PREFACE

This project study has been conducted in the lieu of requirement laid down for the degree of
course of master of business administration. Under this requirement, every student is supposed to
undergo summer training in the industrial unit or commercial organization .It enables the
students to understand the practical aspect of the conceptual studies learn by them in the
commercial subject.

The summer training in PUSHTIKAR SAKH SAHKARI SAMITI LIMITED was a complete
experience in itself which has provided me with the understanding, which has become an
inseparable part of my knowledge of management being learned in management program

Implementing and learning the concept of marketing in a work place provides an opportunity to
learn practically. I got a chance to apply over theory and acquaint myself with the functioning of
market methodology.

Keeping in view the responsiveness of people and findings, I gathered the data and information
and have drawn up some suggestion that would help to improve and the systematize the
marketing mix elements in banking sector.

Real learning place its worth on the when it give sweet fruits in future. Summer training is one
way to learn at work. I enjoyed the interesting experience and every part of it.

ACKNOWLEDGEMENT

It is great pleasure and privilege for me to present this seminar report titled Intrusion Detection
System. In this Seminar report, I have been very fortunate in having received the active cooperation of my guide, whom I would like to thank humbly. I would this opportunity to thanks
each one of them for intellectual exchange valuable suggestion, critical reviews and technical
assistance.I like to express my gratitude to Deepak Mathur Sir (Guide), for helping me to
understand the seminar topic IDS and help ma lot on this topic. They guided and encouraged me
throughout my project work .I am equally thank full to all those who helped me directly or
indirectly in successful completion of the project.

(Signature of student)
Narendra vyas

MBA 3rd SEM

TABLE OF CONTENTS

S.NO

CONTENTS

Preface

Acknowledgement

Overview of banking

Indian Banking history

Profile of company

Banking in india

Marketing mix strategies of bank

Product promotion

Bibliography

Overview of banking

CHAPTER 1
AN OVERVIEW OF THE BANKING SECTOR
SECTION I: BANKING SYSTEM IN INDIA
1.1 Introduction [1] [2]
A bank is a financial institution that provides banking and other financial services to their
customers. A bank is generally understood as an institution which provides fundamental
banking services such as accepting deposits and providing loans. There are also nonbanking
institutions that provide certain banking services without meeting the legal
definition of a bank. Banks are a subset of the financial services industry.
A banking system also referred as a system provided by the bank which offers cash
management services for customers, reporting the transactions of their accounts and
portfolios, through out the day. The banking system in India, should not only be hassle
free but it should be able to meet the new challenges posed by the technology and any
other external and internal factors. For the past three decades, Indias banking system has
several outstanding achievements to its credit. The Banks are the main participants of the
financial system in India. The Banking sector offers several facilities and opportunities to
their customers. All the banks safeguards the money and valuables and provide loans,
credit, and payment services, such as checking accounts, money orders, and cashiers
cheques. The banks also offer investment and insurance products. As a variety of models
for cooperation and integration among finance industries have emerged, some of the
traditional distinctions between banks, insurance companies, and securities firms have
diminished. In spite of these changes, banks continue to maintain and perform their
primary roleaccepting deposits and lending funds from these deposits.
21
1.2 Need of the Banks

Before the establishment of banks, the financial activities were handled by money lenders
and individuals. At that time the interest rates were very high. Again there were no
security of public savings and no uniformity regarding loans. So as to overcome such
problems the organized banking sector was established, which was fully regulated by the
government. The organized banking sector works within the financial system to provide
loans, accept deposits and provide other services to their customers. The following
functions of the bank explain the need of the bank and its importance:
To provide the security to the savings of customers.
To control the supply of money and credit
To encourage public confidence in the working of the financial system, increase
savings speedily and efficiently.
To avoid focus of financial powers in the hands of a few individuals and
institutions.
To set equal norms and conditions (i.e. rate of interest, period of lending etc) to all
types of customers
1.3 History of Indian Banking System [6] [7]
The first bank in India, called The General Bank of India was established in the year
1786. The East India Company established The Bank of Bengal/Calcutta (1809), Bank of
Bombay (1840) and Bank of Madras (1843). The next bank was Bank of Hindustan
which was established in 1870. These three individual units (Bank of Calcutta, Bank of
Bombay, and Bank of Madras) were called as Presidency Banks. Allahabad Bank which
was established in 1865, was for the first time completely run by Indians. Punjab
National Bank Ltd. was set up in 1894 with head quarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,
and Bank of Mysore were set up. In 1921, all presidency banks were amalgamated to

22
form the Imperial Bank of India which was run by European Shareholders. After that the
Reserve Bank of India was established in April 1935.
At the time of first phase the growth of banking sector was very slow. Between 1913 and
1948 there were approximately 1100 small banks in India. To streamline the functioning
and activities of commercial banks, the Government of India came up with the Banking
Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No.23 of 1965). Reserve Bank of India was vested with
extensive powers for the supervision of banking in India as a Central Banking Authority.
After independence, Government has taken most important steps in regard of Indian
Banking Sector reforms. In 1955, the Imperial Bank of India was nationalized and was
given the name "State Bank of India", to act as the principal agent of RBI and to handle
banking transactions all over the country. It was established under State Bank of India
Act, 1955. Seven banks forming subsidiary of State Bank of India was nationalized in
1960. On 19th July, 1969, major process of nationalization was carried out. At the same
time 14 major Indian commercial banks of the country were nationalized. In 1980,
another six banks were nationalized, and thus raising the number of nationalized banks to
20. Seven more banks were nationalized with deposits over 200 Crores. Till the year
1980 approximately 80% of the banking segment in India was under governments
ownership. On the suggestions of Narsimhan Committee, the Banking Regulation Act
was amended in 1993 and thus the gates for the new private sector banks were opened.
The following are the major steps taken by the Government of India to Regulate Banking
institutions in the country:1949 : Enactment of Banking Regulation Act.
1955 : Nationalisation of State Bank of India.

1959 : Nationalization of SBI subsidiaries.

1961 : Insurance cover extended to deposits.
1969 : Nationalisation of 14 major Banks.
1971 : Creation of credit guarantee corporation.
1975 : Creation of regional rural banks.
1980 : Nationalisation of seven banks with deposits over 200 Crores.
23
1.3.1 Nationalisation [3]
By the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large
employer, and a debate has ensured about the possibility to nationalise the banking
industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the
Government of India (GOI) in the annual conference of the All India Congress Meeting
in a paper entitled "Stray thoughts on Bank Nationalisation". The paper was received
with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued
an ordinance and nationalised the 14 largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the
step as a "Masterstroke of political sagacity" Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of
Undertaking) Bill, and it received the presidential approval on 9 August, 1969.
A second step of nationalisation of 6 more commercial banks followed in 1980. The
stated reason for the nationalisation was to give the government more control of credit
delivery. With the second step of nationalisation, the GOI controlled around 91% of the
banking business in India. Later on, in the year 1993, the government merged New Bank
of India with Punjab National Bank. It was the only merger between nationalised banks

and resulted in the reduction of the number of nationalised banks from 20 to 19. After
this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the
average growth rate of the Indian economy. The nationalised banks were credited by
some; including Home minister P. Chidambaram, to have helped the Indian economy
withstand the global financial crisis of 2007-2009.
1.3.2 Liberalisation [3]
In the early 1990s, the then Narsimha Rao government embarked on a policy of
liberalisation, licensing a small number of private banks. These came to be known as
New Generation tech-savvy banks, and included Global Trust Bank (the first of such
new generation banks to be set up), which later amalgamated with Oriental Bank of
24
Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move
along with the rapid growth in the economy of India revolutionized the banking sector in
India which has seen rapid growth with strong contribution from all the three sectors of
banks, namely, government banks, private banks and foreign banks. The next stage for
the Indian banking has been setup with the proposed relaxation in the norms for Foreign
Direct Investment, where all Foreign Investors in banks may be given voting rights which
could exceed the present cap of 10%, at present it has gone up to 49% with some
restrictions.
The new policy shook the banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning.
The new wave ushered in a modern outlook and tech-savvy methods of working for the
traditional banks. All this led to the retail boom in India. People not just demanded more
from their banks but also received more. Currently (2007), banking in India is generally
fairly mature in terms of supply, product range and reach-even though reach in rural India

still remains a challenge for the private sector and foreign banks. In terms of quality of
assets and capital adequacy, Indian banks are considered to have clean, strong and
transparent balance sheets as compared to other banks in comparable economies in its
region. The Reserve Bank of India is an autonomous body, with minimal pressure from
the government. The stated policy of the Bank on the Indian Rupee is to manage
volatility but without any fixed exchange rate-and this has mostly been true. With the
growth in the Indian economy expected to be strong for quite some time-especially in its
services sector-the demand for banking services, especially retail banking, mortgages and
investment services are expected to be strong.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake
in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor
has been allowed to hold more than 5% in a private sector bank since the RBI announced
norms in 2005 that any stake exceeding 5% in the private sector banks would need to be
voted by them. In recent years critics have charged that the non-government owned banks
are too aggressive in their loan recovery efforts in connection with housing, vehicle and
25
personal loans. There are press reports that the banks' loan recovery efforts have driven
defaulting borrowers to suicide.
1.3.3 Government policy on banking industry (Source:-The federal Reserve Act 1913 and
The Banking Act 1933)
Banks operating in most of the countries must contend with heavy regulations, rules
enforced by Federal and State agencies to govern their operations, service offerings, and
the manner in which they grow and expand their facilities to better serve the public. A
banker works within the financial system to provide loans, accept deposits, and provide
other services to their customers. They must do so within a climate of extensive

regulation, designed primarily to protect the public interests.

The main reasons why the banks are heavily regulated are as follows:
To protect the safety of the publics savings.
To control the supply of money and credit in order to achieve a nations broad
economic goal.
To ensure equal opportunity and fairness in the publics access to credit and other
vital financial services.
To promote public confidence in the financial system, so that savings are made
speedily and efficiently.
To avoid concentrations of financial power in the hands of a few individuals and
institutions.
Provide the Government with credit, tax revenues and other services.
To help sectors of the economy that they have special credit needs for eg.
Housing, small business and agricultural loans etc.
26
1.3.4 Law of banking [3]
Banking law is based on a contractual analysis of the relationship between the bank and
customerdefined as any entity for which the bank agrees to conduct an account.
The law implies rights and obligations into this relationship as follows:
The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the
customer; when the account is overdrawn, the customer owes the balance to the
bank.
The bank agrees to pay the customer's cheques up to the amount standing to the
credit of the customer's account, plus any agreed overdraft limit.

 The bank may not pay from the customer's account without a mandate from the
customer, e.g. cheques drawn by the customer.
The bank agrees to promptly collect the cheques deposited to the customer's
account as the customer's agent, and to credit the proceeds to the customer's
account.
The bank has a right to combine the customer's accounts, since each account is
just an aspect of the same credit relationship.
The bank has a lien on cheques deposited to the customer's account, to the extent
that the customer is indebted to the bank.
The bank must not disclose details of transactions through the customer's
accountunless the customer consents, there is a public duty to disclose, the
bank's interests require it, or the law demands it.
The bank must not close a customer's account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular
jurisdiction may also modify the above terms and/or create new rights, obligations or
limitations relevant to the bank-customer relationship.
27
1.3.5 Regulations for Indian banks [4]
Currently in most jurisdictions commercial banks are regulated by government entities
and require a special bank license to operate. Usually the definition of the business of
banking for the purposes of regulation is extended to include acceptance of deposits, even
if they are not repayable to the customer's orderalthough money lending, by itself, is
generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a
monopoly on the business of issuing banknotes. However, in some countries this is not
the case. In UK, for example, the Financial Services Authority licenses banks, and some
commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to
those issued by the Bank of England, the UK government's central bank.
Some types of financial institutions, such as building societies and credit unions, may be
partly or wholly exempted from bank license requirements, and therefore regulated under
separate rules. The requirements for the issue of a bank license vary between jurisdictions
but typically include:
Minimum capital
Minimum capital ratio
'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or
senior officers
Approval of the bank's business plan as being sufficiently prudent and plausible.
1.4 Classification of Banking Industry in India [1] [2] [9] [13]
Indian banking industry has been divided into two parts, organized and unorganized
sectors. The organized sector consists of Reserve Bank of India, Commercial Banks and
Co-operative Banks, and Specialized Financial Institutions (IDBI, ICICI, IFC etc). The
28
unorganized sector, which is not homogeneous, is largely made up of money lenders and
indigenous bankers.
An outline of the Indian Banking structure may be presented as follows:1. Reserve banks of India.
2. Indian Scheduled Commercial Banks.

a) State Bank of India and its associate banks.

b) Twenty nationalized banks.
c) Regional rural banks.
d) Other scheduled commercial banks.
3. Foreign Banks
4. Non-scheduled banks.
5. Co-operative banks.
1.4.1 Reserve bank of India
The reserve bank of India is a central bank and was established in April 1, 1935 in
accordance with the provisions of reserve bank of India act 1934. The central office of
RBI is located at Mumbai since inception. Though originally the reserve bank of India
was privately owned, since nationalization in 1949, RBI is fully owned by the
Government of India. It was inaugurated with share capital of Rs. 5 Crores divided into
shares of Rs. 100 each fully paid up.
RBI is governed by a central board (headed by a governor) appointed by the central
government of India. RBI has 22 regional offices across India. The reserve bank of India
was nationalized in the year 1949. The general superintendence and direction of the bank
is entrusted to central board of directors of 20 members, the Governor and four deputy
Governors, one Governmental official from the ministry of Finance, ten nominated
directors by the government to give representation to important elements in the economic
life of the country, and the four nominated director by the Central Government to
represent the four local boards with the headquarters at Mumbai, Kolkata, Chennai and
29
New Delhi. Local Board consists of five members each central government appointed for

a term of four years to represent territorial and economic interests and the interests of
cooperative
and indigenous banks.
The RBI Act 1934 was commenced on April 1, 1935. The Act, 1934 provides the
statutory basis of the functioning of the bank. The bank was constituted for the need of
following:
- To regulate the issues of banknotes.
- To maintain reserves with a view to securing monetary stability
- To operate the credit and currency system of the country to its advantage.
Functions of RBI as a central bank of India are explained briefly as follows:
Bank of Issue: The RBI formulates, implements, and monitors the monitory policy. Its
main objective is maintaining price stability and ensuring adequate flow of credit to
productive sector.
Regulator-Supervisor of the financial system: RBI prescribes broad parameters of
banking operations within which the countrys banking and financial system functions.
Their main objective is to maintain public confidence in the system, protect depositors
interest and provide cost effective banking services to the public.
Manager of exchange control: The manager of exchange control department manages
the foreign exchange, according to the foreign exchange management act, 1999. The
managers main objective is to facilitate external trade and payment and promote orderly
development and maintenance of foreign exchange market in India.
Issuer of currency: A person who works as an issuer, issues and exchanges or destroys
the currency and coins that are not fit for circulation. His main objective is to give the
public adequate quantity of supplies of currency notes and coins and in good quality.
30

Developmental role: The RBI performs the wide range of promotional functions to
support national objectives such as contests, coupons maintaining good public relations
and many more.
Related functions: There are also some of the related functions to the above mentioned
main functions. They are such as, banker to the government, banker to banks etc.
Banker to government performs merchant banking function for the central and the
state governments; also acts as their banker.
Banker to banks maintains banking accounts to all scheduled banks.
Controller of Credit: RBI performs the following tasks:
It holds the cash reserves of all the scheduled banks.
It controls the credit operations of banks through quantitative and qualitative
controls.
It controls the banking system through the system of licensing, inspection and
calling for information.
It acts as the lender of the last resort by providing rediscount facilities to
scheduled banks.
Supervisory Functions: In addition to its traditional central banking functions, the
Reserve Bank performs certain non-monetary functions of the nature of supervision of
banks and promotion of sound banking in India. The Reserve Bank Act 1934 and the
banking regulation act 1949 have given the RBI wide powers of supervision and control
over commercial and co-operative banks, relating to licensing and establishments, branch
expansion, liquidity of their assets, management and methods of working, amalgamation,
reconstruction and liquidation. The RBI is authorized to carry out periodical inspections
of the banks and to call for returns and necessary information from them. The
nationalisation of 14 major Indian scheduled banks in July 1969 has imposed new

responsibilities on the RBI for directing the growth of banking and credit policies
towards more rapid development of the economy and realisation of certain desired social
objectives. The supervisory functions of the RBI have helped a great deal in improving
31
the standard of banking in India to develop on sound lines and to improve the methods of
their operation.
Promotional Functions: With economic growth assuming a new urgency since
independence, the range of the Reserve Banks functions has steadily widened. The bank
now performs a variety of developmental and promotional functions, which, at one time,
were regarded as outside the normal scope of central banking. The Reserve bank was
asked to promote banking habit, extend banking facilities to rural and semi-urban areas,
and establish and promote new specialized financing agencies.
1.4.2 Indian Scheduled Commercial Banks
The commercial banking structure in India consists of scheduled commercial banks, and
unscheduled banks.
Scheduled Banks: Scheduled Banks in India constitute those banks which have been
included in the second schedule of RBI act 1934. RBI in turn includes only those banks
in this schedule which satisfy the criteria laid down vide section 42(6a) of the Act.
Scheduled banks in India means the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the s State Bank of
India (subsidiary banks) Act, 1959 (38 of 1959), a corresponding new bank constituted
under section 3 of the Banking companies (Acquisition and Transfer of Undertakings)
Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule
to the Reserve bank of India Act, 1934 (2 of 1934), but does not include a co-operative
bank. For the purpose of assessment of performance of banks, the Reserve Bank of India

categories those banks as public sector banks, old private sector banks, new private sector
banks and foreign banks, i.e. private sector, public sector, and foreign banks come under
the umbrella of scheduled commercial banks.
32
Regional Rural Bank: The government of India set up Regional Rural Banks (RRBs) on
October 2, 1975 [10]. The banks provide credit to the weaker sections of the rural areas,
particularly the small and marginal farmers, agricultural labourers, and small
enterpreneurs. Initially, five RRBs were set up on October 2, 1975 which was sponsored
by Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank
and United Bank of India. The total authorized capital was fixed at Rs. 1 Crore which has
since been raised to Rs. 5 Crores. There are several concessions enjoyed by the RRBs by
Reserve Bank of India such as lower interest rates and refinancing facilities from
NABARD like lower cash ratio, lower statutory liquidity ratio, lower rate of interest on
loans taken from sponsoring banks, managerial and staff assistance from the sponsoring
bank and reimbursement of the expenses on staff training. The RRBs are under the
control of NABARD. NABARD has the responsibility of laying down the policies for
the RRBs, to oversee their operations, provide refinance facilities, to monitor their
performance and to attend their problems.
Unscheduled Banks: Unscheduled Bank in India means a banking company as defined
in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not
a scheduled bank.
1.4.3 NABARD
NABARD is an apex development bank with an authorization for facilitating credit flow
for promotion and development of agriculture, small-scale industries, cottage and village
industries, handicrafts and other rural crafts. It also has the mandate to support all other

allied economic activities in rural areas, promote integrated and sustainable rural
development and secure prosperity of rural areas. In discharging its role as a facilitator
for rural prosperity, NABARD is entrusted with:
1. Providing refinance to lending institutions in rural areas
2. Bringing about or promoting institutions development and
3. Evaluating, monitoring and inspecting the client banks
33
Besides this fundamental role, NABARD also:
Act as a coordinator in the operations of rural credit institutions
To help sectors of the economy that they have special credit needs for eg.
Housing, small business and agricultural loans etc.
1.4.4 Co-operative Banks [10]
Co-operative banks are explained in detail in Section II of this chapter
1.5 Services provided by banking organizations [2]
Banking Regulation Act in India, 1949 defines banking as Accepting for the purpose of
lending or investment of deposits of money from the public, repayable on demand and
withdrawable by cheques, drafts, orders etc. as per the above definition a bank essentially
performs the following functions: Accepting Deposits or savings functions from customers or public by providing
bank account, current account, fixed deposit account, recurring accounts etc.
The payment transactions like lending money to the public. Bank provides an
effective credit delivery system for loanable transactions.
Provide the facility of transferring of money from one place to another place. For
performing this operation, bank issues demand drafts, bankers cheques, money
orders etc. for transferring the money. Bank also provides the facility of

Telegraphic transfer or tele- cash orders for quick transfer of money.

A bank performs a trustworthy business for various purposes.
A bank also provides the safe custody facility to the money and valuables of the
general public. Bank offers various types of deposit schemes for security of
money. For keeping valuables bank provides locker facility. The lockers are small
compartments with dual locking system built into strong cupboards. These are
stored in the banks strong room and are fully secured.
Banks act on behalf of the Govt. to accept its tax and non-tax receipt. Most of the
government disbursements like pension payments and tax refunds also take place
through banks.
34
There are several types of banks, which differ in the number of services they provide and
the clientele (Customers) they serve. Although some of the differences between these
types of banks have lessened as they have begun to expand the range of products and
services they offer, there are still key distinguishing traits. These banks are as follows:
Commercial banks, which dominate this industry, offer a full range of services for
individuals, businesses, and governments. These banks come in a wide range of sizes,
from large global banks to regional and community banks.
Global banks are involved in international lending and foreign currency trading, in
addition to the more typical banking services.
Regional banks have numerous branches and automated teller machine (ATM) locations
throughout a multi-state area that provide banking services to individuals. Banks have
become more oriented toward marketing and sales. As a result, employees need to know
about all types of products and services offered by banks.
Community banks are based locally and offer more personal attention, which many

individuals and small businesses prefer. In recent years, online bankswhich provide all
services entirely over the Internethave entered the market, with some success.
However, many traditional banks have also expanded to offer online banking, and some
formerly Internet-only banks are opting to open branches.
Savings banks and savings and loan associations, sometimes called thrift institutions,
are the second largest group of depository institutions. They were first established as
community-based institutions to finance mortgages for people to buy homes and still
cater mostly to the savings and lending needs of individuals.
Credit unions are another kind of depository institution. Most credit unions are formed
by people with a common bond, such as those who work for the same company or belong
to the same labour union or church. Members pool their savings and, when they need
money, they may borrow from the credit union, often at a lower interest rate than that
demanded by other financial institutions.
Federal Reserve banks are Government agencies that perform many financial services
for the Government. Their chief responsibilities are to regulate the banking industry and
to help implement our Nations monetary policy so our economy can run more efficiently
35
by controlling the Nations money supplythe total quantity of money in the country,
including cash and bank deposits. For example, during slower periods of economic
activity, the Federal Reserve may purchase government securities from commercial
banks, giving them more money to lend, thus expanding the economy. Federal Reserve
banks also perform a variety of services for other banks. For example, they may make
emergency loans to banks that are short of cash, and clear checks that are drawn and paid
out by different banks.
The money banks lend, comes primarily from deposits in checking and savings accounts,

certificates of deposit, money market accounts, and other deposit accounts that
consumers and businesses set up with the bank. These deposits often earn interest for
their owners, and accounts that offer checking, provide owners with an easy method for
making payments safely without using cash. Deposits in many banks are insured by the
Federal Deposit Insurance Corporation, which guarantees that depositors will get their
money back, up to a stated limit, if a bank should fail.

INDIAN BANKING HISTORY

HISTORY
Although some form of banking, mainly of the money-lending type, has been in existence in
India since ancient times, it
was only over a century ago that proper banking began. The first bank in India, though
conservative, was established in
1786. From 1786 till today, the journey of Indian Banking System can be segregated into three
distinct phases. They are
as mentioned below:
Source: RBI, Aranca Research
RBI
Scheduled
Commercial
Public Private Foreign RRB
Cooperative
Rural Urban
Unscheduled
Early phase from 1786 to 1969 of Indian Banks
Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms
New phase of Indian Banking System with the advent of Indian Financial & Banking Sector
Reforms after 1991
The banking industry has moved gradually from a regulated environment to a deregulated market
economy. The market
developments kindled by liberalization and globalization have resulted in changes in the
intermediation role of banks.
The pace of transformation has been more significant in recent times with technology acting as a
catalyst. While the

banking system has done fairly well in adjusting to the new market dynamics, greater challenges
lie ahead.
STRUCTURE
The Reserve Bank of India, the nations central bank, began operations on April 01, 1935. It was
established with the
objective of ensuring monetary stability and operating the currency and credit system of the
country to its advantage.
In India, the banks are being segregated in different groups. Each group has their own benefits,
own dedicated target
markets, limitations in operating in India. The commercial banking structure in India consists of
Scheduled Commercial
Banks and Unscheduled Banks.
Scheduled commercial Banks constitute those banks which have been included in the Second
Schedule of Reserve Bank
of India (RBI) Act, 1934. For the purpose of assessment of performance of banks, the Reserve
Bank of India categorise
them as public sector banks, old private sector banks, new private sector banks and foreign
banks.
Business
Division
Retail
banking
Other
Banking
Businesses
Treasury
Operations
Wholesale

banking
BUSINESS DIVISION
SWOT ANALYSIS
STRENGTHS
Valuable contributor to GDP
Regulatory environment
Government Support
WEAKNESSES
Increasing NPA
Low penetration
Lack of product differentiation
OPPORTUNITIES
Modern Technology
Untapped Rural Market
Globalization
THREATS
Unorganized money lending
market
Customer dissatisfaction
Rise of monopolistic structures
PORTERS FIVE FORCES MODEL
Banking is mainly a client oriented business. A high-quality of services to the client is crucial for
the growth and stability
of any bank. A wider distribution and access of financial services helps both consumers and
producers to raise their

welfare and productivity. Such access is especially powerful for the poor as it provides them
opportunities to build
savings, make investments, avail credit, and more important, insure themselves against income
shocks and emergencies.
To survive in an increasingly competitive environment, bank need to come up with various
facilities like Internet
banking, mobile banking etc. With the onset of mobile banking, the industry finds itself at the
threshold of the next
major technological leap.
Retail banking - Loans to Individuals (Auto loan,
Housing Loan, Education Loan and other personal
loan) or small businesses.
Wholesale banking Loans to Mid and Large
corporate (Working Capital loans, Project finance,
Term loans, Lease Finance)
Treasury Operations Investment in Equity,
Derivates, Commodities, Mutual Funds, Bonds,
Trading and Forex operations
Other Banking Businesses Merchant Banking,
Leasing business, Hire purchase, Syndication service etc.
PERFORMANCE
The empirical studies have found a strong relationship between economic growth and financial
development. Finance
plays an important role in the economic growth. The charts depict the performance of Bankex in
last 10 year and
Relative performance of BSE Bankex & BSE Sensex in 2010-11. The performance of Bankex
accelerated during the period

March 2002 to March 2008. The performance of bankex decelerated during March 2008 March
2009 but thereafter it
has shown increasing trend till March 2011.
The four-month period (November 2010-February 2011) was marked by a consistent decline in
all the indices caused by
a number of global and domestic developments. The Sensex declined by 12.4%, while the
Bankex Index declined by
18.3%.
Some of the global factors, such as increase in crude oil prices and high commodity prices
contributed to inflation in the
domestic economy. High inflation coupled with low growth rate in the Index of Industrial
Production (IIP) and tightening
interest rates has caused some concerns over the short-term economic growth, hitting the stocks
in all the sectors,
particularly those in the financial services sector.
Buyer Power - High bargaining power of customers on
account of banks renders uniform services to the
clients. Now a days almost all banks would like to
provide requisite information very easily by way to
Internet, Mobile banking to the clients
Supplier Power- Low bargaining power of suppliers on
account of RBI regulatory benchmarks. Banks have to
meet numerous regulatory standards created by RBI
Competitive Rivalry- High competition of account of
number of prominent public, private, foreign along
with cooperative banks
Availability of Substitutes - High menace from

substitutes like NBFCs, Mutual funds, Government

securities and T-bills
Threat of new entrants - Low threat of new entrants
on account of banking regulations. Before setting up of
a new bank, it is essential to take the consent of RBI.
REGULATION
The expected integration of various intermediaries in the financial system would require a strong
regulatory framework.
It would also require a number of legislative changes to enable the banking system to remain
contemporary and
competitive.
ECONOMIC ANALYSIS
The Indian economy has recorded remarkable growth over
the past decade. India's economic growth is expected to
robust in 2012 and 2013. The International Monetary Fund
(IMF) has pared Indias economic growth projection to 6.9%
in 2012 from its January estimate of 7%, the only emerging
economy for which it has done so. Banks provide capital
formation to various sectors which directly help in the
growth of Indian economy.
SOCIAL ANALYSIS
Indian banking system has been progressing rapidly. There
are ample opportunities for the banks to cover untapped rural market. Yet, banking facilities are
not available in many
rural areas. Many farmers are taking loan from moneylender at a very high rate of interest.
Small-scale industries would
remain important for banks. Changes could be expected in near future for unorganised sectors.

TECHNOLOGICAL ANALYSIS
In recent time, Indian banking industry has been consistently working towards the development
of technological
changes and its usage in the banking operations for the improvement of their efficiency. With the
application of new
and improved technologies banks expected to reduce costs, time and give customer satisfaction.
Core banking has
changed the face of banking by offering value added services. Core banking applications helps to
provide complete front
and backend automation of banks. Technological developments would render flow of
information and data faster
leading to faster appraisal and decision-making. This would enable banks to make credit
management more effective,
besides leading to an appreciable reduction in transaction cost.
Internet banking or banking via the Internet can be considered a remarkable
development in the banking sector. The ability to carry out banking transactions
through the Internet has empowered customers to execute their financial transactions
within the comfort of their homes and offices. In todays busy world, when people do
not have much time even for personal work, Internet banking appears as a boon.
Internet Banking helped give the customer's anytime access to their banks. But for Internet
banking there is a
requirement of a PC / Laptop with an Internet connection. Mobile usage has seen an explosive
growth in economies like India. India has reached 893.84 million mobile subscriber mark
(Source:
TRAI, Dec 2011) for a population of 1.21 billion. With Mobile Banking, customer can check
their
account balance, transfer funds 24 x 7, bills payments, booking of bus / flight tickets, recharge
prepaid mobile and do a lot more effortlessly and securely. Banking through cell phone benefits
the banks too. It cuts down on the cost of tele-banking and is more economical.

ATM (Automated Teller Machine) is electronic machine, which is operated by a

customer himself to deposit or to withdraw cash from bank. ATMs reduce the
work pressure on bank's staff and avoid queues in bank premises. ATMs are of
great help to travellers. They need not carry large amount of cash with them.
They can withdraw cash from any city or state, across the country and even from
outside the country with the help of ATM.
CONCLUSION
The financial sector reforms have brought about significant improvements in the financial
strength and the
competitiveness of the Indian banking system. The prudential norms, accounting and disclosure
standards, risk
management practices, etc are keeping pace with global standards, making the banking system
resilient to global
shocks.
In the recent past, the Indian banking sector has undergone significant developments and
investments. In this sector,
there are huge opportunities and numerous challenges. Money laundering is a growing menace
and it not only poses
serious threat to the stability and integrity of the financial system but also to the sovereignty and
safety of nations
worldwide. In the coming days, challenges before banks would primarily lie in saving
themselves from the growing
threat of money laundering.

PROFILE OF COMPANY

PUSTIKAR SAKH SAHKARI SAMITI LTD.

Pustikar Laghu Vyaparik Pratistan Bachat Evam Sakh Sahkari Samiti Ltd. Jodhpur, a cooperative socieity registered under The Multi State Co-operative Societies Act 2002.
The basic philosophy behind working of the samiti is to work as an effective and alternative
micro finance institution by providing quick and adequate financial assistance along with
technical assistance, where ever necessary , for income generating and shell improving activities
of its members especially belonging to the poor, middle and lower middle class of the society.
Samiti concentrates its entire efforts to achieve fundamental and essential components required
for an over all economic devlopment of the community at large and particularly of its members.
Economic empowerment of its member is the nucleus of its various activiites with a goal to help
the poorest of the poor. Samiti mobilises unemployed poor and underprivileged specially women
through SHG movement.

Saving Deposits

Rate Of Interest

6%

Fixed Deposits ( F.D.R.)

TIME PERIOD

INTEREST RATE

3 Months or More

6 Months or More

7.5%

Less than 1 Year and 3 Years

10%

3 Years

11%

3 years and More

8%

7%

Recurring Deposits ( R.D.)

On Depositing Rs./1000
TIME PERIOD

GENERAL

SENIOR / RETIRED

After 12 Months

1103

1114

After 24 Months

1218

1242

After 36 Months

1384

1425

After 48 Months

1372

1427

After 60 Months

1485

1560

Daily Deposits
On Depositing Rs./100
TIME PERIOD

RATE

AMOUNT

After 12 Months

8.5 %

1256

After 24 Months

9.0 %

2637

After 36 Months

9.5 %

4174

After 48 Months

9.5 %

5848

After 60 Months

9.5 %

7687

LOANS

The livelihood loan schemes at Pustikar Credit Cooperative are characterized by relatively small
loans, a few thousand rupees at most. The repayment period is relatively short, about a year or
so. Women are a major beneficiary of their activities, and the destination of the funds primarily
includes agriculture, distribution, trading, small craft and processing industries. The
administrative structure is generally light and the entire process is participatory in nature. The
impact of credit lending is as widespread as in the rural areas and urban areas.
Pustikar Credit Cooperative extends livelihood loans between 10000- 50000 for various
purposes, like Manufacturing, Servicing, Small Business, Agriculture & Allied Activities, etc.
The loan schemes also simultaneously undertake a social development agenda. This helps
to:
1. Raise the social and political consciousness of members
2. Focus increasingly on women, whose urge for survival has a far greater bearing on
the development of the family
3. Encourage their monitoring of social and physical infrastructure projects - housing,
sanitation, drinking water, education, entrepreneurship, business development,
agriculture, etc.

The lending practices are characterized by an unusually high degree of fairness, flexibility and
service. Program loans are provided for any reasonable purpose. The interest rates charged to
borrowers are below or at market levels, and repayment terms are arranged to accommodate the
needs of the borrowing organization.
The terms and conditions of the loan agreement entered into with borrowers are significantly less
restrictive and obtrusive than most commercial loan contracts. The agreement is nevertheless a
detailed and comprehensive one that is fully protective of the legal rights and financial solvency
of Pustikar Credit Cooperative. Reporting requirements are quite strict in requiring borrowers to
submit substantial information on a regular and timely basis.Pustikar Credit Cooperative is thus

able to closely monitor the financial performance and organizational development of its
borrowers. Pustikar Credit Cooperative provides technical assistance services to its borrowers in
connection with the loan application process and subsequently as circumstances warrant. The
education and experience of staff and Trustees allow it to provide a wide range of quality
services, particularly in the areas of organizational development, financial management, and
training in consensus process

MICRO FINANCE
Pustikar Credit Cooperative Society Limited seeks to empower women living below the poverty
line through the Self-Help Group loans they offer. Disbursed solely to ladies who possess the
skills to begin a craft business but lack the money necessary to start up or expand their own
businesses, Pustikar Credit Cooperatives Self-Help Group loans comprise the vast majority of
their financial operations. Case study research specifically on Pustikar Credit Cooperatives SelfHelp Group process indicates that ladies involved in Samiti's Self-Help Group program initially
discover about Pustikar Samiti via their friends and neighbors. Word-of-mouth publicity has
indeed proven to be an effective means of advertising for Pustikar Credit Cooperative
concerning the Self-Help Group loan scheme, as 221 Self-Help Groups have formed under
Pustikar Credit Cooperative since the societys birth, a figure that continues to grow.
After initially hearing about Pustikar Credit Cooperative, ladies who are interested visit Pustikar
Credit Cooperatives branch to learn more about the process of taking out a loan. Following this
educational session, the ladies recruit other women, usually friends, family or neighbors
partaking in the same craft, to form a 10-woman Self-Help Group. This group then elects a
group leader who assumes the responsibility of tracking individual payments within the group as
well as maintaining contact with Pustikar Credit Cooperative each month to pay the loan
installments. After the initial Self-Help Group formation the ladies return to Pustikar Credit
Cooperative to fill out a loan application. Once this application has been processed, Pustikar
Credit Cooperative staff travels to the homes of the women in the Self-Help Group to investigate
their business and work ethic, assessing whether or not these women will be reliable in repaying
their loan installments. During this assessment visit, Pustikar Credit Cooperatives staff members
look for hardworking and organized women who have strong relationships with their fellow

Self-Help Group members, and consequentially are more likely to hold each other accountable
and pay back their loan. If the Self-Help Group applying to Pustikar Credit Cooperative passes
this assessment visit, they return to Pustikar Credit Cooperative within days of the investigatory
visit for the loan signing ceremony, at which time they receive their money.

SCHEMES

SELF HELP GROUP LOANS (SHG LOAN)

Financing to the poorest of the poor is done through SHG concept. Self Helf
Groups of poor men and women are formed seperatly to devlop spririt of mutual
co-operation there by increasing mutual confidence.
Members of the SHGs are motivated to adopt a habit of regular saving of a fixed
amount to constitute a collective fund, which can be used to meet the emergent
financial needs of the fellow members of the group.
After ensuring satisfactory functioning of the group samiti provides loans to the
SHG for undertaking any income generating economic activities either collectively
or individually.

MICROCREDIT SCHEME

Loans to individual members for starting and or expanding the business and
income generating activies is given under this schoeme.
Loans for processing and trading of any products is given under this head. Loans
to young enemployed skilled individuals are given for strating their ventures on

very soft and reachable terms. Amount of loans ranges from 0.10 Lakh to 2.00
Lakh with easy repayment schedule. We provide loan upto 1.50 Lac on personal
guarntee of acceptable member alongwith post dated cheques for monthly
instalments.
Transport operators are given loan for purchase of new or old vehicles and it
remains hypothecated in favour of the samiti till completion of loan. Mortgage of
immovable propersty is taken for loan above 1.50 Lac alongwith personal
guarantee and post dated cheques.

GENERAL LOAN

Samiti also provides financial assistance to its members for meeting perosnal /
social liabilities and save them from greedy clutches of money lenders.
The amount of loan ranges from 0.10 Lac to 5.00 Lac with repayment period of
maximum 60 months.

CONTACT US
pustikar@gmail.com
GET IN TOUCH
MAIN OFFICE
10/9,
Chopasani Housing Board,
Jodhpur,(Rajasthan.)
Tel : 0291-2760596

BRANCH OFFICE
NarSingh Dhara,
Inside Jalori Bari,
Jodhpur,(Rajasthan.)
Tel : 0291-2633018

BRANCHES

S.No.

Branch Name

Address

Phone No.

1.

Baba Nadi

Tel : 0291-2655655

2.

Phalodi

3.

Bikaner

4.

Jaisalmer

5.

Pali

Pratap Nagar,
Link Road,
Near Bheekha Pyaauu,
Jodhpur,(Rajasthan.)
Near Nagar Palika,
Nagore Road,
Phalodi,(Rajasthan.)
Mohatto ka chowk,
Bikaner(Rajasthan.)
Near Ramesh Talkies,
Kela padaa,
Jaisalmer,(Rajasthan.)
32, Meera Marg,
Bhairo Ghaat,
Pali, Marwar,
(Rajasthan.)

BANKING IN INDIA

Tel : 02925-223690
Tel : 0151-2200964
Tel : 02992-255115
Tel : 02932-220777

Banking in India

Banking in India in the modern sense originated in the last decades of the 18th century. The first
banks were Bank of Hindustan (1770-1829) and The General Bank of India, established 1786
and since defunct.
The largest bank, and the oldest still in existence, is the State Bank of India, which originated in
the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This

was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of
Madras, all three of which were established under charters from the British East India Company.
The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's
independence, became the State Bank of India in 1955. For many years the presidency banks
acted as quasi-central banks, as did their successors, until the Reserve Bank of India was
established in 1935.
In 1969 the Indian government nationalised all the major banks that it did not already own and
these have remained under government ownership. They are run under a structure known as
'profit-making public sector undertaking' (PSU) and are allowed to compete and operate
as commercial banks. The Indian banking sector is made up of four types of banks, as well as the
PSUs and the state banks, they have been joined since the 1990s by new private commercial
banks and a number of foreign banks.
Generally banking in India was fairly mature in terms of supply, product range and reach-even
though reach in rural India and to the poor still remains a challenge. The government has
developed initiatives to address this through the State Bank of India expanding its branch
network and through the National Bank for Agriculture and Rural Development with things like
microfinance. This also included the 2014 plan by the then prime minister to bring bank accounts
to the estimated 40% of the population that were still unbanked.
History
In ancient India there is evidence of loans from the Vedic period (beginning 1750 BC). Later
during the Maurya dynasty(321 to 185 BC), an instrument called adesha was in use, which was
an order on a banker desiring him to pay the money of the note to a third person, which
corresponds to the definition of a bill of exchange as we understand it today. During the Buddhist
period, there was considerable use of these instruments. Merchants in large towns gave letters of
credit to one another.[4]
Colonial era
During the period of British rule merchants established the Union Bank of Calcutta in 1869, first
as a private joint stock association, then partnership. Its proprietors were the owners of the earlier
Commercial Bank and the Calcutta Bank, who by mutual consent created Union Bank to replace
these two banks. In 1840 it established an agency at Singapore, and closed the one at Mirzapore
that it had opened in the previous year. Also in 1840 the Bank revealed that it had been the
subject of a fraud by the bank's accountant. Union Bank was incorporated in 1845 but failed in
1848, having been insolvent for some time and having used new money from depositors to pay
its dividends.[5]
The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock
bank in India, it was not the first though. That honour belongs to the Bank of Upper India, which
was established in 1863, and which survived until 1913, when it failed, with some of its assets
and liabilities being transferred to the Alliance Bank of Simla.
Foreign banks too started to appear, particularly in Calcutta, in the 1860s. The Comptoir
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches in Madras and Pondicherry, then a French possession, followed. HSBC established

itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the
trade of the British Empire, and so became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881
in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in
1894, which has survived to the present and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a relative period
of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial
and other infrastructure had improved. Indians had established small banks, most of which
served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some exchange banks and
a number of Indian joint stock banks. All these banks operated in different segments of the
economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign
trade. Indian joint stock banks were generally under capitalised and lacked the experience and
maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon
to observe, "In respect of banking it seems we are behind the times. We are like some old
fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome
compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and political
figures to found banks of and for the Indian community. A number of banks established then
have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of
Baroda,Canara Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina
Kannada and Udupi districtwhich were unified earlier and known by the name South
Canara ( South Kanara ) district. Four nationalised banks started in this district and also a
leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of
Indian Banking".
During the First World War (19141918) through the end of the Second World War (19391945),
and two years thereafter until the independence of India were challenging for Indian banking.
The years of the First World War were turbulent, and it took its toll with banks simply collapsing
despite the Indian economy gaining indirect boost due to war-related economic activities. At
least 94 banks in India failed between 1913 and 1918 as indicated in the following table:

Years

Number of banks
that failed

Authorised Capital
( Lakhs)

Paid-up Capital
( Lakhs)

1913

12

274

35

1914

42

710

109

Number of banks
that failed

Years

Authorised Capital
( Lakhs)

Paid-up Capital
( Lakhs)

1915

11

56

1916

13

231

1917

76

25

1918

209

Post-Independence
The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal,
paralysing banking activities for months. India's independence marked the end of a regime of
the Laissez-faire for the Indian banking. The Government of India initiated measures to play an
active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the
government in 1948 envisaged a mixed economy. This resulted into greater involvement of the
state in different segments of the economy including banking and finance. The major steps to
regulate banking included:

The Reserve Bank of India, India's central banking authority, was established in April
1935, but was nationalised on 1 January 1949 under the terms of the Reserve Bank of India
(Transfer to Public Ownership) Act, 1948 (RBI, 2005b).
In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of
India (RBI) "to regulate, control, and inspect the banks in India".

The Banking Regulation Act also provided that no new bank or branch of an existing
bank could be opened without a license from the RBI, and no two banks could have common
directors.

Nationalization in the 1960s

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India
except the State Bank of India(SBI), continued to be owned and operated by private persons. By
the 1960s, the Indian banking industry had become an important tool to facilitate the
development of the Indian economy. At the same time, it had emerged as a large employer, and a
debate had ensued about the nationalization of the banking industry. Indira Gandhi, the

then Prime Minister of India, expressed the intention of the Government of India in the annual
conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank
Nationalization."[7] The meeting received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an ordinance
('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969')
and nationalised the 14 largest commercial banks with effect from the midnight of 19 July 1969.
These banks contained 85 percent of bank deposits in the country.[7] Jayaprakash Narayan, a
national leader of India, described the step as a "masterstroke of political sagacity." Within two
weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition
and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated
reason for the nationalisation was to give the government more control of credit delivery. With
the second dose of nationalisation, the Government of India controlled around 91% of the
banking business of India. Later on, in the year 1993, the government merged New Bank of
India with Punjab National Bank.[8] It was the only merger between nationalised banks and
resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the
1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of
the Indian economy.
Liberalization in the 1990s
In the early 1990s, the then government embarked on a policy of liberalization, licensing a small
number of private banks. These came to be known as New Generation tech-savvy banks, and
included Global Trust Bank (the first of such new generation banks to be set up), which later
amalgamated with Oriental Bank of Commerce, UTI Bank (since renamed Axis Bank), ICICI
Bank and HDFC Bank. This move, along with the rapid growth in the economy of India,
revitalised the banking sector in India, which has seen rapid growth with strong contribution
from all the three sectors of banks, namely, government banks, private banks and foreign banks.
The next stage for the Indian banking has been set up with the proposed relaxation in the norms
for foreign direct investment, where all foreign investors in banks may be given voting rights
which could exceed the present cap of 10% at present. It has gone up to 74% with some
restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time, were used
to the 464 method (borrow at 4%; lend at 6%; go home at 4) of functioning. The new wave
ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this
led to the retail boom in India. People demanded more from their banks and received more.
Current period
All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are
Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Cooperative Banks. Scheduled Commercial Banks in India are categorised into five different groups
according to their ownership and/or nature of operation. These bank groups are:

State Bank of India and its Associates

Nationalised Banks

Private Sector Banks

Foreign Banks
Regional Rural Banks.

In the bank group-wise classification, IDBI Bank Ltd. is included in Nationalised Banks.
Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled
Urban Cooperative Banks.

Growth of Banking in India of Scheduled Commercial Banks[9]

In
dic
at
or
s

Num
ber of
Com
merci
al
Bank
s

31 March of

2005

284

Num
ber of
70,373
Branc
hes

Popul
ation
per
Bank
s (in
thous

16

2006

2007

2008

2009

2010

2011

218

178

169

166

163

163

72,072

74,653

78,787

82,897

88,203

94,019

16

15

15

15

14

13

2012

169

2013

151

102,377 109,811

13

12

Growth of Banking in India of Scheduled Commercial Banks[9]

In
dic
at
or
s

31 March of

2005

2006

2007

2008

2009

2010

2011

2012

2013

ands)

67504.
Aggr 17002
21090
26119
31969
38341
44928
52078
59091
54
egate billion( billion( billion( billion( billion( billion( billion( billion(
billion(
Depo US$280 US$340 US$420 US$520 US$620 US$730 US$840 US$960
US$1.1 t
sits billion) billion) billion) billion) billion) billion) billion) billion)
rillion)

11004
15071
19312
23619
27755
32448
39421
46119
52605
Bank
billion( billion( billion( billion( billion( billion( billion( billion( billion(
Credi
US$180 US$240 US$310 US$380 US$450 US$530 US$640 US$750 US$850
t
billion) billion) billion) billion) billion) billion) billion) billion) billion)

Depo
sit as
perce
ntage
toGN
P (at
factor
cost)

62%

64%

69%

73%

77%

78%

78%

78%

79%

Per
Capit
16281( 19130( 23382( 28610( 33919( 39107( 45505( 50183( 56380(
a
US$260) US$310) US$380) US$460) US$550) US$630) US$740) US$810) US$910)
Depo
sit

Per
Capit

10752(

13869(

17541(

21218(

24617(

28431(

34187(

38874(

44028(

Growth of Banking in India of Scheduled Commercial Banks[9]

In
dic
at
or
s

31 March of

2005

2006

2007

2008

2009

2010

2011

2012

2013

a
Credi US$170) US$220) US$280) US$340) US$400) US$460) US$550) US$630) US$710)
t

Credi
t
Depo
sit
Ratio

63%

70%

74%

75%

74%

74%

76%

79%

79%

By 2010, banking in India was generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the private sector and foreign
banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other banks in comparable economies in
its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the
government.
With the growth in the Indian economy expected to be strong for quite some time-especially in
its services sector-the demand for banking services, especially retail banking, mortgages and
investment services are expected to be strong. One may also expect M&As, takeovers, and asset
sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak
Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed
to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need to be vetted by them.
In recent years critics have charged that the non-government owned banks are too aggressive in
their loan recovery efforts in connexion with housing, vehicle and personal loans. There are press
reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.[10][11][12]
By 2013 the Indian Banking Industry employed 1,175,149 employees and had a total of 109,811
branches in India and 171 branches abroad and manages an aggregate deposit of 67504.54
billion (US$1.1 trillion or 840 billion) and bank credit of 52604.59 billion (US$850 billion or
650 billion). The net profit of the banks operating in India was 1027.51 billion(US$17 billion
or 13 billion) against a turnover of 9148.59 billion (US$150 billion or 110 billion) for
the financial year2012-13.[9]

Adoption of banking technology

The IT revolution has had a great impact on the Indian banking system. The use of computers
has led to the introduction of online banking in India. The use of computers in the banking sector
in India has increased many fold after the economic liberalisation of 1991 as the country's
banking sector has been exposed to the world's market. Indian banks were finding it difficult to
compete with the international banks in terms of customer service, without the use of
information technology.
The RBI set up a number of committees to define and co-ordinate banking technology. These
have included:

In 1984 was formed the Committee on Mechanisation in the Banking Industry (1984)
whose chairman was Dr. C Rangarajan, Deputy Governor, Reserve Bank of India. The
major recommendations of this committee were introducingMICR technology in all the
banks in the metropolises in India.[14] This provided for the use of standardized cheque forms
and encoders.
[13]

In 1988, the RBI set up the Committee on Computerisation in Banks (1988)[15] headed by
Dr. C Rangarajan. It emphasized that settlement operation must be computerized in
the clearing houses of RBI
in Bhubaneshwar, Guwahati,Jaipur, Patna and Thiruvananthapuram. It further stated that
there should be National Clearing of intercity cheques atKolkata, Mumbai, Delhi, Chennai and MICR should be made operational. It
also focused on computerisation of branches and increasing connectivity among branches
through computers. It also suggested modalities for implementing on-line banking. The
committee submitted its reports in 1989 and computerisation began from 1993 with the
settlement between IBA and bank employees' associations.[16]

In 1994, the Committee on Technology Issues relating to Payment systems, Cheque

Clearing and Securities Settlementin the Banking Industry (1994)[17] was set up under
Chairman W S Saraf. It emphasized Electronic Funds Transfer(EFT) system, with the
BANKNET communications network as its carrier. It also said that MICR clearing should be
set up in all branches of all those banks with more than 100 branches.

In 1995, the Committee for proposing Legislation on Electronic Funds Transfer and other
Electronic Payments (1995)[18]again emphasized EFT system.[16]

The total number of automated teller machines (ATMs) installed in India by various banks as of
end June 2012 is 99,218.[19] The new private sector banks in India have the most ATMs, followed
by off-site ATMs belonging to SBI and its subsidiaries and then by nationalised banks and
foreign banks, while on-site is highest for the nationalised banks of India.[16]

Branches and ATMs of Scheduled Commercial Banks as of end March 2005[16]

Bank type

Number of
branches

On-site
ATMs

Off-site
ATMs

Total
ATMs

Nationalised banks

33,627

38,606

22,265

60,871

State Bank of India

13,661

28,926

22,827

51,753

Old private sector

banks

4,511

4,761

4,624

9,385

New private sector

banks

1,685

12,546

26,839

39,385

Foreign banks

242

295

854

1,149

TOTAL

53,726

85,134

77,409

1,62,543

Steps taken by Reserve Bank of India (RBI) to strengthen the banking infrastructure

RBI has permitted domestic Scheduled Commercial Banks (excluding RRBs) to open
branches in tier 2 to tier 6 cities (with population up to 99,999 as per census 2001) without
the need to take permission from RBI in each case, subject to reporting.

RBI has also permitted SCBs (excluding RRBs) to open branches in rural, semi-urban
and urban centres in North Eastern States and Sikkim without having the need to take
permission from RBI in each case, subject to reporting.

Regional Rural Banks (RRBs) are also allowed to open branches in Tier 2 to Tier 6
centres (with population up to 99,999 as per Census 2001) without the need to take
permission from RBI in each case, subject to reporting, provided they fulfill the following
conditions, as per the latest inspection report:

CRAR of at least 9%;

Net NPA less than 5%;

No default in CRR / SLR for the last year;

Net profit in the last financial year;

CBS compliant.

Domestic SCBs have been advised that while preparing their Annual Branch Expansion
Plan (ABEP), they should allocate at least 25% of the total number of branches proposed to
be opened during the year in unbanked Tier 5 and Tier 6 centres i.e. (population up to 9,999)
centres which do not have a brick and mortar structure of any SCB for customer based
banking transactions.

RRBs have also been advised to allocate at least 25% of the total number of branches
proposed to be opened during a year in unbanked rural (Tier 5 and Tier 6) Centres).
New private sector banks are required to ensure that at least 25% of their total branches
are in semi-urban and rural centres on an ongoing basis.

MARKETING MIX STRATEGIES OF BANK

MARKETING MIX
In the previous lesson you learnt that marketing identifies consumers needs and supplies various
goods and services to satisfy those needs most effectively. So the businessman needs to:
(a) produce or manufacture the product according to consumers need;
(b)make available it at a price that the consumers find reasonable;
(c) supply the product to the consumers at different outlets they can conveniently approach; and
(d) inform the consumers about the product and its characteristics through the media they have
access to.
So the marketing manager concentrates on four major decision areas while planning the
marketing activities, namely:
(i)
products,
(ii)
price,
(iii)
place (distribution)
(iv)
promotion.
These 4 Ps are called as elements of marketing and together they constitutethe marketing mix.
All these are inter-related because a decision in one area affects decisionsin other areas. In this
lesson you will learn about the basic aspects relating to these 4Psviz., product, price, place and
promotion.
OBJECTIVES
After studying this lesson, you will be able to :
1. explain the concept of marketing mix and its components;
2. explain the meaning of product and its classification;
3. state the various factors affecting pricing decisions;
4. describe different methods of pricing;
5. state the meaning of channels of distribution;
6. identify the various channels of distribution;
7. state the factors affecting choice of a channel of distribution; and
8. explain the concepts of promotion and promotion mix.
CONCEPT AND COMPONENTS OF MARKETING MIX
Marketing involves a number of activities. To begin with, an organisation may decide on its
target group of customers to be served. Once the target group is decided, the product is to be
placed in the market by providing the appropriate product, price, distribution and promotional
efforts. These are to be combined or mixed in an appropriate proportion so as to achieve the
marketing goal. Such mix of product, price, distribution and promotional efforts is known as
Marketing Mix. According to Philip Kotler Marketing Mix is the set of controllable variables

that the firm can use to influence the buyers response. The controllable variables in this context
refer to the 4 Ps [product, price, place (distribution) and promotion]. Each firm strives to build
up such a composition of 4Ps, which can create highest level of consumer satisfaction and at
the same time meet its organisational objectives. Thus, this mix is assembled keeping in mind the
needs of target customers, and it varies from one organisation to another depending upon its
available resources and marketing objectives. Let us now have a brief
idea about the four components of marketing mix.
Product
Product refers to the goods and services offered by the organisation. A pair of shoes, a plate of
dahi-vada, a lipstick, all are products. All these are purchased because they satisfy one or more of
our needs. We are paying not for the tangible product but for the benefit it will provide. So, in
simple words, product can be described as a bundle of benefits which a marketeer offers to the
consumer for a price. While buying a pair of shoes, we are actually buying comfort for our feet,
while buying a lipstick we are actually paying for beauty because lipstick is likely to make us
look good. Product can also take the form of a service like an air travel, telecommunication, etc.
Thus, the term product refers to goods and services offered by the organisation for sale.
Price
Price is the amount charged for a product or service. It is the second most important element in
the marketing mix. Fixing the price of the product is a tricky job. Many factors like demand for a
product, cost involved, consumers ability to pay, prices charged by competitors for similar
products, government restrictions etc. have to be kept in mind while fixing the price. In fact,
pricing is a very crucial decision area as it has its effect on demand for the product and also on
the profitability of the firm.
Place
Goods are produced to be sold to the consumers. They must be made available to
the consumers at a place where they can conveniently make purchase. Woollens are
manufactured on a large scale in Ludhiana and you purchase them at a store from the nearby
market in your town. So, it is necessary that the product is available at shops in your town. This
involves a chain of individuals and institutions like distributors, wholesalers and retailers who
constitute firms distribution network (also called a channel of distribution).
The organisation has to decide whether to sell directly to the retailer or through the
distributors/wholesaler etc. It can even plan to sell it directly to consumers. The choice is guided
by a host of factors about which you will learn later in this chapter.
Promotion
If the product is manufactured keeping the consumer needs in mind, is rightly
priced and made available at outlets convenient to them but the consumer is not made aware
about its price, features, availability etc, its marketing effort may not be successful. Therefore
promotion is an important ingredient of marketing mix as it refers to a process of informing,

persuading and influencing a consumer to make choice of the product to be bought. Promotion is
done through means of personal selling, advertising, publicity and sales promotion. It is done
mainly with a view to provide information to prospective consumers about the availability,
characteristics and uses of a product. It arouses potential consumers interest in the product,
compare it with competitors product and make his choice. The proliferation of print and
electronic media has immensely helped the process of promotion.
CONCEPT OF PRODUCT AND ITS CLASSIFICATION
As stated earlier, product refers to the goods and services offered by the organisation for sale.
Here the marketers have to recognise that consumers are not simply interested in the physical
features of a product but a set of tangible and intangible attributes that satisfy their wants. For
example, when a consumer buys a washing machine he is not buying simply a machine but a
gadget that helps him in washing clothes. It also needs to be noted that the term product refers to
anything that can be offered to a market for attention, acquisition, or use. Thus, the term product
is defined as anything that can be offered to a market to satisfy a want. It normally includes
physical objects and services. In a broader sense, however, it not only includes physical objects
and services but also the supporting services like brand name, packaging accessories,
installation, after sales service etc. Look at the definitions by Stanton and McCarthy as given in
the box.
Product
William J. Stanton
Product is a set of tangible and intangible attributes including packaging, colour price,
manufacturers prestige, retailers prestige and manufacturers and retailers services which
buyer may accept as offering satisfaction of wants and services.
Jerome McCarthy
A product is more than just a physical product with its related functional and aesthetic features.
It includes accessories, installation, instructions on use, the package, perhaps a brand name,
which fulfills some psychological needs and the assurances that service facilities will be
available to meet the customer needs after the purchase.
PRODUCT CLASSIFICATION
Product can be broadly classified on the basis of (1) use, (2) durability, and (3) tangibility. Let us
have a brief idea about the various categories and their exact nature under each head, noting at
the same time that in marketing the terms product and goods are often used interchangeably.
Marketing

Based on use
(1) the product can be classified as:
(a) Consumer Goods; and
(b) Industrial Goods.
Consumer goods
Goods meant for personal consumption by the households or
ultimate consumers are called consumer goods. This includes items like toiletries,
groceries, clothes etc. Based on consumers buying behaviour the consumer goods
can be further classified as :
(i) Convenience Goods;
(ii) Shopping Goods; and
(iii) Speciality Goods.
Convenience Goods
Do you remember, the last time when did you buy a packet of butter or a
soft drink or a grocery item? Perhaps you dont remember, or you will say
last week or yesterday. Reason is, these goods belong to the categories of
convenience goods which are bought frequently without much planning or
shopping effort and are also consumed quickly. Buying decision in case of
these goods does not involve much pre-planning. Such goods are usuallysold
at convenient retail outlets.
Shopping Goods
These are goods which are purchased less frequently and are used very
slowly like clothes, shoes, household appliances. In case of these goods,
consumers make choice of a product considering its suitability, price, style,
quality and products of competitors and substitutes, if any. In other words,
the consumers usually spend a considerable amount of time and effort to
finalise their purchase decision as they lack complete information prior to
their shopping trip. It may be noted that shopping goods involve much more
expenses than convenience goods.
Speciality Goods
Because of some special characteristics of certain categories of goods people
generally put special efforts to buy them. They are ready to buy these goods
at prices at which they are offered and also put in extra time to locate the
seller to make the purchase. The nearest car dealer may be ten kilometres
away but the buyer will go there to inspect and purchase it. In fact, prior to
making a trip to buy the product he/she will collect complete information

about the various brands. Examples of speciality goods are cameras, TV sets,
new automobiles etc.
Industrial Goods
Goods meant for consumption or use as inputs in production of other
products or provision of some service are termed as industrial goods. These
are meant for non-personal and commercial use and include (i) raw
materials, (ii) machinery, (iii) components, and (iv) operating supplies (such
as lubricants stationery etc). The buyers of industrial goods are supposed to
be knowledgeable, cost conscious and rational in their purchase and
therefore, the marketeers follow different pricing, distribution and
promotional strategies for their sale.
Marketing
It may be noted that the same product may be classified as consumer goods as well as industrial
goods depending upon its end use. Take for example the case of coconut oil. When it is used as
hair oil or cooking oil, it is treated as consumer goods and when used for manufacturing a bath
soap it is termed as industrial goods. However, the way these products are marketed to these two
groups are very different because purchase by industrial buyer is usually large in quantity and
bought either directly from the manufacturer or the local distributor.
2. Based on Durability the products can be classified as :
(a) Durable Goods; and
(b) Non-durable Goods.
(a)

Durable Goods

Durable goods are products which are used for a long period i.e., for months or years together.
Examples of such goods are refrigerator, car, washing machine etc. Such goods generally require
more of personal selling efforts and have high profit margins. In case of these goods, sellers
reputation and presale and after-sale service are important determinants of purchase decision.
(b) Non-durable Goods
Non-durable goods are products that are normally consumed in one go or last for a few uses.
Examples of such products are soap, salt, pickles, sauce etc. These items are consumed quickly
and we purchase these goods more often. Such items are generally made available by the
producer through large number of convenient retail outlets. Profit margins on such items are
usually kept low and heavy advertising is done to attract people towards their trial and use.
3. Based on tangibility, the products can be classified as:

(a) Tangible Goods;

(b) Intangible Goods.
(a) Tangible Goods :
Most goods, whether these are consumer goods or industrial goods and whether these are durable
or non-durable, fall in this category as they have a physical form, that can be touched and seen.
Thus, all items like groceries, cars, raw-materials, machinery etc. fall in the category of tangible
goods.

(b) Intangible Goods :

Intangible goods refer to services provided to the individual consumers or to the organisational
buyers (industrial, commercial, institutional, government etc.). Services are essentially intangible
activities which provide want or need satisfaction. Medical treatment, postal, banking and
insurance services etc., all fall in this category.
Marketing Products
Based on Use Based on Durability Based on Tangibility Durable Non-Durable
Tangible
(Goods)
Intangible
(Services)
Consumer
Goods
Industrial
Goods
4Convenience
Goods
Shopping
Goods
Speciality
Goods
Raw
materials
Machinery Components Operating
Supplies
PRICING AND FACTORS AFFECTING PRICING DECISIONS
As stated earlier price is the consideration in terms of money paid by consumers for the bundle
of benefits he/she derives by using the product/ service. In simple terms, it is the exchange value

of goods and services in terms of money. Pricing (determination of price to be charged) is

another important element of marketing mix and it plays a crucial role in the success of a product
in the market. If the price fixed is high, it is likely to have an adverse effect on the sales volume.
If, on the other hand, it is too low, it will adversely affect the profitability. Hence, it has to be
fixed after taking various aspects into consideration. The factors usually taken into account while
determining the price of a product can be broadly described as follows:
(a)

Cost

No business can survive unless it covers its cost of production and distribution.
In large number of products, the retail prices are determined by adding a reasonable profit
margin to the cost. Higher the cost, higher is likely to be the price, lower the cost lower the price.
(b)

Demand

Demand also affects the price in a big way. When there is limited supply of
a product and the demand is high, people buy even if high prices are charged by the producer.
But how high the price would be is dependent upon prospective buyers capacity and willingness
to pay and their preference for the product. In this context, price elasticity, i.e. responsiveness of
demand to changes in price should also be kept in view.
(c)

Competition

The price charged by the competitor for similar product is an important determinant of price. A
marketeer would not like to charge a price higher than the
competitor for fear of losing customers. Also, he may avoid charging a price lower
than the competitor. Because it may result in price war which we have recently seen in the case
of soft drinks, washing powder, mobile phone etc.
(d)

Marketing Objectives

A firm may have different marketing objectives such as maximisation of profit, maximisation of
sales, bigger market share, survival in the market and so on. The prices have to be determined
accordingly. For example, if the objectiveis to maximise sales or have a bigger market share, a
low price will be fixed. Recently one brand of washing powder slashed its prices to half, to grab
a bigger share of the market.
(e)

Government Regulation

Prices of some essential products are regulated by the government under the Essential
Commodities Act. For example, prior to liberalization of the economy, cement and steel prices
were decided by the government. Hence, it is essential that the existing statutory limits, if any,
are also kept in view while determining the prices of products by the producers.
METHODS OF PRICE FIXATION

Methods of fixing the price can be broadly divided into the following categories.
1. Cost based pricing
2. Competition based pricing
3. Demand based pricing
4. Objective based pricing
1. Cost Based Pricing
Under this method, price of the product is fixed by adding the amount of desired profit margin to
the cost of the product. If a particular soap costs the marketeer Rs. 8 and he desires a profit of
25%, the price of the soap is fixed at Rs 8 + (8x25/100) =Rs. 10. While calculating the price in
this way, all costs (variable as well as fixed) incurred in manufacturing the product are taken into
consideration.
2. Competition Based Pricing
In case of products where market is highly competitive and there is negligible difference in
quality of competing brands, price is usually fixed closer to the price of the competing brands. It
is called young rate pricing and is a very convenient method because the marketeers do not
have to worry much about demand and cost and effect the change as per the changes by the
industry leaders.
3. Demand Based Pricing
At times, prices are determined by the demand for the product. Under this method,
without paying much attention to cost and competitors prices, the marketeers try to
ascertain the demand for the product. If the demand is high they decide to take advantage and fix
a high price. If the demand is low, they fix low prices for their product. At times they resort to
differential prices and charge different prices from different groups of customers depending upon
their perceived values and capacity to pay. Take the case of cinema halls where the rates of
tickets differ for the different sets of rows in the hall.
4. Objective Based Pricing
This method is applicable to introduction of new (innovative) products. If, at the
introductory stage of the products, the organisation wishes to penetrate the market
i.e., to capture large parts of the market and discourage the prospective competitors
to enter into the fray, it fixes a low price. Alternatively, the organisation may decide to skim the
market i.e., to earn high profit by taking advantage of a group of customers who give more
importance to their status or distinction and are willing to pay even a higher price for it. In such a
situation they fix quite high price at the introductory stage of their product and market it to only
those customers who can afford it.
CHANNELS OF DISTRIBUTION

You are aware that while a manufacturer of a product is located at one place, its consumers are
located at innumerable places spread all over the country or the world. The manufacturer has to
ensure the availability of his goods to the consumers at convenient points for their purchase. He
may do so directly or, as stated earlier, through a chain of middlemen like distributors,
wholesalers and retailers.
The path or route adopted by him for the purpose is known as channel of distribution. A channel
of distribution thus, refers to the pathway used by the manufacturer for transfer of the ownership
of goods and its physical transfer to
the consumers and the user/buyers (industrial buyers).
Stanton has also defined it as A distribution channel consists of the set of people and firms
involved in the transfer of title to a product as the product moves from producer to ultimate
consumer or business user. Basically it refers to the vital links connecting the manufacturers
and producers and the ultimate consumers/users.
It includes both the producer and the end user and also the middlemen/agents engaged in the
process of transfer of title of goods.
Primarily a channel of distribution performs the following functions:

(a) It helps in establishing a regular contact with the customers and provides them the necessary
information relating to the goods.
(b) It provides the facility for inspection of goods by the consumers at convenient points to make
their choice.
(c) It facilitates the transfer of ownership as well as the delivery of goods.
(d) It helps in financing by giving credit facility.
(e) It assists the provision of after sales services, if necessary.
(f) It assumes all risks connected with the carrying out the distribution function.
TYPES OF CHANNELS OF DISTRIBUTION
Generally we do not buy goods directly from the producers. The
producers/manufacturers usually use services of one or more middlemen to
supply their goods to the consumers.
But sometimes, they do have direct contact with the customers with no
middlemen in
between them. This is true more for industrial goods where the customers
are highly
knowledgeable and their individual purchases are large. The various
channels used for
distribution of consumer goods can be described as follows:
(a) Zero stage channel of distribution

Manufacturer Consumers
.
Zero stage distribution channel exists where there is direct sale of goods by
the producer to the consumer. This direct contact with the consumer can be
made through door-to door salesmen, own retail outlets or even through
direct mail. Also in case of perishable products and certain technical
household products, door-to-door sale is an easierway of convincing
consumer to make a purchase. Eureka Forbes, for example, sells.
its water purifiers directly through their own sales staff.
(b) One stage channel of distribution
In this case, there is one middleman i.e., the retailer. The manufacturers sell
their goods
to retailers who in turn sell it to the consumers. This type of distribution
channel is
preferred by manufacturers of consumer durables like refrigerator, air
conditioner,
washing machine, etc. where individual purchase involves large amount. It is
also used
for distribution through large scale retailers such as departmental stores (Big
Bazaar,
Spensors) and super markets.

(c) Two stage channel of distribution

This is the most commonly used channel of distribution for the sale of
consumer goods.
In this case, there are two middlemen used, namely, wholesaler and retailer.
This is
applicable to products where markets are spread over a large area, value of
individual
purchase is small and the frequency of purchase is high.
(d) Three stage channel of distribution
When the number of wholesalers used is large and they are scattered
throughout the
country, the manufacturers often use the services of mercantile agents who
act as a

link between the producer and the wholesaler. They are also known as
distributors.
.
FACTORS AFFECTING THE CHOICE OF DISTRIBUTION CHANNEL
Choice of an appropriate distribution channel is very important as the pricing
as well as
promotion strategy are dependent upon the distribution channel selected.
Not only that,
the route which the product follows in its journey from the manufacturer to
the consumer
also involves certain costs. This in turn, affects not only the price of the
product but also
the profits. Choice of inappropriate channels of distribution may result in
lesser profits forthe manufacturer and higher price from the consumer.
Hence, the manufacturer has to becareful while finalising the channel of
distribution to be used.
He should pay attention to the following factors while making his choice.
(A)

Nature of Market

There are many aspects of market which determine the choice

of channel of distribution. Say for example, where the number of buyers is
limited,
they are concentrated at few locations and their individual purchases are
large as is the
case with industrial buyers, direct sale may be the most preferred choice. But
in case
where number of buyers is large with small individual purchase and they are
scattered, then need may arise for use of middlemen.

Nature of Product
Nature of the product considerably affects the choice of channel
of distribution. In case the product is of technical nature involving a good
amount of

pre-sale and after sale services, the sale is generally done through retailers
without
involving the wholesalers. But in most of the consumer goods having small
value,
bought frequently in small quantities, a long channel involving agents,
wholesalers and
retailers is used as the goods need to be stored at convenient locations.
Items like
toiletries, groceries, etc. fall in this category. As against this in case of items
like
industrial machinery, having large value and involving specialised technical
service and
long negotiation period, direct sale is preferred.
Nature of the Company
A firm having enough financial resources can afford to its
own a distribution force and retail outlet, both. But most business firms
prefer not to
create their own distribution channel and concentrate on manufacturing. The
firms
who wish to control the distribution network prefer a shorter channel.
Middlemen Consideration
If right kind of middlemen having the necessary experience, contacts,
financial strength and integrity are available, their use is preferred as they
can ensure success of newly introduced products. Cost factors also have to
be kept in view as all middlemen add their own margin of profit to the price
of the products.
But from experience it is learnt that where the volume of sales are adequate,
the use of middlemen is often found economical and less cumbersome as
against direct
sale.
PROMOTION
Promotion refers to the process of informing and persuading the consumers
to buy certain product. By using this process, the marketeers convey
persuasive message and information to its potential customers. The main
objective of promotion is to seek buyers attention towards the product with
a view to:
arouse his interest in the product;
inform him about its availability; and
inform him as to how is it different from others.

It is thus a persuasive communication and also serves as a reminder. A firm

uses different
tools for its promotional activities which are as follows :
Advertising
Publicity
Personal selling
Sales promotion
These are also termed as four elements of a promotion mix. Let us have a
brief idea
about these promotion tools.
Advertising
Advertising is the most commonly used tool for informing the present
and prospective consumers about the product, its quality, features,
availability, etc. It
is a paid form of non-personal communication through different media about
a product,
idea, a service or an organisation by an identified sponsor. It can be done
through print
media like newspaper, magazines, billboards, electronic media like radio,
television,
etc. It is a very flexible and comparatively low cost tool of promotion.
Publicity
This is a non-paid process of generating wide range of communication to
contribute a favourable attitude towards the product and the organisation.
You may
have seen articles in newspapers about an organisation, its products and
policies. The
other tools of publicity are press conference, publication and news in the
electronic
media etc. It is published or broadcasted without charging any money from
the firm.
Marketeers often spend a lot of time and effort in getting news items placed
in the
media for creation of a favourable image of the company and its products.
Personal selling
You must have come across representatives of different companies

knocking at your door and persuading you to buy their product. It is a direct
presentation
of the product to the consumers or prospective buyers. It refers to the use of
salespersons to persuade the buyers to act favourably and buy the product.
It is most
effective promotional tool in case of industrial goods.
Sales promotion
This refers to short-term and temporary incentives to purchase or
induce trials of new goods. The tool include contests, games, gifts, trade
shows,
discounts, etc. Sales promotional activities are often carried out at retail
levels.
.

PRODUCT PROMOTION

PRODUCT PROMOTION :Product is a substance or an article which is manufactured or produced for sale. An action taken
by a companys marketing staff with the intention of encouraging the sale of a good of service to
their target market. For example, product promotion performed by a typical business might take
the form of advertising the product in question via print or internet ads, direct mail or e-mail
letters, trade shows, telephone and personal sales calls, TV and radio ads, billboards, posters and
flyers.

Method of product promotion:There are three kinds of method:1. Personal selling :

Personal selling includes the sale which is done at small region.
2. Mass selling
:
Selling which is promoted through or via mass communication like media.
3. Sales promotion :
Selling which is promoted by promotion of sale.

Personal selling:1. Direct communication between seller and buyer :

Personal selling provide direct communication between seller and buyer for example
on a shop shopkeeper and customer can discuss about a new product personally.
2. face 2 face contact :
Personal selling also provide face to face contact.
3. Usually used to sell industrial goods and services:
All industrial goods and services are provided by personal selling.
4. Also used to sell some expensive consumer items:
By personal selling we can sell expensive consumer items like cars , computer , iphone
etc.

Mass selling:Mass selling is a market coverage strategy in which a firm decides to ignore market segment
differences and appeal the whole market with one offer or one strategy. The idea is to broadcast a
message that will reach the largest number of people possible. Traditionally mass marketing has
focused on radio, television and newspapers as the media used to reach this broad audience. By
reaching the largest audience possible exposure to the product is maximized. In theory this would
directly correlate with a larger number of sales or buys into the product.
Mass marketing is the opposite to niche marketing as it focuses on high sales and low prices.
Mass Marketing aims to provide products and services that will appeal to the whole market.
Niche marketing targets a very specific segment of market for example specialized services or
goods with few or no competitors.

communicating with large numbers of potential customers

non-personal selling

Advertising is a form of Mass Selling

used when the target market is large and dispersed

Advertising:Advertising in business is a form of marketing communication used to encourage, persuade, or

manipulate an audience(viewers, readers or listeners; sometimes a specific group) to take or
continue to take some action. Most commonly, the desired result is to drive consumer behavior
with respect to a commercial offering, although political and ideological advertising is also
common. This type of work belongs to a category called affective labor.
In Latin, ad vertere means "to turn toward".The purpose of advertising may also be to reassure
employees or shareholders that a company is viable or successful. Advertising messages are
usually paid for by sponsors and viewed via various old media; including mass media such as
newspaper, magazines, television advertisement, radio advertisement, outdoor
advertising or direct mail; or new mediasuch as blogs, websites or text messages.
Commercial advertisers often seek to generate increased consumption of
their products or services through "branding", which involves associating a product name or
image with certain qualities in the minds of consumers. Non-commercial advertisers who spend
money to advertise items other than a consumer product or service include political parties,
interest groups, religious organizations and governmental agencies. Nonprofit organizations may
rely on free modes of persuasion, such as a public service announcement (PSA).
Modern advertising was created with the innovative techniques introduced with tobacco
advertising in the 1920s, most significantly with the campaigns of Edward Bernays, which is
often considered the founder of modern, Madison Avenue advertising.
In 2010, spending on advertising was estimated at $143 billion in the United States and $467
billion worldwide

Publicity:Publicity is the movement of information with the effect of increasing public awareness of a
subject. The subjects of publicity include people (for example, politicians and performing
artists), goods and services, organizations of all kinds, and works of art or entertainment.
Publicity is gaining public visibility or awareness for a product, service or your company via the
media. It is the publicist that carries out publicity, while PR is the strategic management function
that helps an organization communicate, establish and maintain communication with the public.
This can be done internally, without the use of media.
From a marketing perspective, publicity is one component of promotion which is one component
of marketing. The other elements of the promotional mix are advertising, sales promotion, direct
marketing and personal selling. Examples of promotional tactics include:

event sponsorship

Arrange a speech or talk

Make an analysis or prediction

Conduct a poll or survey

Art people

Issue a report

Take a stand on a controversial subject

Arrange for a testimonial

Announce an appointment
Invent then present an award

Stage a debate

Organize a tour of your business or projects

The advantages of publicity are low cost, and credibility (particularly if the publicity is

aired in between news stories like on evening TV news casts). New technologies such as
weblogs, web cameras, web affiliates, and convergence (phone-camera posting of
pictures and videos to websites) are changing the cost-structure. The disadvantages are
lack of control over how your releases will be used, and frustration over the low
percentage of releases that are taken up by the media.

Publicity draws on several key themes including birth, love, and death. These are of
particular interest because they are themes in human lives which feature heavily
throughout life. In television serials several couples have emerged during crucial ratings
and important publicity times, as a way to make constant headlines. Also known as
a publicity stunt, the pairings may or may not be according to the fact.

"Publicity is not merely an assembly of competing messages: it is a language in itself

which is always being used to make the same general proposal," writes the art critic John
Berger. "It proposes to each of us that we transform ourselves, or our lives by buying.
.publicity is not paif for something more.

Examples of Publicity:famous person photographed using your product your product mentioned in National
News in a positive way your product featured in a movie TV commentary about aspects

of your product trade magazines carrying a story

eg. Road and Track doing a feature on the new Land rover

Publicity can be negative:eg. If a famous movie star gets electrocuted using your product, this can cause people to NOT
want to buy it - this would be a major problems
eg. If your product is sabotaged - this could include tampering with medical products i.e..
Tylenol
eg. If there are negative rumours about the ingredients in your product
eg. If there are negative ingredients about the moral aspects of your company
Promotion people:

Sales Managers

Advertising Managers
Sales Promotion Managers

Sales Managers:Sales manager is the typical title of someone whose role is sales management. The role typically
involves talent development and leadership.

Sales planning
Sales planning involves strategy, setting profit-based sales targets, quotas,
sales forecasting, demand management and the writing and execution of a sales plan.
A sales plan is a strategic document that outlines the business targets, resources and sales
activities. It typically follows the lead of the marketing plan, strategic planning and the business
plan with more specific detail on how the objectives can be achieved through the actual sale of
products and services.

Recruitment of Sales Staff

The three recruitment tasks used in sales management are Job analysis; Job description and Job
qualifications
Job analysis is performed to specify the certain tasks that a salesperson would be responsible for
on a daily basis. It should identify what activities are deemed as being vital to the success of the
company. Any person associated with the sales organization or the human resources department
could carry out the analysis as well as an outside specialist (Spiro, pp.134). The person that is

responsible for completing a job analysis should have an in-depth comprehension of the daily
activities of the salespeople.
This job analysis is then written in an explicit manner as a job description. The general
information consists of
1. Title of job 2. Organizational relationship 3. Types of products and services sold 4. Types of
customers called on 5. Duties and responsibilities related to the job 6. Job demands

An effective job description will identify compensation plans, size of workload, and the
salespeoples duties. It is also primarily responsible for hiring tools such as application forms and
psychological tests.
The most difficult part of this process would be the determination of job qualifications. A reason
for this difficulty is because hiring affects a companys competitive advantage in the market as
well as the amount of revenue.[6] Additionally, there should be a set of hiring attributes that is
associated with each sales job that is within a company. If an individual does not excel in their
assigned territory, it could be due to external factors relating to that persons environment.
Let it be noted that a company should be careful not to submit to discrimination in regards to
employment. A number of qualifications (ethnic background, age, etc.) can not be used in the
selection process of hiring.

Sales reporting
The sales reporting includes the key performance indicators of the sales force.
The Key Performance Indicators indicate whether or not the sales process is being operated
effectively and achieves the results as set forth in sales planning. It should enable the sales
managers to take timely corrective action deviate from projected values. It also allows senior
management to evaluate the sales manager.

More "results related" than "process related" are information regarding the sales funnel and
the hit rate.
Sales reporting can provide metrics for sales management compensation. Rewarding the best
managers without accurate and reliable sales reports is not objective.

Advertising Managers: They manage the mass selling activities

They chose the company to make the commercials
Pick the billboard signs etc.
If the company is big enough they hire an outside agency
They may also do publicity as well

Sales Promotion Managers:-

They manage the Sales Promotion activities

They decide about in-store coupons, prizes, contests etc.
They spend a lot of time visiting the retail outlets where the product is sold

Pushing through the promotion channel:-

Producerpersonal selling 2 wholesalerretailer

customer

Promotion techniques used run ads in trade magazines to make wholesalers aware of the product
provide incentives to retailers to carry the item free case of drinks with each 2 cases it
buys run contests for salespeople to win prizes for selling the product.

Pulling through the promotion channel:Producerpersonalselling2wholesalerretailer

customer

Promotion techniques used run TV commercials so customers directly learn about the product then they go to the store and ask for it, or call around to find out where it is sold give free
samples to potential customers

Advantage of product promotion:-

Creates differentiation
Creates new content and communication opportunities
Creates up sell ns cross sell opportunities
Drives customer decision making
Creates world-of-mouth opportunities

-: Summary: By we all discuss about product promotion in previous slides we learn

about how to promote a product by using different matters and
techniques .
Product promotion is a key concept of success of any product and better
marketing of any kind of product.

Bibliography
www.google.co.in
www.wikepedia.com
www.pushtikarsamiti.com
Course books
WWW.bestmanagementarticles.com
Marketing policies of banks