dismantled some import barriers. Applied MFN tariffs on a range of non-food consumer goods were eliminated with immediate effect (400 tariff lines at HS 8-digit level).

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In July 2012, the Government announced a further unilateral initiative to eliminate or reduce import duties on items such as electrical appliances, textiles and apparel, and food trade policy measures. 9. Israel's average applied MFN tariff is 7% in 2012. Over half of the tariffs are duty-free lines, and less than 5% of tariff lines exceed the 20% rate. The average applied MFN tariff on non agricultural products is relatively low (4.2%), while tariffs on agricultural goods (WTO definition), average 24.5%. For agricultural products, market-access opportunities are provided, inter alia, by duty-free access (i.e. about one third of applied MFN tariffs are zero), preferential tariffs, and over 100 agricultural tariff quotas (MFN and preferential). Numerous mixed or compound MFN duties add complexity to the agricultural tariff regime. Israel has not yet transposed its Schedule of concessions from HS 1996 nomenclature, which makes a comparison with its applied MFN tariffs (HS 2012) difficult because of the difference in nomenclatures. 10. Since its last TPR, Israel has launched trade facilitation initiatives for authorized economic operators and couriers (pre-clearance of air shipments). On the other hand, Israel maintains non automatic import licensing procedures on a vast range of products for various reasons, such as health, safety, security, and tariff-quota administration. Up-to-date

notifications would help improve the transparency of these import procedures. In general, Israel's notification record has been mixed. There is room for improvement in a number of areas where Israel has outstanding notification obligations, such as agriculture, regional trade agreements, and import licensing. 11. Israel maintains export licensing and approval (permit) schemes but there are no export taxes or levies. Israel has not used export subsidies on agricultural products since 2010. One export state trading enterprises is active in the groundnut sector. 12. Israel has made considerable progress in aligning its technical regulations and food standards with mandatory standards of international, regional or foreign origin. The

Government aims to accomplish full harmonization of Israeli technical regulations with overseas mandatory standards by end-2012 (end-2013 for food standards). Israel has notified three new or revised SPS measures since its last TPR in 2006. The SPS notifications concern alignment of Israel's phyto sanitary import requirements with international standards, and an amendment of BSE-related import requirements.
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13. Israel remains a significant user of anti-dumping measures, but overall the incidence of new measures remains within the long-term trend. During the review period, Israel

introduced safeguard legislation to implement the WTO Agreement on Safeguards and initiated two safeguard investigations. 14. Israel applies value-added tax on imported and domestic goods and services currently at the rate of 16%. A number of items, including fruit and vegetables, are zero-rated. Certain luxury and consumer goods, as well as alcoholic beverages are subject to purchase tax. For the assessment of purchase tax on imported products, Israel uses a type of surcharge, called TAMA, which approximates domestic wholesale prices. A tax reform for alcoholic

beverages is to be implemented whereby TAMA will be cancelled and replaced by a specific tax on domestic and imported alcoholic beverages alike. 15. Israel is party to the Agreement on Government Procurement (GPA) and has participated in the negotiations of the revised GPA. Israel has made a number of market-access commitments that enhance the opportunities for foreign companies to compete in its government procurement market. It has also undertaken to phase out its offset regime with respect to procurement covered by GPA. It will progressively reduce the current 20% offset level and eliminate offsets entirely after 15 years from the entry into force of the revised GPA for Israel. The Israeli tender legislation has been reformed since 2006. 16. Israel has a well developed intellectual property system, which underpins the country's status as one of the most innovative economies. A significant development in Israeli

intellectual property law is the introduction of the Copyright Act 2007, which, inter alia, replaced the doctrine of fair dealing with that of fair use, thus providing a more flexible approach to copyright exceptions - an exceptional step that few jurisdictions have taken so explicitly. Israel has reached an agreement with the United States to amend certain

pharmaceutical IPR provisions relating to patent-term extension, patent-application publication, and data exclusivity. 17. Israel continues to face competition-related challenges for reasons such as high tariff protection (agriculture), the small size of the economy, a certain degree of geographic isolation with little regional trade and language barriers, contributing to market-entry barriers. One of the Government's key policy objectives has been to enhance competition in the domestic market.
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Since its last TPR in 2006, it has made a series of structural reforms in various sectors to strengthen competition in the economy, including in financial services, telecommunications, and transport services. Moreover, a reform of the competition law in the area of oligopolies has been enacted.

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1.8LEGAL ASPECTS AND BARRIERS IN ISRAELI BANKING INDUSTRY

Banking, which remains the largest sector in Israels financial markets, is characterized by significant entry barriers, a high concentration of assets among a relatively small number of banks, limited credit allocation, and relatively narrow choice of financial products. For these reasons, it can be reasonably inferred that there is not a significant level of competition among incumbent banks over households and SMEs.

Although the level of competition in retail banking cannot be directly observed, our analysis suggests that such entry barriers confer on Israels five large banks a considerable ability to exploit market power and extract monopoly rents. The combination of barriers to entry with the banks market positions can be particularly harmful for SMEs and households because it results in considerable rationing of credit.

Market concentration, which measures how much output is controlled by a single bank or group of banks, is sometimes incorrectly used as an indicator of whether a certain market is competitive. A common presumption is that fewer firms and more concentrated markets diminish incentives to compete. But when the concentration is caused by barriers that prevent additional firms from entering the market, either because of government policy or a lack of the necessary production assets, the entry barriersnot market concentrationare the underlying cause of limited competition, as is the case in the Israeli credit markets. Accordingly, measures of market concentration should not be confused with market power, which pertains to the ability of firms to extract monopoly rents. First, market concentration does not necessarily result from excluding competitors or creating entry barriers. Economies of scalethe cost savings obtained by supplying or buying larger quantities through a single firmcould also give rise to concentration. Second, even in the most concentrated markets, a firm (e.g., a monopoly) does not necessarily benefit from an ability to extract monopoly rents. If a firms activities are undermined by the potential entry of rivals, it would not be able to extract monopoly rents, regardless of its size or market share. Therefore, market concentration alone does not indicate a markets competitiveness.

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In retail banking, this implies that a concentrated market is not necessarily an uncompetitive one. Small banking segments, in particular, may become considerably concentrated because of the cost advantages of economies of scale.

Regardless of the specific causes for the banking concentration in Israel, three empirical regularities clearly arise from our analysis: Considerable concentration is characteristic of small economies, the retail banking market in Israel is exceedingly concentrated relative to developed markets, and this high concentration has not declined in recent years. Israels three leading banks controlled 88 percent of all bank assets in 2006, compared with an average 72 percent for OECD nations. While such concentration may be on par with certain small economies, the combination of the five banks large market shares and the entry barriers detailed in this section severely limits credit competitiveness and capital access.

Entry Barrier 1: Limited Access to Credit Scoring and History In contrast to traditional market settings where consumers are valued based on their willingness to pay for a given product, retail banking typically requires extensive information to assess a consumers ability to repay debt. Information about a borrowers assets, credit worthiness, payment commitments, and history is essential for any bank in assessing the risk of extending credit to a potential customer. Therefore a banks viability depends on private information held exclusively by its rivals . For this reason, disclosure of consumer credit history has been regulated in most developed nations for nearly four decades. The 1970 U.S. Fair Credit Reporting Act (FCRA), which was amended in 1996, is considered by many to be an effective framework for disseminating credit information. Israel passed a credit scoring law in 2002 and specific credit scoring regulations in 2004.

2. Limited Access to Payment Card Networks: One important feature of banking competition that has evolved over the past two decades is competition between credit card networks. Credit card networks serve both banks and cardholders by enabling a cardholder to make purchases against either credit or funds the cardholder holds at the card-issuing institution.

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More importantly, with respect to lending competition, credit card networks can presumably facilitate credit provision by enabling rival banks to issue credit lines to different individuals even if they do not manage their demand deposit bank accounts.

In the past decade, the Antitrust Authority has made numerous attempts to improve both payment card membership rules and fees. However, our analysis suggests that the four leading banks control of the three card networks in IsraelVisa, MasterCard and American express - largely eliminates any provision of household credit by rival card networks. This conclusion is based on three important observations: (a) limited intra-brand competition among card issuers (b) limited credit allocation through payment cards and (c) limited access to payment card networks.

If there are both significant entry barriers to retail banking that prevent competition in the provision of credit, as well as the potential for undermining such barriers through credit cards, then incumbent banks may find it profitable to sacrifice revenue in their credit card network to collectively foreclose the retail banking segment.

Although there are clear benefits, even in the scenario above, for banks to enable an additional issuer to join their card network, conflicts may arise when incumbent banks find it privately profitable to block access to their networks altogether. Such conflicts could be harmful if there is very little inter-brand competition (between American Express and MasterCard, for instance) and incumbent banks prevent non-bank members from issuing credit through payment card networks.

The alleged conflict between private interests of incumbent banks and competitive access to issuers does not justify a divestiture of payment cards from banks. While the economic basis for such divestiture is questionable, the potential competitive outcome of such market share redistribution is even less clear. It is, however, imperative to maintain inter-brand competition between card networks. In this respect, control of two payment card brands by a single large bank could be anticompetitive if it transforms the credit card industry from a three player to a two-player market structure.

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3. Prohibitive Regulatory Oversight: Because the financial well-being of banking institutions contributes considerably to a countrys financial stability, banks require oversight. Such oversight affects the strategies, effectiveness, and level of competition among banks subject to regulation. Considerable research in the past decade has come to question the effectiveness of supervisory oversight of banks while demonstrating that such oversight has significant implications for competition.

The regulatory situation in Israel exemplifies the complexities of evaluating the effectiveness of strict banking oversight. Israel has not witnessed a severe banking crisis since 1983 and has so far withstood the current financial crisis. But is this perceived stability occurring because of or in spite of the current regulatory regime? Is Israels regulatory oversight harmful to competition, and if so, in what way? Both questions are complex and should be thoroughly addressed beyond this brief discussion. We will, however, attempt to highlight specific policies that could harm competition, independent of their potential impact on financial stability.

Bank of Israel Proper Conduct Code The Proper Conduct of Banking Business Regulations affords the Bank of Israel significant regulatory discretion over banking. In addition to risk management or prudential standards, the conduct code also regulates such things as dividends, corporate governance, standards for handling telephone transactions, and requirements for days of operations. Although certain requirements in the conduct regulation may have an impact on banks financial stability, the totality of such standards could also cause significant compliance costs, which would ultimately prohibit potential entrants from accepting deposits or issuing credit.

In this context, there are two groups of competitors that may be affected by the conduct regulation provisions: foreign banks and non-depository financial firms. To the extent that foreign banks or non-depository firms in Israel (such as insurance or fund managers) face fewer restrictions in their respective markets, offering credit and complying with the conduct regulation could be prohibitively costly for such firms. This may be particularly true when there is significant variation in regulatory requirements between banks and other financial institutions.

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Despite the Bank of Israels stated non-discriminatory policy, foreign banks have not made significant investments in large-scale branching or operations in Israel. According to a recent comparison of regulatory practices, Israel fares poorly with respect to entry barriers imposed on foreign banks.

Regulation of Commissions and Fees Another concern is the regulation of banks commissions and fees. Although the Bank of Israel recently revised certain aspects of fee setting to attain better coherence, it left the regulation of fees fundamentally unchanged by continuing to review, authorize, and ultimately determine fee changes as stipulated in the Banking (Customer Service) Law, 57411981.

This practice is troubling for a number of reasons. Given recent allegations that bank fees have been subject to illegal price fixing as well as the tendency of price regulation to provide convenient focal points for coordination between competitors, it is unclear whether fee regulation is altogether effective. Also, it is possible that regulation, even if effective at reducing fees, can be offset by other banking revenue, such as interest rates.

Licensing Requirements for Accepting Deposits The Banking (Licensing) Law, 5741-1981 requires any financial institution that accepts cash deposits to obtain a banking license and comply with the Supervisor of Banks prudential and conduct oversight. Accordingly, non depository institutions such as provident or mutual funds, which pose the most immediate competitive threat to retail banks in Israel, are prohibited from investing funds from their investors directly in credit to households and SMEs.

Although a licensing requirement is common in most, if not all, developed financial markets, in Israel this requirement limits the ability of non-depository institutions to offer competitive credit to households and SMEs.

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4. Limits on Non-bank Consumer Loans The Regulation of Non-Bank Loans Law, 5753-1993, which was revised in 2007 to cover loans of up to NIS 1 million, was initiated to protect consumers from exploitation by nonbank lenders. The law was intended to address certain black market lenders that reportedly offered loans at annual interest rates exceeding 100 percent. It requires minimal disclosure of the name of the lender, annual interest rate, repayment schedule, and other relevant information.

It also caps the legal interest rates for all non-bank loans at the average un-indexed interest rate reported by the Bank of Israel multiplied by 2.25. In August 2009, the average unindexed rate was 4.01 percent, making 9 percent the legal maximum for non-bank lending.

This legal limit on interest rates, from which banks and their subsidiaries are exempt, has a severe anticompetitive impact for two reasons. It prevents non-bank institutions from offering credit to the one group that needs it most: risky customers who cannot obtain a bank loan. In this respect, it places financial distress on customers who have faced difficulties obtaining credit from banks. It also restricts non-banks to levels of interest rates that may not be profitable.

For these two reasons, such limitations serve as an entry barrier. In summary, based on the analysis of entry barriers above, we find that the absence of credit unions, community development financial institutions, foreign banks, and other alternatives largely results from a failure to accommodate the economics of non-depository institutions through proper legislation and regulation. It should be further noted that, in contrast to the insurance industry, where two of Israels leading insurance firms are controlled by foreign companies, none of Israels leading banks has been acquired by foreign banks despite the fact that foreign banks play a vital role in international markets and the domestic financial markets of many small economies.

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Recent Banking Reforms It has been suggested by many that the divestiture of provident and mutual funds stipulated by the 2005 Bachar reforms has brought non-financial firms closer to retail banking competition by providing a toehold in household financial services. These reforms have reduced the level of banking assets in Israel However, it is imperative to recognize that divesting complimentary products (long-term savings, for example) from retail banking services (such as management of checking accounts) does not necessarily reduce the ability of retail banks to extract monopoly rents.

Reviewing the interest rate margins of the leading five banks since the reforms suggests that the reforms to date have not produced a significant decline in interest rate margins For this reason, and as was initially stated in the Bachar Committee report, it is critical to resolve any regulatory barriers to retail banking so additional financial firms can provide meaningful competition. As we argue below, it is critical to address all three entry barriers for meaningful competition in the banking segment to take place.

New Accounting Standards: The impending implementation of IFRS in 2011 will have a significant impact for the banking sector particularly in the area of treatment of taxes. The core group of the ministry of corporate affairs extended the deadline for banks and NBFCs to April 2013 at a recent meeting held on March 29, 2010. The top five accounting challenges to be faced by banks are loan impairment, use of fair value, derivatives and hedge accounting, de-recognition of financial assets and consolidation of entities.

Risk Management: Banks in India are also moving from the individual silo system to an enterprise wide risk management system. Banks would be required to allocate significant resources towards this objective over the next few years.

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1.9 OVERALL PRODUCTS/SERVICES OFFERED BY THE BANKING INDUSTRY OF INDIA

Some of common available banking products of Indian banks are explained below:

Credit Card Credit Card is post paid or pay later card that draws from a credit line-money made available by the card issuer (bank) and gives one a grace period to pay. If the amount is not paid full by the end of the period, one is charged interest. A credit card is nothing but a very small card containing a means of identification, such as a signature and a small photo. It authorizes the holder to change goods or services to his account, on which he is billed.

The bank receives the bills from the merchants and pays on behalf of the card holder. These bills are assembled in the bank and the amount is paid to the bank by the card holder totally or by installments. The bank charges the customer a small amount for these services. The card holder need not have to carry money/cash with him when he travels or goes for purchasing. Credit cards have found wide spread acceptance in the metros and big cities. Credit cards are joining popularity for online payments.

The major players in the Credit Card market are the foreign banks and some big public sector banks like SBI and Bank of Baroda. India at present has about 3 million credit cards in circulation.

Debit Cards Debit Card is a prepaid or pay now card with some stored value. Debit Cards quickly debit or subtract money from ones savings account, or if one were taking out cash.

Every time a person uses the card, the merchant who in turn can get the money transferred to his account from the bank of the buyers, by debiting an exact amount of purchase from the card.
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When he makes a purchase, he enters this number on the shops PIN pad. When the card is swiped through the electronic terminal, it dials the acquiring bank system either Master Card or Visa that validates the PIN and finds out from the issuing bank whether to accept or decline the transaction. The customer never overspread because the amount spent is debited immediately from the customers account.

So, for the debit card to work, one must already have the money in the account to cover the transaction. There is no grace period for a debit card purchase. Some debit cards have monthly or per transaction fees.

Debit Card holder need not carry a bulky checkbook or large sums of cash when he/she goes at for shopping. This is a fast and easy way of payment one can get debit card facility as debit cards use ones own money at the time of sale, so they are often easier than credit cards to obtain.

The major limitation of Debit Card is that currently only some 8000-10000 shops country wide accepts it. Also, a person cant operate it in case the telephone lines are down.

Automatic Teller Machine The introduction of ATMs has given the customers the facility of round the clock banking. The ATMs are used by banks for making the customers dealing easier. ATM card is a device that allows customer who has an ATM card to perform routine banking transaction at any time without interacting with human teller. It provides exchange services.

This service helps the customer to withdraw money even when the banks are closed. This can be done by inserting the card in the ATM and entering the Personal Identification Number and secret Password. ATMs are currently becoming popular in India that enables the customer to withdraw their money 24 hours a day and 365 days.

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It provides the customers with the ability to withdraw or deposit funds, check account balances, transfer funds and check statement information. The advantages of ATMs are many. It increases existing business and generates new business. It allows the customers to transfer money to and from accounts, to view account information, to order cash, and to receive cash.

E-Cheques

The e-cheques consists five primary facts. They are the consumers, the merchant, consumers bank the merchants bank and the e-mint and the clearing process. This cheque system uses the network services to issue and process payment that emulates real world cheque. The payer issues a digital cheque to the payee ant the entire transactions are done through internet.

Electronic version of cheques are issued, received and processed. A typical electronic cheque transaction takes place in the following manner:

1. The customer accesses the merchant server and the merchant server presents its goods to the customer. 2. The consumer selects the goods and purchases them by sending an e-cheque to the merchant. 3. The merchant validates the e-cheque with its bank for payment authorisation. 4. The merchant electronically forwards the e-cheque to its bank. 5. The merchants bank forwards the e-cheque to the clearing house for cashing. 6. The clearing house jointly works with the consumers bank clears the cheque and transfers the money to the merchants banks. 7. The merchants bank updates the merchants account. 8. The consumers bank updates the consumers account with the withdrawal information. 9. The e-cheque is a great boon to big corporate as well as small retailers. Most major banks accept e-cheques. Thus this system offers secure means of collecting payments, transferring value and managing cash flows.

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Electronic Funds Transfer (EFT) Many modern banks have computerized their cheque handling process with computer networks and other electronic equipments. These banks are dispensing with the use of paper cheques. The system called electronic fund transfer (EFT) automatically transfers money from one account to another.

This system facilitates speedier transfer of funds electronically from any branch to any other branch. In this system the sender and the receiver of funds may be located in different cities and may even bank with different banks. Funds transfer within the same city is also permitted. The scheme has been in operation since February 7, 1996, in India.

The other important type of facility in the EFT system is automated clearing houses. These are the computer centers that handle the bills meant for deposits and the bills meant for payment. In big companies pay is not disbursed by issued cheques or issuing cash. The payment office directs the computer to credit an employees account with the persons pay.

Tele-banking Tele-banking refers to banking on phone services; a customer can access information about his/her account through a telephone call and by giving the coded Personal Identification Number (PIN) to the bank. Tele-banking is extensively user friendly and effective in nature.

Mobile Banking A new revolution in the realm of e-banking is the emergence of mobile banking. Online banking is now moving to the mobile world, giving everybody with a mobile phone access to real-time banking services, regardless of their location. But there is much more to mobile banking from just online banking.

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It provides a new way to pick up information and interact with the banks to carry out the relevant banking business. The potential of mobile banking is limitless and is expected to be a big success. Booking and paying for travel and even tickets is also expected to be a growth area.

According to this system, customer can access account details on mobile using the Short Messaging System (SMS) technology where select data is pushed to the mobile device, the wireless application protocol (WAP) technology, which will allow user to surf the net on their mobiles to access anything and everything. This is a very flexible way of transacting banking business.

Already ICICI and HDFC banks have tied up cellular service provides such as Airtel, Orange, Sky Cell, etc. in Delhi and Mumbai to offer these mobile banking services to their customers.

Internet Banking Internet banking involves use of internet for delivery of banking products and services. With internet banking is now no longer confirmed to the branches where one has to approach the branch in person, to withdraw cash or deposits a cheque or requests a statement of accounts.

In internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. The Internet Banking now is more of a normal rather than an exception due to the fact that it is the cheapest way of providing banking services.

As indicated by McKinsey Quarterly research, presently traditional banking costs the banks, more than a dollar per person, ATM banking costs 27 cents and internet banking costs below 4 cents approximately. ICICI bank was the first one to offer Internet Banking in India.

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Demat Demat is short for de-materialization of shares. In short, Demat is a process where at the customers request the physical stock is converted into electronic entries in the depository system. In January 1998 SEBI (Securities and Exchange Board of India) initiated DEMAT ACCOUNTANCY System to regulate and to improve stock investing. As on date, to trade on shares it has become compulsory to have a share demat account and all trades take place through demat.

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1.10

BARRIERS TO INDIAN BANKING SECTOR

Enhanced Customer Experience: Banks are facing challenges as customers have become demanding and the loyalties are diffused with low switching costs. High service user charges are also concern.

Asset Quality: Asset quality in the banking sector is set to be a key issue as Crisil projects net NPA as a percentage of net Advances to touch 2.3% in FY11, as fallout of the downturn and consequent restructuring of advances.

Transparency and Supervision: The disclosure requirements have become stringent over the years and covers Capital adequacy, Asset quality, Asset liability management, Profitability, Country risk exposure, Risk exposures in derivatives, Segment reporting and Related Party disclosures.

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1.11

PRESENT TRADE WITH QUANTITY AND AMOUNT OF THE BANKKS IN INDIA

State Bank of India Number of Branches: 14,119 branches, including 157 foreign offices in 32 countries Total Assets (NIS billion): US$360 billion Share of total banking system deposits: 20

ICICI Bank Number of Branches: 2883 Total Assets (NIS billion): US$ 98.99 billion

HDFC Bank Number of Branches: 2776 Total Assets (NIS billion): US$ 70.17 billion

Bank of Baroda Number of Branches: 4007 Total Assets (NIS billion): US$ 83.25 billion

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1.12

TECHNOLOGICAL ADVANCEMENT IN INDIA

Information technology is one of the most important facilitators for the transformation of the Indian banking industry in terms of its transactions processing as well as for various other internal systems and processes. The various technological platforms used by banks for the conduct of their day to day operations, their manner of reporting and the way in which interbank transactions and clearing is affected has evolved substantially over the years. The technological evolution of the Indian banking industry has been largely directed by the various committees set up by the RBI and the government of India to review the implementation of technological change. No major breakthrough in technology implementation was achieved by the industry till the early 80s, though some working groups and committees made stray references to the need for mechanization of some banking processes. This was largely due to the stiff resistance by the very strong bank employees unions. The early 1980s were instrumental in the introduction of mechanization and computerization in Indian banks. This was the period when banks as well as the RBI went very slow on mechanization, carefully avoiding the use of computers to avoid resistance from employee unions. However, this was the critical period acting as the icebreaker, which led to the slow and steady move towards large scale technology adoption. Computerization The process of computerization marked the beginning of all technological initiatives in the banking industry. Computerization of bank branches had started with installation of simple computers to automate the functioning of branches, especially at high traffic branches. Thereafter, Total Branch Automation was in use, which did not involve bank level branch networking, and did not mean much to the customer. Networking of branches are now undertaken to ensure better customer service. Core Banking Solutions (CBS) is the networking of the branches of a bank, so as to enable the customers to operate their accounts from any bank branch, regardless of which branch he opened the account with.
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The networking of branches under CBS enables centralized data management and aids in the implementation of internet and mobile banking. Besides, CBS helps in bringing the complete operations of banks under a single technological platform. Satellite Banking Satellite banking is also an upcoming technological innovation in the Indian banking industry, which is expected to help in solving the problem of weak terrestrial communication links in many parts of the country. The use of satellites for establishing connectivity between branches will help banks to reach rural and hilly areas in a better way, and offer better facilities, particularly in relation to electronic funds transfers. However, this involves very high costs to the banks. Hence, under the proposal made by RBI, it would be bearing a part of the leased rentals for satellite connectivity, if the banks use it for connecting the north eastern states and the under banked districts. Development of Distribution Channels The major and upcoming channels of distribution in the banking industry, besides branches are ATMs, internet banking, mobile and telephone banking and card based delivery systems. Automatic Teller Machines ATMs were introduced to the Indian banking industry in the early 1990s initiated by foreign banks. Most foreign banks and some private sector players suffered from a serious handicap at that time- lack of a strong branch network. ATM technology was used as a means to partially overcome this handicap by reaching out to the customers at a lower initial and transaction costs and offering hassle free services. Since then, innovations in ATM technology have come a long way and customer receptiveness has also increased manifold. Public sector banks have also now entered the race for expansion of ATM networks. Development of ATM networks is not only leveraged for lowering the transaction costs, but also as an effective marketing channel resource.

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Introduction of Biometrics Banks across the country have started the process of setting up ATMs enabled with biometric technology to tap the potential of rural markets. A large proportion of the population in such centers does not adopt technology as fast as the urban centers due to the large scale illiteracy. Development of biometric technology has made the use of self service channels like ATMs viable with respect to the illiterate population. Though expensive to install, the scope of biometrics is expanding rapidly. It provides for better security system, by linking credentials verification to recognition of the face, fingerprints, eyes or voice. Some large banks of the country have taken their first steps towards large scale introduction of biometric ATMs, especially for rural banking. At the industry level, however, this technology is yet to be adopted; the high costs involved largely accounting for the delay in adoption. Multifunctional ATMs Multifunctional ATMs are yet to be introduced by most banks in India, but have already been recognized as a very effective means to access other banking services. Multifunctional ATMs are equipped to perform other functions, besides dispensing cash and providing account information. Mobile recharges, ticketing, bill payment, and advertising are relatively new areas that are being explored via multifunctional ATMs, which have the potential to become revenue generators for the banks by effecting sales, besides acting as delivery channels. Most of the service additions to the ATM route require specific approval from the regulator. ATM Network Switches ATM switches are used to connect the ATMs to the accounting platforms of the respective banks. In order to connect the ATM networks of different banks, apex level switches are required that connect the various switches of individual banks. Through this technology, ATM cards of one bank can be used at the ATMs of other banks, facilitating better customer convenience. Under the current mechanism, banks owning the ATM charge a fee for allowing the customers of some other bank to access its ATM.
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Internet Banking Internet banking in India began taking roots only from the early 2000s. Internet banking services are offered in three levels. The first level is of a banks informational website, wherein only queries are handled; the second level includes Simple Transactional Websites, which enables customers to give instructions, online applications and balance enquiries. Under Simple Transactional Websites, no fund based transactions are allowed to be conducted. Internet banking in India has reached level three, offering Fully Transactional Websites, which allow for fund transfers and various value added services. Internet banking poses high operational, security and legal risks. This has restrained the development of internet banking in India. The guidelines governing internet banking operations in India covers a number of technological, security related and legal issues to be addressed in relation to internet banking. According to the earlier guidelines, all internet banking services had to be denominated in local currency, but now, even foreign exchange services, for the permitted underlying transactions, can be offered through internet banking. Phone Banking and Mobile Banking Phone and mobile banking are a fairly recent phenomenon for the Indian banking industry. There exist operative guidelines and restrictions on the type and quantum of transactions that can be undertaken via this route. Phone banking channels function through an Interactive Voice Response System (IVRS) or tele-banking executives of the banks. The transactions are limited to balance enquiries, transaction enquiries, stop payment instructions on cheques and funds transfers of small amounts (per transaction limit of Rs 2500, overall cap of Rs 5000 per day per customer). According to the draft guidelines on mobile banking, only banks which are licensed and supervised in India and have a physical presence in India are allowed to offer mobile banking services. Besides, only rupee based services can be offered. Mobile banking services are to be restricted to bank account and credit card account holders which are KYC and AMC compliant.

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Card Based Delivery Systems Among the card based delivery mechanisms for various banking services, are credit cards, debit cards, smart cards etc. These have been immensely successful in India since their launch. Penetration of these card based systems have increased manifold over the past decade. Aided by expanding ATM networks and Point of Sale (POS) terminals, banks have been able to increase the transition of customers towards these channels, thereby reducing their costs too. Payment and Settlement Systems The innovations in technology and communication infrastructure in recent years have impacted banks in a large way through the development of payment and settlement systems, which are central to the major portion of the businesses of banks. In order to strengthen the institutional framework for the payment and settlement systems in the country, the RBI constituted, in 2005, a Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) as a Committee of its Central Board. The BPSS now lays down policies relating to the regulation and supervision of all types of payment and settlement systems, sets standards for existing and future systems, approves criteria for authorization of payment and settlement systems, and determines criteria for membership to these systems, including continuation, termination and rejection of membership. Thereafter, the government and the RBI felt the need for a legal framework dedicated to the efficient functioning of the payment and settlement systems. The Payment and Settlement Systems Act was passed in December 2007, which empowered the RBI to regulate and supervise the payment and settlement systems and provided a legal basis for multilateral netting and settlement.

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Paper Based Clearing Systems Among the most important improvement in paper based clearing systems was the introduction of MICR technology in the mid 1980s. Though improvements continued to be made in MICR enabled instruments, the major transition is expected now, with the implementation of the Cheque Truncation System for the processing of cheques. Cheque Truncation System (CTS) Truncation is the process of stopping the movement of the physical cheque which is to be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc. Thus, the CTS reduce the probability of frauds, reconciliation problems, logistics problems and the cost of collection. The cheque truncation system was launched on a pilot basis in the National Capital Region of New Delhi on February 1, 2008, with the participation of 10 banks. The main advantage of the cheque truncation system is that it obviates the physical presentation of the cheque to the clearing house. Instead, the electronic image of the cheque would be required to be sent to the clearing house. This would provide a more cost-effective mode of settlement than manual and MICR clearing, enabling realization of cheques on the same day. Amendments have already been made in the NI Act to give legal recognition to the electronic image of the truncated cheque, providing for a sound legal framework for the introduction of CTS. Electronic Clearing Service The Electronic Clearing Service (ECS) introduced by the RBI in 1995, is akin to the Automated Clearing House system that is operational in certain other countries like the US. ECS has two variants- ECS debit clearing and ECS credit clearing service. ECS credit clearing operates on the principle of single debit multiple credits and is used for transactions like payment of salary, dividend, pension, interest etc.

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ECS debit clearing service operates on the principle of single credit multiple debits and is used by utility service providers for collection of electricity bills, telephone bills and other charges and also by banks for collections of principal and interest repayments. Settlement under ECS is undertaken on T+1 basis. Any ECS user can undertake the transactions by registering themselves with an approved clearing house. The RBI has recently launched the National Electronic Clearing Service (NECS), in September 2008, which is an improvement over the ECS currently operational. Under NECS, all transactions shall be processed at a centralized location called the National Clearing Cell, located in Mumbai, as against the ECS, where processing is currently done at 74 different locations. Electronic Funds Transfer Systems The launch of the electronic funds transfer mechanisms began with the Electronic Funds Transfer (EFT) System. The EFT System was operationalised in 1995 covering 15 centers where the Reserve Bank managed the clearing houses. Special EFT (SEFT) scheme, a variant of the EFT system, was introduced with effect from April 1, 2003, in order to increase the coverage of the scheme and to provide for quicker funds transfers. SEFT was made available across branches of banks that were computerized and connected via a network enabling transfer of electronic messages to the receiving branch in a straight through manner (STP processing). In the case of EFT, all branches of banks in the 15 locations were part of the scheme, whether they are networked or not. A new variant of the EFT called the National EFT (NEFT) was decided to implemented (November 2005) so as to broad base the facilities of EFT. This was a nationwide retail electronic funds transfer mechanism between the networked branches of banks. NEFT provided for integration with the Structured Financial Messaging Solution (SFMS) of the Indian Financial Network (INFINET). The NEFT uses SFMS for EFT message creation and transmission from the branch to the banks gateway and to the NEFT Centre, thereby considerably enhancing the security in the transfer of funds.

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While RTGS is a real time gross settlement funds transfer product, NEFT is a deferred net settlement funds transfer product. As the NEFT system stabilized over time, the number of settlements in NEFT was increased from the initial two to six. NEFT now provides six settlement cycles a day and enables funds transfer to the beneficiaries account on T+0 basis, bringing it closer to real time settlement. RTGS The other payment and settlement systems deployed were mostly aimed at small value repetitive transactions, largely for the retail transactions. The introduction of RTGS in 2004 was instrumental in the development of infrastructure for Systemically Important Payment Systems (SIPS). The payment system in India largely followed a deferred net settlement regime, which meant that the net amount was settled between banks on a deferred basis. This posed significant settlement risks. RTGS was launched by RBI, which enabled a real time settlement on a gross basis. To ensure that RTGS system is used only for large value transactions and retail transactions take an alternate channel of electronic funds transfer, a minimum threshold of one lakh rupees was prescribed for customer transactions under RTGS on January 1, 2007. RTGS minimizes systemic risks too, in addition to settlement risks, as paper based funds settlement through the Interbank clearing are replaced by the electronic, credit transfer based RTGS system. High systemic risks are posed by high value interbank transfers, so, it is considered desirable that all major interbank transfers among commercial banks having accounts with RBI be routed only through the RTGS system. The RTGS system had a membership of 107 participants (96 banks, 8 primary dealers, the Reserve Bank and the Deposit Insurance, Credit Guarantee Corporation and Clearing Corporation of India Ltd.) as at end-August 2009. The reach and utilization of the RTGS has witnessed a sustained increase since its introduction in 2004. The bank/branch network coverage of the RTGS system increased to 58,720 branches at more than 10,000 centers facilitating the increased usage of this mode of funds transfer.

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Technology Vendors Many Indian banks handled technological issues in house till the late 1990s. Thereafter, the complications of the business necessitated the engagement of specialized vendors to handle complex issues. Due to the complexities involved, most banks now prefer to engage IT vendors to introduce specialized software to help in their risk management systems, retail and corporate banking, card management systems, complete back office support including data management systems.

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1.13

REQUIREMENTS OF RESOURCES IN INDIA

DEMAND DRIVERS FOR BANKING SEGMENT Market dynamics Increasing reach of banks into rural areas and Tier2/Tier3 cities. Banks aim to achieve a penetration level of 74% and 81.5% in 2013 and 2018. Micro finance emerging as a major thrust area Increasing Mergers and acquisitions to reap the benefits of consolidation. Improving competitiveness in terms of lower interest rates, increased productivity, better working capital management, deleveraging. Growth in Indian exports and imports.

Technology Technology in banking is drawing more and more customers for banking related products and services as they become more cost effective and customer friendly. Banks renders various technology based services such as mobile banking, net banking, tele banking, atm/credit cards, etc. Banking sector spend about 46% of its technology budget in business continuity, 32% for adding product functionality/new products/new features and the remaining 22% in new technology which can change the business process.

Household savings Bank deposits have been the mainstay of the saving process in the Indian economy and banks have played an increasingly important role in stepping up the financial savings rate, physical savings, nevertheless, have tended to grow in tandem with the financial savings. With the shrinking share of household sector deposits in total deposits, banks need to explore ways of broadening the depositor base, especially in rural and semi-urban areas by offering customized products and features suitable to individual risk-return requirements.

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1.14

COMPARISON OF BANKING INDUSTRY OF ISRAEL AND INDIA

ISRAEL Forces of Changes Deregulation, Technology and Banking Crises are the major drivers of changes in Israel. Major Players Bank Leumi, Mizrahi Tefahot Bank, Discount Bank, and Bank Hapoalim are the major players.

INDIA Technology and Privatization are the most important drivers of changes in the Indian banking industry. State Bank of India, HDFC Bank, ICICI Bank, Bank of Baroda, HSBC Bank, and Axis Bank, etc. are some of the major players.

Services Offered by the Banks

Different types of accounts like savings, current and fixed term accounts; ATM facilities, Credit card facilities, Tele-Banking, Cheques, etc.

Different types of accounts like savings, current, Demat accounts; ATM as well as credit card facilities, Cheques, E-Banking, etc.

Present Trade Volume (in mode of total assets) (In NIS million for Israel and in US$ billion for India) Technological Advancement

Bank Hapoalim-273.3 Bank Mizrahi-86.3 Discount Bank-154.8 Bank Leumi-272.8 In case of Israel due to technology various services like ATM, mobile banking, etc. have emerged but still the people are not much convenient with the new technology usage except for the ATM facilities.

SBI Bank-360 ICICI Bank-98.99 HDFC Bank-70.17 BOB-83.25 In case of India, larger proportion of growth of banking industry can be attributed to the technological advancement. All the facilities via technology like ATM, credit card; E-banking, etc. have been widely accepted in India.

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Barriers

Some of the barriers in banking industry of Israel are: Licensing requirements for accepting deposits Limited credit allocation Narrow choice of financial products Lack of necessary production assets Limited access to credit card networks

Some of the barriers in Indian banking industry are: Asset Quality - is the most important in order to excel in the industry Enhanced customer experience customers require more better services in order to be loyal as the switching costs are low Transparency & Supervision stringent measures are taken to ensure it

Requirements of Resources

Resources in case of Israeli banking system is obtained from different channels,

Demand drivers in Indian banking sector are the Technology, Household

Customer relationship model, savings and market Management Information system, Govt. tax authorities, regulatory bodies, etc. dynamics.

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CHAPTER-2

COMPARISON OF BANKS

2.1 BANK HAPOALIM

Bank Hapoalim BM is an Israel-based financial institution. Bank Hapoalim is Israels leading bank. Overseas, the bank operates through 44 branches, subsidiaries, and representative offices. The Companys operations are divided into seven segments of activity. The Households Segment provides a range of banking services and financial products to households. The Private Banking Segment provides a range of banking services and financial products, including investment advisory services, to private customers of medium to high net worth in Israel and abroad. The Small Business Segment provides products and services to small businesses. The Commercial Segment provides products and services to medium-sized business clients. The Corporate Segment provides products and services to large business clients. The Financial Management Segment is responsible for the management of the Companys assets and liabilities. It also includes the activity of the Companys dealing rooms. Others and Adjustments includes all other activities of Bank Hapoalim BM. In Israel, the Bank Hapoalim Group has 288 full-service branches, eight regional business centers, and dedicated Customer Relationship Managers for major corporate customers, including financial institutions. The bank is recognized for its expertise in helping customers choose the products and services that are best suited to their business requirements.

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PRODUCT OFFERINGS Bank Hapoalim offers its services in the various following categories: Investment Services Bank Hapoalim offers a broad and deep array of financial instruments for access to the worlds investment markets. Investment services are offered through Hapoalim Securities USA, Inc. (Hapoalim Securities), a wholly-owned non-bank subsidiary of Bank Hapoalim. Hapoalim Securities is a registered broker/dealer providing a vast range of investment products and service with established international capabilities. Various services offered are: Foreign Currency Trading - Bank Hapoalim New York offers expert execution in multiple currencies utilizing the safety, security, and expertise of our real-time trading systems. Each of these products is designed to help you take advantage of positive interest rate movement and hedge against adverse fluctuations. Foreign currency trades include Spot Transactions, Forwards Contracts, Non-Deliverable Forward Currency Contracts and Call and Put Options. Financial Derivatives There are two types of derivatives offered Interest rate derivatives and Foreign exchange derivatives. Money Market Sweep Accounts - A Money Market Sweep Account allows the investor to invest automatically. A daily target balance is set in the checking account to cover all the expected distributions. At the end of each day, any amount above the target is automatically transferred into a highly rated Money Market Investment Fund of the investors choice. The sweep account allows earning a competitive return on money that would otherwise sit idle in a non-interest bearing account. Mutual Funds - Hapoalim Securities offers the ability to invest in many top performing mutual funds.

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Cash Management Bank Accounts - There are three main types of accounts:

Checking Account - Designed for businesses, business owners, executives, private banking customers and philanthropic organizations with sophisticated requirements.

Savings Account - This account allows the cash to grow with a competitive interest rate while providing immediate access to funds. Money Market Deposit Account It is an alternative savings account that provides a relatively higher interest rate, but requires a higher minimum balance and a limited number of withdrawal and check-writing privileges per month.

Credit/Debit Cards Credit Cards The Bank Hapoalim New York Branches MasterCard is available to U.S. and qualifying international clients. For non-U.S. residents who travel frequently, consider the American Express Charge Card to handle Foreign Exchange charges. Your monthly bill may be debited from your Bank Hapoalim checking account. American Express offers Green, Gold, or Platinum cards and, by exclusive invitation, the Centurion card.

Debit Card - The Bank Hapoalim Debit Card provides safe payment convenience anywhere MasterCard is accepted. Time-consuming check approvals can be avoided, tracking of spending using monthly account statements can be done, and cash withdrawals possible at any ATM. All transactions will appear on the regular monthly account statement and will be automatically debited from the account.

Loan Sweep Accounts - A Loan Sweep Account with Bank Hapoalim allows paying off the business loan faster and reduces the amount of interest to be paid. A daily target balance is set in the business checking account to cover all the expected distributions. At the end of each day, any amount above the target is automatically applied to the outstanding business loan payment.
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Check Collections - Bank Hapoalim facilitates the international collection process by negotiating checks in a range of foreign currencies and U.S. Dollars. When funds are received from the correspondent bank, they may be converted to U.S. Dollars or credited to the account in the same currency as the check.

Money Transfer - Money Transfer service provides secure and timely execution throughout the global network. Benefit is obtained from both intra-day liquidity and settlement at a competitive price. Wire transfers are one of the fastest and safest ways to transfer money overseas.

Time Deposits - A Time Deposit allows money to grow at a guaranteed interest rate when held over a specified term period. Terms for Time Deposit accounts range from one week to 10 years.

Credit and Lending Term Loans - Bank Hapoalim offers competitive fixed- and adjustable-rate term loans. All loans are subject to credit approval. Automatic payments may be scheduled from the Bank Hapoalim Checking Account.

Private Real Estate Financing - Bank Hapoalim offers a portfolio of financing solutions for real estate investors, developers, and owner occupants.

Bridge Loans - A Bridge Loan from Bank Hapoalim can help to meet the current obligations until the investors are able to obtain long-term financing.

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VARIOUS OTHER INNOVATIVE SERVICES OFFERED BY BANK HAPOALIM ARE: Poalim Mobile Banking

Bank Hapoalim leads in mobile banking and offers a range of possibilities that facilitate management of financial transactions and that includes exclusive national and international applications while taking advantage of the unique capabilities of smart phones and their advanced graphics; application for capital market trading; mobile wallet to carry out transfers and payments; capital market information application open to customers of all banks; implementation of fast payment of bills by photocopying the voucher without having to enter any details; money transfer through bumps without having to enter the account particulars to which the money is being transferred; smart graphs that enable a comparison between share and index performances.

Poalim Connect

Realizing that customers, who are characterized by heavy use of direct channels, prefer available personalized solutions without having to give up the option of receiving branch service, the bank launched a comprehensive total solution that includes personal service in direct channels without relinquishing the relationship with the branch.

In this manner, customers operating through Poalim Connect are connected to their account: through advanced interface that displays all of the important data on one main screen and in a design adapted to tablet computers.

The new interface includes real time alerts, including the option of receiving customized SMSs, contact initiated by the banker for important, personal events in the customers life, receiving reminders to carry out transactions and options for phone calls or meetings in the branch with specialist consultants.

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Dan Haschan

In 2010, activities were also launched to promote the importance of savings among children and their parents. Coin deposit machines were positioned in public places that allow children to deposit coins they collected into their account. Today, children can view transactions carried out in their account, and they are awarded a designated ATM card that allows them to print out bank statements just like their parents.

Poalim in Hi-Tech

Designated service for hi-tech companies in which bankers specializing in providing service to hi-tech companies are trained and positioned in 22 designated branches in geographical areas with high concentrations of Hi-tech companies like (Ramat Hahayal, Herzliya Pituah, Har Hotzvim in Jerusalem, etc.). The service is provided to companies in various stages of their operational lifecycle, from start-up to mature.

Poalim for the Community

As part of its community activities, the bank operated Dan Haschan summer camps, which integrated the learning of money-saving habits into entertainment and recreational activities.

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OVERALL OPERATIONS

During its 89 years of operation, the bank has developed a network of branches and widespread commercial activity in all banking sectors, enabling it to offer customers a wide range of banking and financial services. The bank serves the majority of its clients through its two main divisions: a Corporate Division that serves most of its business clients, and a Retail Division, operating via an affiliate system, that serves household customers, private banking, and small businesses, and also spearheads the bank's consumer credit and mortgage activity. This division is comprised of 270 branches and business representatives, providing complete and comprehensive banking services.

Bank Hapoalim has extensive overseas activities, operating via banking subsidiaries, financial companies, the bank's overseas branches and representative offices, and through relationships with over 2,400 banks worldwide. The bank strives to expand its operations overseas, with the aim of increasing profitability and diversifying risk in all the bank's international activities. The bank's international operations currently include activities in Europe, the US, Canada, Latin America, Australia, Hong Kong and Singapore. Its international activities are focused on private banking, activity in emerging markets, and the corporate sector.

As part of its operations in emerging markets, Bank Hapoalim has recently acquired banks in Turkey and Kazakhstan. In addition to its business achievements, the bank also generates, through its activities and operations, a multitude of added value benefits essential to its clients, including imparting a sense of responsibility and accountability for their financial activities after they have received the proper guidance and knowledge from bank personnel.

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CODE OF CONDUCT

Bank Hapoalim is a leading financial institution in Israel and is in the business of providing banking services and products to customers in Israel and abroad. Maintaining this position requires meticulous attention to innovation and initiative and a constant striving for success, while adhering to professional and behavioral ethics. The Code of Ethical Conduct endeavors to express its organizational vision and values and to establish Bank Hapoalim as a reliable leading brand, trusted by customers and employees. Because of the importance the Bank attaches to the Code of Ethical Conduct, it has appointed a Management Team member, the Head of Human Resources, Logistics and Procurement Division, as the Head of Ethics in the Bank. The Bank strictly observes the law and government regulations, which are anchored in its procedures. The Code of Ethical Conduct is intended to provide guidance and orientation in cases where rules of conduct are not adequately defined by the law or Bank procedures. The Code sets standards that can ensure that Bank employees behave appropriately when they encounter such ethical problems, in all units and at all levels. The Bank has also appointed an Ethics Officer from HR division, Leadership and Development Unit, whose job will be to ensure that employees enquiries and complaints relating to ethical conduct issues will be forwarded to and dealt with by the authorized functions and to assist the Head of Ethics to implement the Code of Ethical Conduct in the Bank.

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2.2 MIZRAHI TEFAHOT BANK

Mizrahi Tefahot Bank Ltd (Mizrahi Tefahot), formerly United Mizrahi Bank Ltd., is an Israel-based bank offering international, commercial, mortgage, domestic and personal financial services. It also provides fund and portfolio management. The Bank offers a variety of short-term investment programs for periods ranging from one to five years, with fixed and varying interest rates. Mizrahi Tefahot operates through 166 branches in Israel, and affiliates in Israel and abroad, with branches or representation internationally, Los Angeles, Cayman Islands, Mexico, Switzerland, Netherland and London. The Bank has interests in telecommunications and industrial companies, such as Mofet Israel Technology Fund Ltd., Pesagot Jerusalem Ltd. and Plenus Technology.

PRODUCT OFFERINGS

Mizrahi Tefahot offers Various Banking Services: Special accounts for young persons, soldiers, students, employees, the self-employed and retirees

Private banking - Investments in deposits, savings accounts, provident and mutual funds, Loans readily available for different purposes, advanced products and services in foreign currency sectors and a diverse range of advanced capital market activities.

Commercial banking - Individually tailored mortgage programs, Expertise in real estate communication and information processing technologies, etc.

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Private Banking Mizrahi Tefahot Bank offers professional Private Banking services specifically tailored to fit the needs of domestic clients as well as foreign residents from all over the world. In case of Domestic Private Banking, Mizrahi-Tefahot Bank has created a system of professional and personalized Private Banking services for the high net-worth clients, bringing the full range of banking needs to customers door. Personal attention combined with high skills and a tailor-made portfolio is the hallmark of Mizrahi-Tefahot Private Banking, which is made available to customers through Private Banking advisor. In case of International Private Banking (IPB), foreign residents can take advantage of numerous opportunities provided in Israel and around the world by Mizrahi-Tefahot International Private Banking Units. The various services are: Global money markets and securities exchanges International trade and commerce Real-estate and mortgages Trust services Incomparable investment and economical advice Deposits - High Interest Yield, Liquidity and Convertibility

Mizrahi-Tefahot Bank (UMTB) operates a computerized system for securities transactions used by brokers on the Tel-Aviv Stock Exchange (TASE). Complemented by online international communications with major banks and with UMTB-affiliated dealing rooms, the professional brokerage services include: Stocks, Commodities, Mutual funds, Foreigncurrency trading, Bonds, Options and futures, Precious metals, etc.

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Retail Dominance Mizrahi Tefahot provides "comprehensive service" at the highest level to the household and private customer sector, offering a range of unique products and services, enabling them to manage their financial affairs simply and cost-effectively. These services include advanced account management services with attractive commission rates, credit facilities at advantageous interest rates, various mortgages and loans for any purpose and a variety of rewarding investment options. The Bank provides high net worth individuals with personal and professional services, which are tailored to meet their own particular requirements.

Mizrahi Tefahot "Live" Mizrahi Tefahot is characterized by its unique products and services that provide added value to clients. Mizrahi Tefahot is the only bank in Israel that operates "LIVE" virtual branches that offer full banking services provided by a personal banker who is easily available via advanced and sophisticated virtual channels. Currently the Bank operates four "LIVE" branches.

Mortgage Leader Mizrahi-Tefahot is the No. 1 mortgage leader in Israel, through "Tefahot" the largest and leading mortgage brand in Israel, with a market share encompassing one third of the domestic market. The combination between commercial-retail activities and mortgage activities creates a "positive link" between checking accounts and mortgage loans, enabling clients of the Bank to utilize unique products and services that are a direct result of the link between these two activities. The mortgage activities of the Bank include Bank Adanim, a subsidiary of Mizrahi-Tefahot that was merged into the Bank at the beginning of 2009.

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Control of Bank Yahav The Mizrahi-Tefahot Group includes Bank Yahav, in which the Bank has a 50% holding. Bank Yahav was for many years a niche bank serving government and public sector employees. The Bank now offers banking services to all retails clients. As part of the cooperation within the group, we have opened mortgage representatives of "Tefahot" in the main branches of Bank Yahav.

Corporate Banking and Trading Rooms Mizrahi-Tefahot provides a wide range of products and services to the corporate sector. The Corporate Division and the Regional Business Centers throughout the country, offer corporate and business customers personal and professional services, tailored to each corporation or business needs according to size and nature. Mizrahi Tefahot operates a sophisticated and advanced trading room and offers the private and business customers a wide range of foreign currency, financial instruments and capital markets operations, activities where the bank has a market share much larger than its relative size.

International Presence The Bank has subsidiaries in Switzerland and the Netherlands and branches and representative offices in UK, USA, Germany, Mexico, Uruguay, Panama and the Cayman Islands. Mizrahi-Tefahot is the first Israeli bank to link its Israeli and global foreign trading rooms into one synchronized floor.

Investment and Pension Advisory Services The professional investment advisors of Mizrahi-Tefahot provide personal advisory services to suit the customers specific needs. In addition, the Bank provides objective advanced pension advisory services to both self-employed and salaried employees.

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Labor Agreement Ensuring Industrial Quiet until 2015 Mizrahi-Tefahot enjoys good labor relations and internal work environment, thus enabling full focus on the business plan of the Bank. Management and the employees representatives have signed a labor agreement ensuring industrial quiet until the end of 2015. The agreement also includes a voluntary retirement plan for 200 employees, enabling the Bank to continue to improve efficiencies regarding the size and quality of the work force.

Community Involvement As a community orientated business, Mizrahi-Tefahot is deeply committed to the community. The Bank has taken a strategic decision to shift from a policy of donations to active social involvement. Currently, the majority of the Bank's branches and head office units actively cooperate with associations and organizations that work with children having special needs.

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2.3 ISRAEL DISCOUNT BANK LTD

Israel Discount Bank is the third largest bank and a leading financial group in Israel. With nation-wide coverage and a strong and growing domestic franchise, Discount Bank provides a full spectrum of corporate and retail financial products and services to its clients, both in Israel and in key financial centers around the world. Domestically, the Group is comprised of commercial banks and financial services companies active in credit cards, investment banking, portfolio management, trustee services and leasing. Discount bank also holds a 26.45% equity stake in First International bank of Israel, the 5th largest bank in the country. In addition to its traditional branch system, Discount Bank is leading the retail market with new and innovative concept branches, internet and call-center based banking, and offers extended evening branch hours. As part of its long-term strategy, Discount Bank intends to lead the domestic retail sector in terms of improved service standards and client satisfaction, while strengthening the bank's franchise in both the corporate and middle-market sectors.

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Abroad, the bank operates through a network of subsidiaries, branches and representative offices in North America, Europe and Latin America, with a focus primarily on commercial and private banking. Israel Discount Bank New York (IDBNY) is the largest Israeli-owned bank operating outside of Israel. In terms of corporate social responsibility, Discount is recognized for its particularly active community involvement bank employees volunteer extensively within the communities in which the bank operates. The bank is a member of the Tel-Aviv Stock Exchange.

HISTORY

Israel Discount Banks story parallels the history of the State of Israel; it combines pioneering idealism with the dedication and pragmatism needed to build a nation. The Bank was founded by Leon Recanati, a leader of the Zionist movement in Greece, who immigrated with his family to the small pre-State Jewish settlement in the Land of Israel. Recanati, who wanted to play an active part in the formation of this new society, quickly understood that the fledgling economy needed financing in order to grow and prosper. An experienced merchant, he chose to embark on a new path and in 1935 established Israel Discount Banks first office in Tel Aviv. The Banks first branch was opened in 1943 in Jerusalem, with a branch in Tel Aviv established five years later. This was a period of rapid development of the Israeli economy, and Israel Discount Bank was a key player in this growth. As business grew, the Bank expanded its domestic network, acquiring controlling interest in Palestine Mercantile Bank, and later the Israel branches of Ottoman Bank. From the beginning, the Bank combined the highest professional standards with an international orientation. In 1949, the Bank opened its first branch in Haifa, as its first representative office abroad in New York. It also extended its services into Latin America, opening an office in Montevideo, Uruguay in 1958.

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In Israel, the Bank was the preferred financial institution of small and medium-sized businesses and professionals. As such it enjoyed an extremely high level of customer confidence, as shown by its rapid growth in deposits and loans, which often exceeded the average rate for all banks in Israel. To finance its rapid growth, the Bank early on turned to the capital markets, making its first public offering in Israel in 1963 and in the United States in 1964. The Banks New York operations grew substantially, and the representative office became a full service branch in 1962. In 1967, after acquiring a U.S. bank, it became Israel Discount Bank of New York. Insured by the Federal Deposit Insurance Corporation (FDIC), Israel Discount Bank of New York took over the major portion of the Banks Southern Hemisphere banking operations in1980, and has grown to become one of the largest banks in New York State and the United States. During the next two decades the Bank continued its international expansion, opening a branch in Los Angeles, three branches in Florida, a branch in London, and representative offices in Paris, Berlin, Buenos Aires, Santiago and Sao Paulo. In addition, a subsidiary of Israel Discount Bank of New York -- Discount Bank Latin America -- was opened in Montevideo and Punta del Este, with representative offices in Buenos Aires, Lima, Mexico City, Porto Alegre and Rio de Janeiro.

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PRODUCT SPECIFIC DIMENSIONS 1. Corporate and trade finance

General corporate loans and overdrafts Invoice Financing and Factoring Syndicated Loans Documentary Credits Guarantees, including HM Customs and Excise Duty Deferment Receivable Discounting Standby L/Cs Import/Export Finance Produce Loans and Commodity Finance

2. Property finance

Residential and investment finance (excluding owner occupation) Commercial, including Industrial Hotel finance : specializing in financing hotels in distressed condition, assisting with their purchase and refurbishment

3. Treasury service

Deposits in all major currencies Structured products Foreign Exchange Interest rate and FX Risk Management Bonds
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2.4 LEUMI BANK

Type Industry Founded

: : :

Public company (TASE: LUMI) Banking 27 February 1902 Tel Aviv, Israel Israel and 21 other countries Rakefet Russak-Aminoach (President and CEO) Eitan Raff, Chairman Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private

Headquarters : Area served Key people : :

Products :

banking, private equity, savings, Securities, asset management, wealth management. Services Revenue Net income Total assets Total equity Employees Subsidiaries Website : : : : : : : : Financial Services NIS 7,750 million (2011) NIS 1,891 million (2011) NIS 365,854 million (2011) NIS 23,628 million (2011) 13,490 (2011) Arab Israel Bank www.leumi.co.il

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SERVICES Investment Services: For those with over 250,000 (or currency equivalent) to invest, they offer both Advisory and Execution only services accessed directly through our experienced team of Relationship Managers.

Advisory Service: They offer investment advice on fund choice and asset allocation, providing you with comprehensive portfolio valuations in all the major currencies. They also structure one-off deposit solutions for our clients using a range of parameters and in close cooperation with our Dealing Room. They do not advise on individual equities and on their derivatives.

Execution Only Service: They are able to execute the purchase and sale of a comprehensive range of securities products.

Wealth Planning Solutions and Fiduciary Services: They structure, establish and administer trusts, private investment companies registered in various locations, and foundations; all through our subsidiary in Jersey.

Treasury and Dealing Services: Our Relationship Managers, in conjunction with our Dealing Room, are able to offer a full dealing service and provide you with the latest market information. They offer immediate competitive pricing in all major currencies, covering spot and forward periods and swaps trades. For sophisticated investors they offer access to a range of derivative instruments as investments, or for protection against interest, exchange, and equity risk.

Banking Services: They offer a full range of banking services in all major currencies, a comprehensive selection of deposit products and provide payment services, debit and charge cards and a wide-ranging internet banking offering Leumi online.

Lending: They offer lending facilities against portfolios of securities, bank guarantees, cash deposits, and on a back-to-back basis.

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Executive Residential Mortgages: They offer a flexible five-year interest only mortgage for a minimum amount of 1m. These mortgages feature a multi currency option and are intended for UK and expatriate high net worth individuals for the purchase of their main residential property in the UK.

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2.5 STATE BANK OF INDIA PRODUCT SPECIFIC DIMENSIONS Corporate banking Corporate Banking application provides features to administer and manage non personal accounts online. Features

User management at your fingertips Easy synchronization with Corporate ERP System Bulk file upload facility for payments Pay Direct, Indirect, State Govt. Taxes & EPF Payments online Provision for highly customized MIS

Personal banking Our internet banking portal provides personal banking services that gives you complete control over all your banking demands online. Features

International Funds Transfer Online SBI launched for Mobile! State Bank Virtual Card Online Term Deposits Convenient Utility Bill Payments ASBA facility Tax payments

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SBI express remit

On our website, you provide prior information of intended wire transfer and generate unique tracking number for the same and then wire transfer money to our account with complete information along with tracking number.

Most Competitive Exchange Rates. Send up to a maximum of USD 100,000 (minimum of USD 50) per transaction. A unique transaction reference number helps to track your transaction online 24X7 through every stage of money transfer.

Online SBI global Online shopping Foreign travel card

PRODUCT OFFERINGS Home Loan : "THE MOST PREFERRED HOME LOAN PROVIDER" voted in AWAAZ Consumer Awards along with the MOST PREFERRED BANK AWARD in a survey conducted by...

Education Loan : A term loan granted to Indian Nationals for pursuing higher education in India or abroad where admission has been secured. All courses having...

Loan against Property : A dream comes true! An all purpose loan for anything that life throws up at you!! Do you need funds for a marriage ceremony, want to take your.

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Business Loan : Traders Easy Loan scheme is launched by SBI to provide hassle free loan to Traders. Any businessman/ entrepreneur/ professional and self employed...

Personal Loan : SBI Saral - Personal Loan makes funds readily available to you whenever you desire or need. Access this facility from over 3000 branches across the...

Car Loan : Move ahead in life with SBI Car Loans with more than 6000 Branches offering Car Loans. If you have been putting off purchasing that Car, SBI...

VARIANTS AVAILABLE IN THE PRODUCT OFFERINGS Account view / Statement Online SBI can generate an account statement for a date range for any of your accounts. The statement includes transaction details, opening, and closing and accumulated balance in the account.

Funds Transfer You can now avail a bouquet of funds transfer services through Internet banking Transfer funds within your own accounts Transfer funds to third party account held in the same bank Make an Inter bank funds transfer to any account held in any bank including State Bank Group Pay any VISA credit card bill Transfer funds to religious and Charitable institutions Record standing instructions to transfer a fixed amount at a scheduled frequency for a period not exceeding one year Transfer funds to NRE PIS accounts to facilitate online trading

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Third party funds transfer (RTGS/NEFT) RTGS- Real Time Gross Settlement- This is a system where the processing of funds transfer instructions takes place at the time they are received (real time). Also the settlement of funds transfer instructions occurs individually on an instruction by instruction basis (gross settlement). RTGS is the fastest possible interbank money transfer facility available through secure banking channels in India. NEFT- National Electronic Fund Transfer- This system of fund transfer operates on a Deferred Net Settlement basis. Fund transfer transactions are settled in batches as opposed to the continuous, individual settlement in RTGS. Presently, NEFT operates in hourly batches from 8 am to 7 pm on week days and 8 am to 1 pm on Saturdays.

Demand Draft request Online SBI enables customers to issue demand drafts online. Customer has the option to collect the draft from branch or give his mandate to dispatch the draft by courier to the beneficiary.

Demat view facility Corporate Internet Banking enables you to view your Corporate Demat account online. You can view the account details, and generate the following statements online.

Statement of holding Statement of transactions Statement of billing

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OVERALL OPERATIONS State Bank of India (SBI) on Saturday announced it will get Rs. 3,004 Crore as part of the governments capital infusion plan for the current fiscal. The fund infusion will enable the bank to support national and international banking operations undertaken through its subsidiaries and associates, SBI said in a BSE filing. The central board of the bank in its meeting today has approved infusion of capital funds in the bank by the Government of India to the tune of Rs 3,004 Crore during 2012-13, it said. The capital will be infused by way of preferential allotment of equity shares to the government. The proposal is subject to necessary regulatory approvals, it said. Last fiscal, the government had infused Rs. 7, 900 Crore in SBI to increase the Tier-I capital of the countrys largest bank. Following the capital infusion in March 2012, the government holding in SBI rose to 61.58 per cent from 59.4 per cent. The government approved infusion of Rs. 12,517 Crore in around 10 state-owned banks by March.

MARKET SHARE India's second-largest private sector lender HDFC Bank overtook largest bank SBI in terms of market capitalization on Tuesday. At Rs 471.80 a share, HDFC Bank's market cap works out to 1.10 lakh Crore - almost a percent higher than SBI's Rs 1.09lakh Crore. HDFC Bank's total assets is almost one-sixth of SBI's total assets which stand at over 12 lakh Crore. According to analysts tracking banks, the decline in SBI's share price helped HDFC Bank gain higher m-cap. Also, SBI has been battling with negative sentiments and headwinds in the form of declining net interest margins, fears of higher NPAs and exposure to sectors like power, aviation and infrastructure. SBI has the largest exposure to Kingfisher.

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Financial highlights of company's performance Mar '12 Balance sheet Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Provisions Total Liabilities Assets: Cash & Balances with RBI 54,075.94 94,395.50 28,478.65 61,290.87 34,892.98 55,546.17 48,857.63 51,534.62 15,931.72 1,335,519.22 1,223,736.20 1,053,413.73 964,432.08 721,526.31 Liabilities 671.04 671.04 0.00 0.00 83,280.16 0.00 83,951.20 635.00 635.00 0.00 0.00 64,351.04 0.00 64,986.04 634.88 634.88 0.00 0.00 65,314.32 0.00 65,949.20 804,116.23 103,011.60 634.88 634.88 0.00 0.00 57,312.82 0.00 57,947.70 631.47 631.47 0.00 0.00 48,401.19 0.00 49,032.66 12 months Mar '11 12 months Mar '10 12 months Mar '09 Mar '08

12 months 12 months

1,043,647.36 933,932.81 127,005.57 119,568.96

742,073.13 537,403.94 53,713.68 51,727.41

1,170,652.93 1,053,501.77 907,127.83 & 80,915.09 105,248.39 80,336.70

795,786.81 589,131.35 110,697.57 83,362.30

Balance with Banks, Money 43,087.23 at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 867,578.89 312,197.61 14,792.33 9,658.46 5,133.87 332.68 53,113.02

756,719.45 295,600.57 13,189.28 8,757.33 4,431.95 332.23 43,777.85

631,914.15 285,790.07 11,831.63 7,713.90 4,117.73 295.18 35,112.76

542,503.20 416,768.20 275,953.96 189,501.27 10,403.06 6,828.65 3,574.41 263.44 37,733.27 8,988.35 5,849.13 3,139.22 234.26 44,417.03

1,335,519.24 1,223,736.20 1,053,413.74 964,432.08 721,526.32 698,064.74 201,500.44 1,251.05 585,294.50 205,092.29 1,023.40
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429,917.37 166,449.04 1,038.76

614,603.47 736,087.59 152,964.06 93,652.89 912.73 776.48

2.6 ICICI BANK PRODUCT SPECIFIC DIMENSIONS Privilege banking

Privilege Banking customers enjoy relationship privileges across ICICI Bank Products and services including deposits, loans, cards, Forex and locker facilities.

Relationship Privileges Pre-qualification for loan eligibility Preferential interest rates and/or processing fees on Loan products Discounts on Locker facility and preferential allotment Preferential pricing on purchase of gold, sale/purchase of Forex

Wealth management Over the course of your lifetime, wealth will play different roles from starting a new business, to preserving and protecting it, providing for your children, planning your retirement or leaving a legacy behind. We understand your financial needs at different life stages and offer you a comprehensive suite of Wealth Management services to cater these changing financial needs. Private banking At ICICI Bank Private Banking our offerings are centered on you and your vision for life. Our panel of expert analysts develops incisive solutions based on in-depth methodical research. This assures you of solutions, specifically conceived for your unique needs. We believe in going that extra mile to offer you solutions that work for you and suit your lifestyle.

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NRI banking With a view to attract the savings and other remittance into India through banking channels from the person of Indian Nationality / Origin who are residing abroad and bolster the balance of payment position, the Government of India introduced in 1970 Non-Resident(External) Account Rules which are governed by the Exchange Control Regulations. The funds held in NonResident (External) Accounts (NRE Accounts) qualify for certain benefits like exemptions from taxes in India, free repatriation facilities, etc.

Corporate banking

Personal banking

PRODUCT OFFERINGS Credit cards A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them.[1] The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

Finance and insurance Financial services are the economic services provided by the finance industry, which encompasses a broad range of organizations that manage money, including credit unions, banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States

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Investment banking An investment bank is a financial institution that assists individuals, corporations, and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions, and provide ancillary services such as market making, trading of derivatives, fixed income instruments, foreign exchange, commodities, and equity securities.

Mortgage loans A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.

Retail banking Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards.
o

Commercial bank is the term used for a normal bank to distinguish it from an investment bank. (After the great depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital markets activities. This separation is no longer mandatory.)

Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). It is the most successful department of banking.

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VARIANTS AVAILABLE IN THE PRODUCT OFFERINGS A) Secured Loans

FEATURES Lending Exposure: Upto Rs 50.0 million for working capital and capital expenditure needs

Acceptable collaterals: Residential/Commercial/Industrial property, liquid securities

Eligible entities: Sole Proprietorship Firm, Partnership Firms, Private limited Companies, Public limited Companies

Pre-requisites : Minimum one year business operation & audited financial. (*and such other pre-requisites as may be desired by the bank)

BENEFITS

Low collateral requirementLending available upto 3 times of the value of the collateral

Fast processing De-centralized operations for fast processing and quick availability of loans

Convenient Documentation Convenient documentation process to offer ease and flexibility

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Attractive Pricing Low interest rates and commission charges

Priority sector clients Attractive pricing offered for customers under priority sector lending.

Fast and Easy renewals Hassle free renewals with less documentation

Dedicated and exclusive relationship managers Dedicated relationship managers to provide complete financial solutions

Easy Accessibility Leverage on our anywhere banking services through 2500 plus branch network

B) Business Loans Backed by CGTMSE

This is a facility specially designed under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme of SIDBI and Ministry of Small and Medium Enterprises.

FEATURES Facilities offered:

Cash Credit for meeting working capital finance requirement

Letter of Credit to facilitate trade

Bank Guarantees for performance and financial obligations

Term Loan for purchase of commercial assets & business expansion needs

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Lending Exposure: Up to Rs 10 million for meeting working capital and capital expenditure needs

Eligible entities: Sole Proprietorship Firms, Partnership Firms, Private limited Companies, Public limited Companies

Eligible business segment: Manufacturers

Pre- requisites*:

Audited financial statements of past two years

Existing Track record of loans

Investment in Plant & Machinery to be less than Rs. 50 million (*and such other pre-requisites as may be desired by the bank) BENEFITS

1. Collateral free loan No collateral is taken providing ease to customers.

2. Fast processing De-centralized operations and simple documentation enabling fast turnaround time.

3. Convenient Documentation Convenient documentation process to offer ease and flexibility

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4. Hassle -free loan No third party guarantee required

5. Attractive Pricing Low interest rates and commission charges

6. Wide reach Loan can be availed at any of our 2500 plus branch network

7. Multiple banking possible Multiple banking facilities can be availed by offering Pari passu charge on current assets

OVERALL PROCESS OF CONDUCT Selection Process

At ICICI Bank, the selection process aims at getting applicants who are likely to succeed at various roles in the Bank. The endeavor is to select people who have a high service orientation, are passionate about their career goals, and who display integrity and ethics in all engagements.

Depending on the level of recruitment, the selection process consists of following combinations:

Aptitude Tests Group Discussion (This method is primarily used for campus selection process) Psychometric Profiling Personal Interview

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Aptitude Tests:

Designed for entry level jobs in the Bank, the aptitude test aims to assess basic aptitude of applicants including Numerical, Verbal comprehension, logical reasoning and basic checking abilities.

Group Discussion:

Based on case studies, the group discussions are mainly conducted to judge applicants on their analytical thinking, approach to hypothetical building around business situations and the ability to break down complex problems to arrive at simple solutions.

Psychometric Profiling:

A questionnaire - based psychometric tool that assesses the typical or preferred behavior of individuals in work settings. Applicants are required to complete the questionnaire before they appear for the interview. This tool gives us a better understanding of the applicant and is not used for elimination of applicants.

Personal Interview:

All applicants are expected to go through the interview round, which is the final step in the selection process.

OVERALL OPERATIONS ICICI Bank is India's second-largest bank with total assets of Rs. 4,736.47 billion (US$ 93 billion) at March 31, 2012 and profit after tax Rs. 64.65 billion (US$ 1,271 million) for the year ended March 31, 2012. The Bank has a network of 2,900 branches and 10,021 ATMs in India, and has a presence in 19 countries, including India.

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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 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. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

MARKET SHARE Primary Markets

We are the leading collecting bankers (market leader) to Public/ Rights/ Private Placement/ Mutual Funds/ Capital Gains Bonds issues. ICICI Bank is the only Bank to cross Rs. 1 trillion Collections. We are the market leader in IPO Collection with a 34% share and 65% market share in Retail and HNI Segment.

Escrow and Paying Bankers We act as escrow and paying bankers to Mergers and Acquisitions.

Secondary Markets

As mentioned above, ICICI Bank acts as a 'clearing and settlement' banker for members of NSE, BSE, NCDEX, MCX and Spot Exchange. ICICI Bank also offers following products/services: Cash Management Services NRI accounts
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Payment gateway Portfolio management services accounts Supply Chain Management Account Corporate Internet Banking

Financial highlights of company's performance

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2.7 BANK OF BARODA INTRODUCTION: Bank of Baroda is the third largest bank in India, after the State Bank of India and the Punjab National Bank and ahead of ICICI Bank. BOB has total assets in excess of Rs. 2.27 lakh Crore, or Rs. 2,274 billion, a network of over 3,000 branches and offices, and about 1,100 ATMs. IT plans to open 400 new branches in the coming year. It 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, credit cards and asset management. Its total business was Rs. 4,402 billion as of 30 June 2010. PRODUCTS DIMENSIONS: Net banking Lockers NRI services Accounts

PRODUCT OFFERINGS: Wholesale Banking Rural/Agri Banking Wealth Management CPPC - Pension Baroda Health Pre-paid Cards Interest Rates Deposit Products Loan Products Internet Banking Mobile Banking ATM / Debit Cards Demat

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Variants available in product offering of Bank of Baroda Banc assurance Under banc assurance, the customers can obtain the general insurance products of NIC Ltd through the banks branch network. Baroda Health It is a Mediclaim insurance policy available for the account holders w.e.f. 23-02-2006 at all our branches across the country. (Details can be found on the banks website www.bankofbaroda.com) Mutual Fund Bank facilitates in selling the products of UTI Mutual Fund and Birla Mutual Fund to its customers through its designated branches Information given in this booklet is subject to change / revision. This booklet should not be considered as a legal document creating rights and obligations. It is for promoting better understanding between Customer and Banker. Only key information on various services / facilities is given in this booklet. Each service has its own detailed terms and conditions which can be made available on request.

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2.8 HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC)

INTRODUCTION: The 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, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

PRODUCT SPECIFIC DIMENSIONS:

Product Dimensions
Service Quality Safe deposit Lockers Fast tech friendly bank Best Managed Boards Finest Online Bank

PRODUCT OFFERINGS: Products of HDFC bank are as follows: Accounts & deposits Loans Cards Investments Insurance Forex Premium banking Private banking

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1.

Accounts & deposits: Savings account Salary account Current account Deposit Demat account Safe deposit Rural account

2.

Loans Personal loan Business loan Car loan Home loan Two wheeler loan Loan against assets Education loan Government Sponsored Programs Rural loan

3.

Cards Debit Credit Prepaid Credit Cards Reward Program

4. Investments Wealth service Investments Products

5.

Insurance Life Health Travel Motor Home

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6. 7.

Forex Travel solutions Remittance Products Other Forex Services Premium Banking Imperia Banking Preferred Banking Classic Banking

VARIANTS AVAILABLE IN THE PRODUCTS OFFERINGS:

HDFC Bank to launch Times Card: This unique credit card has been specifically designed to cater to the lifestyle and entertainment needs of young professionals between the ages of 24 and 38 years and offers exceptional value-for-money in the movies and dining space. The Times Card comes with a specially crafted rewards program and year-long discounts. This includes 25% off on movie tickets, 20% discount on dining, and best-in-segment deals. Users also have the exclusive option to redeem accumulated points against air miles in addition to the usual catalogue based redemption options. Another first in the credit card space is the presence of the QR code on the Times Card plastic. The QR code can be scanned using any Smart phone to reach www.hdfcbank.timescard.com, where customers can view the latest offers and also apply for the Card. The collaboration brings together Times Groups understanding of the youth lifestyle segment and the entertainment space, coupled with HDFC Bank's understanding of the endusers, as the leading player in the credit card segment. Times Card will be launched in eight cities, namely Mumbai, Chennai, Delhi, Kolkata, Hyderabad, Bangalore, Pune, and Chandigarh. It will be available in two variants, Platinum and Titanium, which will be offered exclusively on the MasterCard platform, allowing customers to transact at millions of global merchant establishments and giving them access to benefits across the world. The Platinum Times Card is the premium variant and entitles cardholders to higher reward points on their spends as well as exclusive privileges on their card in addition to the wide range of benefits available on the Titanium Times Card.

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As a leader in the digital and print media space we have always carefully chosen our strategic partnerships. The association with HDFC Bank helps us create a unique product in the entertainment space that is in line with our goal to consistently deliver unique products and services to our customers. Aimed at young working professionals, the card provides a slew of benefits and privileges that provide value-for-money. We are sure the co-branded credit card will provide superior customer experience enabling us to deepen our relationship with our wide customer base, said Ms. Archana Vohra, Vice President and Business Head, Times Internet Limited. As the country's leading credit card issuer, we are constantly offering our customers world class products that are customized to suit their ever-evolving needs. We have always believed in offering every Indian a product designed specifically for him or her. Keeping this goal in mind we have launched credit cards for women, doctors, teachers, and most recently for farmers. We now have a premium product of the highest quality and great customer value for the discerning youth of India and young at heart as they enjoy exclusivity. HDFC Bank's partnership with Times Internet will further enhance our product offering and provide young Indians with an unrivalled entertainment experience, said Mr. Parag Rao, Senior Executiv e Vice-president and Business Head, Credit Cards & Merchant Acquiring Services, HDFC Bank

Financial Performance: Mar '12 Mar '11 Mar '10 Mar '09

INVESTMENT VALUATION RATIOS Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital 97.01 -93

2.00 4.30 37.71 138.66

10.00 16.50 160.36 524.34

10.00 12.00 106.25 436.03

10.00 10.00 92.36 464.77

419.10 --

363.55 --

252.37 --

PROFITABILITY RATIOS Interest Spread Adjusted Cash Margin (%) Net Profit Margin Return on Long Term Fund (%) Return on Net Worth (%) Adjusted Return on Net Worth (%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations MANAGEMENT EFFICIENCY RATIOS Interest Income / Total Funds Net Interest Income / Total Funds Non Interest Income / Total Funds Interest Expended / Total Funds Operating Expense / Total Funds Profit Before Provisions / Total Funds Net Profit / Total Funds Loans Turnover Total Income / Capital Employed (%) Interest Expended / Capital Employed (%) Total Assets Turnover Ratios Asset Turnover Ratio 0.11 0.12 0.10 0.11 0.10 0.11 0.13 0.14 4.87 3.76 3.84 5.63 1.68 0.18 10.54 1.57 0.17 9.76 1.45 0.18 9.85 1.42 0.24 12.50 10.58 5.70 -0.03 4.87 2.83 2.67 9.76 6.01 -3.76 3.02 2.79 9.84 6.00 0.01 3.84 3.60 2.21 12.50 6.86 -5.63 4.38 2.26 127.52 545.53 470.19 344.44 5.80 17.59 15.93 76.06 17.26 17.26 127.52 5.95 18.13 16.09 59.91 15.47 15.47 545.53 5.89 16.71 14.76 56.08 13.70 13.68 470.19 6.98 13.15 11.35 83.31 15.32 15.29 344.44

PROFIT AND LOSS ACCOUNT RATIOS Interest Expended / Interest Earned Other Income / Total Income Operating Expense / Total Income -0.32 26.82
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54.93

47.09

48.14

54.56

-30.94

0.09 36.59

-35.06

Selling Distribution Cost Composition

0.46

0.65

0.41

0.54

BALANCE SHEET RATIOS Capital Adequacy Ratio Advances / Loans Funds (%) 16.52 79.19 16.22 79.34 17.44 77.24 15.69 78.87

DEBT COVERAGE RATIOS Credit Deposit Ratio Investment Deposit Ratio Cash Deposit Ratio Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax LEVERAGE RATIOS Current Ratio Quick Ratio 0.08 6.20 0.06 6.89 0.03 7.14 0.04 5.23 78.06 36.99 8.81 8.24 0.58 1.38 76.02 34.45 10.79 8.22 0.79 1.47 72.44 37.85 9.35 7.78 0.63 1.43 66.64 44.43 10.71 9.75 0.44 1.29

CASH FLOW INDICATOR RATIOS Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value 22.69 20.54 77.30 79.46 43.22 22.02 127.52 22.72 20.16 77.29 79.84 47.14 84.40 545.53 21.72 19.15 78.25 80.82 50.14 64.42 470.19 22.16 19.10 77.79 80.87 54.91 52.77 344.44

MARKET SHARE:-

The Banks target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, small & mid-sized corporate and agri-based businesses. It carries Market Cap of 156,510.44 Cr. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.
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OVERALL OPERATIONS OF HDFC :-

There are various operations that HDFC performs and some of them which can be listed down here are as follows:-

HDFC Bank caters to a wide range of banking services covering commercial and investment banking on the wholesale side and transactional / branch banking on the retail side. The bank has three key business segments:

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Wholesale Banking

The Bank's target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, small & mid-sized corporate and agri-based businesses.

Retail Banking

The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements.

Treasury

Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities.

The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Banks business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership and People.

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CHAPTER-3

FINDINGS

3.1 OVERALL The Israeli banking sector is relatively deep and well developed, but it remains highly concentrated. The total assets of the banks account for 138 percent of GDP in 2010. There are five major banking groups in Israel, which hold 93 percent of the total assets of the banking system (Leumi 28.7 percent, Hapoalim 28 percent, Discount 16.2 percent, Mizrahi-Tefahot 11.7 percent and First International 8.8 percent). In addition, there are three independent banks Union Bank (3 percent of total assets), Bank of Jerusalem and Dexia Israel Bank, each with less than one percent of total banking sector assets.

Five branches of foreign banks (Barclays Bank, Citibank, HSBC, BNP Paribas and the State Bank of India) constitute about two percent of the banking system.

The high concentration in the banking system is directly linked to the concentrated structure of the Israeli economy, where a number of conglomerates (often familyowned) control leading positions in several industries. In recent years, the greatest impact on the competitive environment has come from the rapid development of the domestic (corporate) bond market, while banks retain more competitive power in their household lending business.

The banking systems balance sheet reflects that of a conservative banking system which is mainly based on the classic banking activities of extending credit and raising deposits. Credit accounts for around 69 percent of total assets, with credit to the government being negligible.

Israeli banks have the largest credit exposure towards private individuals (34.2 percent of total credit, with almost half of this being housing loans). Construction and real estate is the second largest recipient of bank credit with 16.2 percent, followed by borrowers activity abroad with 13 percent, and manufacturing with 10 percent.

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After credit, the second largest item on the asset side of the balance sheet are securities, which represent 13.8 percent of total assets, with 66 percent of them being government bonds. Israeli banks mainly fund their activities with a broad and stable deposit base, which represents 77.2 percent of total liabilities and equity. At the same time, they exhibit low reliance on wholesale debt, given the loan-to deposit ratio of less than 100 percent (90 percent).Bonds and subordinated loans account for 7.9 percent of total liabilities and equity.

Banks are supervised by the Bank of Israel. The regulation and supervision of Israeli banks is relatively good and has contributed significantly to the resilience of the banking sector during the financial crisis. The banking system adopted Basel II on 31 December 2009 and is preparing to gradually introduce the system of international standards as required by Basel III. Nevertheless, areas for improvement exist and the Bank of Israel continues to enhance its regulatory and supervisory framework.

Performance and soundness indicators of Israeli banks do not point to immediate risks to the banking sectors stability. The banks enjoy stable funding profiles and healthy liquidity, while the economys strong performance has supported asset quality. Israeli banks presence in most customer segments and a broad product range further support their earnings. Furthermore, the banks benefit from a very high likelihood and capability of systemic support, while the supervisory approach of the Bank of Israel is conservative and proactive.

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3.2 INDIA OPPORTUNITIES AND CHALLENGES IN ISRAEL BANKING INDUSTRY

Management of Risks The growing competition increases the competitiveness among banks. But, existing global banking scenario is seriously posing threats for Indian banking industry. According to Shrieves (1992), there is a positive association between changes in risk and capital. Research studied the large sample of banks and results reveal that regulation was partially effective during the period covered. Moreover, it was concluded that changes in bank capital over the period studied was risk-based. Wolgast, (2001) studied the Merger and acquisition activity among financial firms.

The author focused bank supervisors in context with success of mergers, risk management, financial system stability and market liquidity. The study concluded that large institutions are able to maintain a superior level of risk management. Al-Tamimi and Al-Mazrooei (2007) examined the risk management practices and techniques in dealing with different types of risk. Moreover, they compared risk management practices between the two sets of banks. The study found the three most important types of risk i.e. commercial banks foreign exchange risk, followed by credit risk, and operating risk

Sensarma and Jayadev (2009) used selected accounting ratios as risk management variables and attempted to gauge the overall risk management capability of banks. They used multivariate statistical techniques to summarize these accounting ratios. Moreover, the paper also analyzed the impact of these risk management scores on stock returns through regression analysis. Researchers found that Indian banks' risk management capabilities have been improving overtime. Returns on the banks' stocks appeared to be sensitive to risk management capability of banks. The study suggest that banks want to enhance shareholder wealth will have to focus on successfully managing various risks.

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Growth of Banking Zhao, Casu and Ferrari (2008) used a balanced panel data set covering the period of 1992-2004 and employing a Data Envelopment Analysis (DEA)-based Malmquist Total Factor Productivity (TFP) index. The empirical study indicated that, after an initial adjustment phase, the Indian banking industry experienced sustained productivity growth, which was driven mainly by technological progress.

Banks' ownership structure does not seem to matter as much as increased competition in TFP growth. Foreign banks appear to have acted as technological innovators when competition increased, which added to the competitive pressure in the banking market. Finally, our results also indicate an increase in risk-taking behavior, along with the whole deregulation process .

It was found in the study of Goyal and Joshi (2011a) that small and local banks face difficulty in bearing the impact of global economy therefore, they need support and it is one of the reasons for merger. Some private banks used mergers as a strategic tool for expanding their horizons. There is huge potential in rural markets of India, which is not yet explored by the major banks.

Human Resource Management Gelade and Ivery (2003) examined relationships between human resource management (HRM), work climate, and organizational performance in the branch network of a retail bank. Significant correlations were found between work climate, human resource practices, and business performance.

The results showed that the correlations between climate and performance cannot be explained by their common dependence on HRM factors, and that the data are consistent with a mediation model in which the effects of HRM practices on business performance are partially mediated by work climate Bartel (2004) studied the relationship between human resource management and establishment performance of employees on the manufacturing sector.

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Using a unique longitudinal dataset collected through site visits to branch operations of a large bank, the author extends his research to the service sector. Because branch managers had considerable discretion in managing their operations and employees, the HRM environment could vary across branches. Site visits provided specific examples of managerial practices that affected branch performance. An analysis of responses to the banks employee attitude survey that controls for unobserved branch and manager characteristics shows a positive relationship between branch performance and employees satisfaction with the quality of performance evaluation, feedback, and recognition at the branchthe incentives dimension of a high-performance work system. In some fixed effects specifications, satisfaction with the quality of communications at the branch was also important.

Global Banking It is practically and fundamentally impossible for any nation to exclude itself from world economy. Therefore, for sustainable development, one has to adopt integration process in the form of liberalization and globalization as India spread the red carpet for foreign firms in 1991. The impact of globalization becomes challenges for the domestic enterprises as they are bound to compete with global players. If we look at the Indian Banking Industry, then we find that there are 36 foreign banks operating in India, which becomes a major challenge for Nationalized and private sector banks. These foreign banks are large in size, technically advanced and having presence in global market, which gives more and better options and services to Indian traders.

Financial Inclusion Financial inclusion has become a necessity in todays business environment. Whatever is produced by business houses, that has to be under the check from various perspectives like environmental concerns, corporate governance, social and ethical issues. Apart from it to bridge the gap between rich and poor, the poor people of the country should be given proper attention to improve their economic condition.

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Dev (2006) stated that financial inclusion is significant from the point of view of living conditions of poor people, farmers, rural non-farm enterprises and other vulnerable groups, financial inclusion, in terms of access to credit from formal institutions to various social groups. Apart from formal banking institutions, which should look at inclusion both as a business opportunity and social responsibility, the author conclude that role of the self-help group movement and microfinance institutions is important to improve financial inclusion.

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CHAPTER-4

CONCLUSION

The major banks that we have discussed here like Hapoalim Bank, Leumi Bank. Discount Bank, Mizrahi-Tefahot Bank has various new and valuable services that they provide to the people of Israel. The trade taking places in these banks are also noticeable and profitable to the economy of the country. The legal aspects and barriers in banking industry are also easy to understand and manageable.

Also we can see that when compared to the banking industry of India the results are somewhat satisfactory. The working of the banking industry in both the countries is different and from the findings it is clear that the Israeli banking sector remains highly concentrated. Also some of the rules differ from that of the Indian banking Rules.

There are opportunities to enter the banking industry in Israel but with the help of deep research and required resources only. With the challenges like management of risks, growth of banking, human resource management, global banking and financial inclusion it is necessary to understand in deep the banking industry of the country.

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CHAPTER-5

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Israel: Financial System Stability Assessment Report by International Monetary Fund, 2012. Retrieved from http://www.imf.org/external/pubs/ft/scr/2012/cr1269.pdf

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