Executtive Summary: Impact of Globlisation On Indian Banking Sector 1

1 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR
EXECUTTIVE SUMMARY
Banking sector reforms in India are aimed at induction of best International practices and technological changes for competing globally. The reserve bank of India (RBI) has time and again emphasized transparency, diversification of ownership and strong corporate governance to mitigate sector. Banking sector reforms have supported the transition of Indian economy to a higher growth path. While significantly improving the satiability of the financial system. In comparison with the pre-reforms period, the Indian Banking system today is more stable and efficient. However, the gains of the past decade need to be consolidated, so that these could be translated to derive the institutions, markets and practices into a mature financial system that a can meet the challenges of globalization. The banking system would, therefore, not only need to be stable, nut also supportive of still higher levels of planned investments by channeling financial resources more efficiently from surplus to deficits sectors. Competitive pressures as well as prudential regulatory requirements have made banks risk adverse as reflected in their tendency to investment in relatively risk free gilt instruments. The behavior and strategies of banking business need changes infavour of tesk taking even while performing core activities. Also, there is a need to ensure long term finance to support development and growth in the economy, even as restructuring takes place through mergers and Universal banking. The present book address issues like Basel II Accord guidelines, second generation banking Sector Reforms, Cost Benefits and productivity analysis of Indian banks, danger Zone, banks, Privatization and the recent reform measures.
TYBCOM (BANKING AND INSURANCE) Vth Sem
Vital statistics regarding the Indian banking Sector and the recent Annual Policy Statement. 2008-2009 of the RBI has also been discussed. ___ India gained highly from the LPG model as its GDP increased to 9.7% in 2007-2008. In respect of market capitalization, India ranks fourth in the world. But even after globalization, condition of agriculture has not improved. The share of agriculture in the GDP is only 17%. The number of landless families has increased and farmers are still committing suicide. But seeing the positive effects of globalization, it can be said that very soon India will overcome these hurdles too and march strongly on its path of development.
2.2 CONCEPT OF
Globalization The human society around the world, over a period of time, has established greater contact, but the pace has increased rapidly since the mid 1980s. The terms globalization means international integration. It includes an array of social, political and economic changes. Unimaginable progress in modes of communications, transportation and computer technology have given the process a new lease of life. The World is more interdependent now than ever before. Multinational companies manufacture products across many countries and sell to consumers across the globe. Money, technology and raw materials have broken the international barriers. Not only products and finances, but also ideas and cultures have breached the national boundaries. Laws, economies and social movements have become international in nature and not only the Globalization of the Economy but also the Globalization of politics, culture and law is the order of the day. The formation of General Agreement on Tariffs and Trade (GATT), International Monetary Fund and the concept of free trade has boosted globalization.
CHAPTER -3 NEED FOR GLOBALIZATION INDIA CRISIS IN THE 80S LEADING TO ADVENT OF NEW ECONOMIC POLICY (NEP) 1991 AND GLOBALISATION
In 1985, a series of moves amounted to an expansive, debt dependent fiscal policy directed at stimulating the growth of the economy. The changes covered all the major fields of regulation except the capital market. The rigour of Monopolies and Restrictive Trade Practices Act, (MRTP) ( 1969) was considerably reduced. The government encouraged foreign investment into many areas. It liberalized the imports of capital goods and materials, especially those needed for large projects. The government restored to higher and higher doses of deficit financing to defray its expenditures. By 1991 India was faced with the prospect of defaulting of her debt obligations, unable even to secure short term loans. In JUNE-JULY 1991, in order to restore confidence among Indias debtors and in the rupee, the government entered into an agreement with the IMF. The rupee was devalued by 24%. Quantitative Restrictions on imports were moderated. Foreign financial institutions were allowed to enter the stock market. A series of reforms were undertaken in all aspects of the economy Industrial Reforms, Economic Reforms, Financial Sector Reforms, Banking Reforms, Trade Reforms are the most important ones to be mentioned. The following Table shows the Recovery from crisis after Globalization.
INDIA : RECOVERY FROM CRISIS (Per cent except as indicated)

1 GDP growth at Constant prices Growth of Industrial production Inflation (Annual Average Change in WPI) Growth of Exports (measured in US $) Growth of Imports (measured in US $) Gross Domestic Capital Formation Public : Private : Gross Fixed Capital Formation Public Private Gross Domestic Savings Public 199091 2 5.3 8.2 10.3 9.2 13.5 24.1 9.3 14.7 22.9 9.0 13.9 23.1 1.1 199596 3 7.3 13.1 8.1 20.8 28.0 26.5 7.7 18.9 24.4 7.7 16.7 25.1 2.0 21.7 199697 4 7.5 6.1 4.6 5.3 6.7 22.1 7.0 15.1 22.8 6.9 15.9 23.2 1.7 26.4 199798 5 5.0 6.7 4.4 4.6 6.0 22.9 6.6 16.3 21.7 6.4 15.4 23.5 1.5 29.4 199899 6 6.9 4.1 5.9 5.0 2.2 21.2 6.4 14.8 21.2 6.3 15.0 22.0 -0.8 32.5 19992000 7 6.4* 6.7# 3.3 10.8 17.3 22.7* 7.1* 15.6* 22.3* 6.4* 14.9* 22.3* -1.2* 38.0 200001 8 5.2@ 4.9# 7.2 19.9 0.2 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 42.3
Foregin Exchange 5.8 Reserves (end year, in billion US $)
* Quick Estimates - @ Revised Estimates - # Provisional - NA-Not available
Source : Revised Estimates of Annual National Income 2000-01, Central Statistical Organisation, Economic Survey 2000-01, Handbook of Statistics on Indian Economy, RBI Bulletin, July 2001.
CHAPTER -4 BANKING SECTOR REFORMS TOWARDS GLOBALISATION

Financial System forms a significant part of the infrastructure essential for breaking the vicious circle of poverty. Schumpeter spoke of credit as a phenomenon of development and regarded the banking system along with entrepreneurship as banking in economic development is one of positive contribution which ignites the growth and pattern of evolution of the banking structure. The Indian banking system has passed through distinct phases of development after independence. The first phase can be attributed to the nationalization of 14 banks on July 19, 1969 (and another 6 banks in 1980) Nationalization of banks was described as historic momentous and bold and timely by some economists while it was vehemently criticized as wrong and untimely by others In defense of her view, Mrs. Indira Gandhi, the then Prime Minister of India, argued that the Indian Commercial Banking system did not play its proper role in the planned development of the nation. According to her, the banking system was controlled by a coterie of industrialist and business magnates who had used public funds to build up private industrial empires. Small industrial and business units were continuously and consistently ignored and hence the nationalization of banks. Beginning 1969, the second phase can be attributed to the diversification of the banking system in terms of expansion and social banking; the third phase being attributed to the advent of NEP, 1991, which gave a further impetus to this sector. The then Congress government had appointed on August 14, 1991, a committee under the chairmanship of Shri M. Narasimhan to examine all aspects relating to the structure, organization, functions and procedures of the
financial system. The committee submitted its final report to the government on November 16, 1991. The committee had noted that deterioration in the financial health of the system had reached a point where unless remedial measures were taken soon, it would further erode the confidence of the depositors and investors. Many major recommendations were made for the improvement of the banking sector in their various segments, areas of concern were pointed, and an agenda of reforms to be immediately implemented by the banks were suggested. Some of the major policy reforms introduced in the banking sector, in brief, were the following : 1) prudential norms introduced in banks, 2) imparting greater transparency, 3) financial autonomy for nationalized banks announced, 4) new set of private sector banks were allowed to function and more foreign banks allowed to open branches, 5) local area banks proposal was cleared for implementation, 6) bank branch licensing were liberalized, 7) customer service in banking sector was perceived as an integral part of overall reforms, 8) 25 core recommendations of GOIPURIA COMMETTEE report had been implemented, 9) banks were allowed to set up Automated Teller machines (ATMs) to provide financial facilities, 10) separate department set up for banking supervision. A major effort was made to strengthen the banking systems in general and bublic sector banks in particular through measures of capitalization, quality of loan portfolio, greater element of competition and strengthening of supervisory process. With all the above reforms and more reforms in other sectors too, India was put on to the road of globalization, adopting it as an economic policy. Also to attract foreign direct investments (FDI) to India, adoption of globalization, liberalization and privatization became necessary since it found examples in countries like Taiwan, Singapore and Thailand, which had attracted foreign investments by adopting the policy of globalization.
CHAPTER -5 IMPACT OF GLOBALISATION

A) 1) Improving the Financial Soundness of Banks Prudential Norms : New guidelines were issued in 1992 for income recognition, asset classification and provisioning requirements. The norms have been progressively tightened since their inception. The introduction of prudential norms and regulations has been aimed at improving the financial conditions of banks by ensuring greater safety and soundness of the financial system, imparting transparency and accountability of operations and thereby restoring the credibility and confidence in the finance system as a whole. In further strengthening of prudential norms, the banks were asked t provide for 0.25% on standard assets also. The authorities also adopted the capital adequacy standards of the Basle Accord to bring Indias regulatory framework closer to international standards. By end-March 2000, 26 out of 27 Public Sector Banks achieved the prescribed Capital to Risk Assets Ratio (CRAR) of 9 per cent. The medium-term strategy for strengthening and restructuring banks includes improving loan recovery process. Towards this end, Debt Recovery Tribunals have been established for expediting adjudication and loan recovery at select centres. For quicker and inexpensive adjudication of customer complaints against
deficiency in banking services, the Banking Ombudsman Scheme has been introduced in June 1995.
2.
Capital Account Convertibility Report and the Banking Sector As part of Indias move towards opening up of the capital account, the Report of the Committee on Capital Account Convertibility (CAC Report) (Chairman: Shri S. S. Tarapore) had advocated important preconditions part of overall consolidation of the financial sector. These include, a progressive reduction in the gross non-performing assets (as per cent of total advances) of the banking sector from 13.7 per cent (as on March 1997) to 5.0 per cent by 2000 and complete deregulation of interest rates by 1997-98. Similarly, the average effective Cash Reserve Ratio has also been prescribed to be brought down over the same period from 9.3 per cent as on March 1997 to 3.0 per cent. On attainment of these signposts, the Committee made certain recommendations granting freedom to the banks to borrow in overseas markets, short-term (upto one year) and long-term (over one year), to the extent of 50 per cent of the unimpaired tier-I capital with a sub-limit of one-third (i.e. 16.67 per cent) of tier-I capital for short-term borrowings.
Recapitalisation of Public Sector Banks To restore the soundness of Public Sector Banks, the Government of India has been contributing, on a selective basis, to the recapitalization of Public Sector Banks, subject to these banks undertaking certain performance obligations and commitments to ensure an improvement in their viability and profitability.
Equity Capital and Sub-ordinated Debt raised by Banks To broaden the ownership base of several Public Sector Banks (PSBS), the Government has effected substantial divestment of its holding of shares in Public Sector Banks. The Banking Regulation Act, 1949 and the Banking Companies (Acquisition) Acts, 1970 and 1980 have been amended to allow private equity participation in the capital of nationalised commercial banks upto 49 per cent of their paid-up capital as part of their recapitalisation and restructuring efforts. Amendments to the State Bank of India (SBI) Act and the State Bank of India General Regulations, 1955 to facilitate public issue of shares of State Bank of India were promulgated in October 1993.
Improved Governance The Reserve Bank of India has made a beginning in bringing greater clarity to the roles of Board of Directors and the external auditors in the governance of banks. Boards have been directed to lay down policies in areas like investments, asset-liability management and loan recovery. The role of external auditors has been enlarged. As a move towards greater transparency in banking operations, from 1996-97 onwards, banks have been directed to provide under Provisions and Contingencies in the profit and Loss Account, details of provision for bad and doubtful debts, provisions for diminution in the value of investments and tax provisions separately instead of showing it as a conglomerate item.
Bank are also required to disclose the capital adequacy ratio as well as net non-performing assets to net advances. These apart, banks have been directed to set up Audit Committees of the Board that will be responsible for ensuring the efficacy of the internal control and audit functions of the bank, besides compliance with the regulatory norms. These measures are expected to strengthen the perceived linkage between management and risk control. 6 Autonomy of Public Sector Banks Side by side, several banks are already in the process of implementing the corporate strategies chalked out by the management consultants appointed by them. One important are in this context pertain to the question of autonomy of Public Sector Banks (PSBs). A certain amount of functional autonomy had already been granted to management of Public Sector Banks in terms of loan policy, interest rate policy and recovery management. To further improve their efficiency, Public Sector Banks complying with certain performance parameters viz., a track record of net profits on a continuous basis, 9 per cent net non-performing assets cap, capital adequacy ratio of at least 9 per cent and a net worth not less than Rs. 100 crore have been granted a higher degree of operational freedom including those to recruit personnel with specialized skills without going through the centralised recruitment process, freedom to appoint officers, decision on rural postings, deputation and lateral movement to other banks.
B)
Strengthening the Institutional Framework Apart from easing of the external constraints on banks, major efforts have been made through appropriate institution building measures.
1)
Increased Competition Entry of New Private Sector Banks Enhancing competition among banks constitutes a key element of financial sector reforms so as to raise efficiency and improve bank performance. Accordingly, in January 1993, Reserve Bank of India announced guidelines for entry of new private sector banks. The new private sector banks with adequate capital, technology and managerial competence were supposed to be vehicles of change in the banking sector especially in the urban banking segment. Approvals have also been given for establishment of new foreign banks to set up operations in India and existing foreign banks have been allowed to expand their branch network. Local Area Baks In order to enhance competition in rural areas, Local Area Banks (LABs) with jurisdiction over two or three contiguous districts have been allowed. With a capital base of Rs. 5 crore, these new Local Area Banks can build asset portfolio worth Rs.75.80 crore.
C)
Strengthening of Supervisory Mechanism Banking Supervision As the banking system acquires greater momentum and diversifies into new areas and operations, there is greater need for effective and consolidated supervision so that the systemic health of financial sector is not jeopardised. Keeping this in mind, the Board for Financial Supervision (BFS) has been established with operational support provided by the Department of Banking Supervision (DBS) under the aegis of the Reserve Bank of India. The medium-term strategy for strengthening and restructuring banks includes improving loan recovery. Towards this end, Debt Recovery Tribunals (DRTs) have been established for expediting adjudication and loan recovery at select centres. In tune with international practices of supervision, a
comprehensive three-tier supervisory model comprising of both on-site inspection, off-site monitoring and periodical external auditing based on CAMELS (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and Systems & Controls) methodology, already extant for commercial banks has now been made applicable to other financial entities as well. Steps have been initiated by the Reserve Bank of India to resort to extensive use of information technology for purpose of supervision.
CHAPTER -6 GLOBALIZATION CHALLENGES. NEED FOR NEW OUTLOOK

1. The liberalization of the insurance sector is forcing India banks to take a fresh look at their products, their business processes and their customer relations. If they do not make significant changes in each of these categories now. They will be left far behind the competition although the Indian banking sector is not homogenous, all banks are being confronted by much the same issues. 2. Banks will have to build the profitability of their operations since banks especially in the public sector, have been required to play a developmental role since independence, their business model is not structured around profiles. 3. Banks will have to strengthen their capital base Indian banking is currently suffering from a major shortage of capital. In an foreign banks are affected public sectors banks are particular by hared hit.., since the government has dramatically cut back financing. 4. Banks will have to focus on building relationships with customers based on service value, not product price. In other
words, they will have to sell more to each customer and keep him or her loyal. 5. Indian banks must successfully confront the complicated issue of managing it. 6. Banks need to develop comprehensive databases intended to improve customer profitability and understand risk. Since banks have little organized customer date, it is difficult for them the ways in which they might profitability beverage their relationship with customers. Similarly, lacking sufficient information, banks have little understanding of the varying and manifold risks of particular assets. This often results in over exposure Finally, banks management must become more innovative and responsive to change. Long term vision and leadership will help banks benefits from liberalization.
CHAPTER -7 MEASURES TAKEN BY INDIAN BANKING SYSTEM

Introduction :This has some relevance to the Indian Economic Reforms initiated in 1991. This is because of the dynamic, complex and still evolving mature of the reforms the financial sector reforms have greatly changed the face of Indian banking sector reforms have greatly changed the face of Indian banking. The financial sector is open to international competition under World trade organization (WTO). Financial sector reforms were initiated as part of overall economic reforms in the country. The terms globalization is not only the confined to economic reforms rather it is a broad phenomenon evolving the translation of cultural, social and political scenarios among the nations. There was a major shaft in Indian Development strategy since July, 1991 with the implementation of New Economic Policy (NEP) for liberalization, privatization and Globalzation (LPG). Since then, the financial sector is in a process of rapid transformation. The Indian Banking system has a large geographic and functional coverage the state Bank of India has countrys largest network with more then 9,000 branches throughout the country with the total number of branches for all banks nearing 70,000 (Sengupta and Thomas, 2006). Banking today has transformed into a technology intensive and customer friendly model
- Interest rated on deposits and lending have been deregulated with banks enjoying greater freedom to determine their rates. - Also the reserve requirement i.e., statutory liquidity ratio (SLR) and cash reserve ratio (CRR) have been lowered. - Thus releasing more lend able resources, which reduced and strong banks have been allowed to access the capital market for raising additional capital.
LICENSING FOREIGN BANKS :- Indias approach to financial sector reforms has served the country well, in terms of aiding growth, avoiding crisis, enchanting efficiency and imparting resilience to the system. - In the Banking system, diversified ownership of public sector banks has been promoted over the years. However the number of foreign bank branches in India has increased in recent years since RBI issued a number of licenses beyond the commitments of WTO.
CHAPTER 10CHAGES IN INDIAN BANKING SYSTEM

Foreign Direct Investment as seen as an important source of non-debt inflows, and is increasing being sought as a vehicle for technology flows and as a means of attaining competitive efficiency by creating a meaningful network of global interconnections. FDI plays a vital role in the economy because it does not only provide opportunity to host countries to enhance their economic development but also opens new vistas to home countries to optimize their earning by employing their ideal resources. India has sought to increase inflows of FDI with a liberal policy since 1991 after decades cautious attitude. The 1990s have witnessed a sustained rise in annual inflows to India. Basically, opening of the economy after 1991 dose not live much choice but to attract the foreign investment, as an engine of dynamic growth especially in vies of fast paced movement of the world forward Liberalization , Privatization, and Globalization. Limits for FDI FDI in the banking sector has been liberalized by raising FDI limit in private sector banks to 74 per cent under automatic root including investment by foreign investment in India . The aggregate foreign investment in a private bank from all source will be 74 per cent of paid-up capital of the bank
FDI and Portfolio investment in nationalized banks are subject to overall statutory limit of 20 per cent. The same ceiling also applies in respect of such investment in State Bank of India and its associate banks. The Present banking Scenario In recent times economy is increase the role of multi- nation banks in the banking and insurance sector, despite, the concern expressed by the left communist parties are opposing the finance minister move to raise overseas investment limits in the insurance business. The government wants to fulfill a pledge to allow companies like New York Life Insurance, Met life insurance to raise investment in local companies to 49 percent from 26 per cent. But it is opposed on the front that it will lead to state run insurers loosing business and workers their job. Left do not want foreign investment to have greater voting rights in private banks and oppose the privatization of state run pension fund. There are several reasons why such move is fraught with dangers. When domestic or foreign investors acquire a large share holding in any bank and exercise proportionate voting rights, it creates potential problems not only of excursive concentration in the banking sector but also can expose the economy to more intensive financial crises at the slightest hint of panic. Opposition is not considering the need of present situation. FDI in banking sector can various problems of the overall banking sector . Such as-
CHAPTER 11 :INDIAN BANKINGAFTER GLOBLISATION

When one looks at the reforms in the banking sector since 1991, it may appear that we have come a long way. With new banks in the system competition has indeed intensified. Prudential regulation is in place. There has been deregulation of interest rates which has given banks power pricing of their products. These are the major changes which have taken place already. And yet the banking sector in the medium term is empected to see even more fundamental changes. The first relates to ownership. Public Sector banks are to retain as Public Sector Banks. In respect of private Sector Banks, RBI has opened up possibility of organic as well as inorganic growth of Foreign Banks operating in India. After Globalization there are many changes in Indian Banking sector such as:-
Changes in Indian banking sector after Globalization:-MERGER OF NATIONALIZED BANKS:Since 1991-92 with the onset of liberalization and deregulation process the banking sector in India is undergoing a sea changes . A gradual shift has place from the regulated environment a market driven competitive system. With the opening up of financial services under WTO, the process of globalization would gain momentum. In the banking system all over the world forth coming changes are associated with. - Consolidation of players through mergers and acquisitions.
- Globalization of operations. -Development of new technology. The high level committee constituted by IBA in its report on banking Banking industry Vision2010 has made the following as management will Mergers and Acquisitions would gather momentum as management will strive to met the expectation of stock banks. A banks seek niche areas , we could see emergences national banks 100% global scale and number of regional players. Mergers among banks in India are going to be natural phenomenon in the year to come. The process of mergers and acquisition is not a new happening in case of Indian banking Grindlays banks emerged with standard bank, Times Banks with HDFC Bank of Madura with ICICI Bank, Nedungadi Bank Ltd., With Punjab National Bank an most recently Global Trust Bank merged with oriental bank of commerce.
MERGERS OF BANKS SINCE - 1991

SR.NO 1. 2. 3. 4. 5. 6. 7. 8. 9. MERGED WITH Central Bank of India Punjab National Bank Bank of India State Bank of India Oriental Bank of Commerce Oriental Bank of Commerce Bank of Baroda Union Bank of India HDFC Bank YEAR 1991 1994 1994 1996 1997 1997 1999 1999 2000
Purbanchal Bank New Bank Of India Bank of Karad Kashinath seth Bank Bari Doab Bank Punjab Co-op Bank Bareilly Co-op Bank Sikkim Bank Ltd. Times Bank Ltd.
10.
Bank of Madura
ICICI Bank
2001
Source : Indain banks associeation.

Impact of globalization with reference state bank of India Impact of globalization with reference state bank of India Bank State Bank of Saurashtra merger with State Bank of India gets government approval July 24, 2008 The Union Cabinet today decided to issue an order sanctioning the scheme of Acquisition of State Bank of Saurashtra by State Bank of India and to introduce Bill :a) repealing the State Bank of Saurashtra Act, 1950 in the Parliament. b) to take consequential amendments in the State Bank of India (Subsidiary Banks) Act, 1959 to remove references to State Bank of Saurashtra wherever it occurs in the State Bank of India (Subsidiary) Banks Act, 1959. The Bill would be called namely State Bank of India (Subsidiary Banks Amendment) Bill, 2008.
* AN INTEGRATED APPRAOCH TO FINANCIAL PANNING

Banks intermediation in India is much lower than in most of south east Asia. Further given the changing profiles bath in terms of age profile and increasing affluence, customers increasingly demand enhanced service levels and multiples products from banks. Today customers seek finable and convenient and convenient distribution channels available at all times and places. They prefer banks which offer doorstep holistic banking services to enables them to meet all
their financial needs under a single umbrella - be it traditional banking, insurance, mutual fund investment or credits cards. In short, today bank customers are buyers of total financial solutions, the financial system of the future would, therefore entail large size banking malls as banks convert them selves into upper shops offering a wide range of financial products and other value added technology driven services. The new growth paradigms market shift towards retail banking since the mid nineties. Areas like mortgage products credit cards, utility services etc are still offering vast potential waiting to be tapped.
* MULTIPLE DELIVERY ACCESS.

Financial services delivery has undergone rapid changes in the last two years. A particular faced of change has been the increasing usage model as against the Face to face branch. New delivery channels being developed in view of the changing customers profile. The younger generation have been introduced of future bank customers and they are driving the technology innovation in banks. Banks are now reengineering their services for optimal benefits to their customers. State of the art Technology offers ATMs credit cards, Debit Cards, Phone Banking, Internet Banking etc. ATMs networks for instances has Core banking solutions with changed the front officers of bank branches and given customers 24 hours access to their accounts anytime anywhere. capability for online, real time transaction processing are now being adopted by the public sector banks. A number of banking has set up banking over the telephone, Internet, ATM or branch infect provides a means for one bank free banking future.
It is technology that is enabling banks to provide these flexible distribution channels. Such technological innovation have resulted in a win win situation for the both customers who are getting quality customers service and saving on their precious time and banks with reduced transaction costs. Internet has become an increasingly powerful tool for banks to serve existing customers increased information is encouraging customers to change their banks more frequently. The growth to interest based e- finance is a strong trend in India which I expected to continue in the next few years.
* FOCUS OF EFFECIENCY OF OPERATION.

Today, banks are no more competing locally, but in the global market place. The banking industry here has been in industry in transaction adapting to this new environment. Increased competitive pressures have forced management to control and decrease assets through the use of ever expanding new technology. If E- banking is introduced with corresponding in time and costs nor improvement in the quality of services. These need for change is also being addressed. Process reengineering is being introduced to enhance the speed and efficiency of delivery of liability products and services, improve the quality of appraisal and sanction, reduce the turn around time for sanction of loan and enable pooling of skills, this will create database marketing capabilities strengthening the banks ability to acquire new customers, build lasting relationship with existing customers and increase customer satisfaction.
* CUSTOMIZATION OF PRODUCTS
In a business where products are increasingly are being customized value addition and service quality is what will differentiate banks from their
competitors. Over the last decade, induction of technology and introduction of new products like derivatives securitization etc have made to meet the depth of mark with varied financial products tailor choices. made to meet the specific segments. Price competitiveness and efficiency in delivery channels will dictate
* RURAL FORAY
The technology advantages enjoyed by private banks in the 90s have been more or less neutralized and services network in the future growth regions in India will emerge as the key differentiator. More than 58% of the countrys population is employed in rural India. The rural economies are undergoing vast changes in the form of increasing incomes and greater integration between rural to urban markets and develop them into profit centers. Banks have begun to Leverage their strong networks in rural areas with customized products offering to suit the rural lifestyles and expectations. Going forward, banks will realize future income streams increasingly from their rural operations.
INTERNATIONALIZATION OF OPERATIONS.
With corporate scaling up their operations and embarking on an overseas acquisitions spree, opportunities for banks are also on the rise those have increased with the removal of restriction of regulations for financing of such overseas by outs. As more Indian corporate spread
their wings and foreign investments grow,
the years a head could
provide the necessary funds and simultaneously financing the corporate.
CHAPTER 11 :FUTURE SCENARIO OF INDIAN BANKING SECTOR AFTER GLOBALIZATION:As the business environment is changing faster, the banks will have to make continuous modifications, adjustment and refinements in their systems and procedures. In 1950 the old Imperial bank of India was 10 times bigger than the Hong Kong and Shangai Bank. Since then Imperial Bank of India which towers bank of India has morphed into State Bank O India completion here. Yet SBI is today 10th of modern of HSBCS size. So there is lot that Indian Banks have achieved over part a few decades but they continued to pygmies in the land of grants. It did not matter till now because Indian Banks were wrapped in the protective for many decades. A few foreign grants were already in when the barriers went up Citi-bank, Standard Chartered, HSBC and few more were allowed in subsequently but were shackled with all sort of restrictions. But the mesh of rules that ring fenced Indian Banks is now being dismantled rapidly. Indian will have far greater freedom to come in grow and acquire. Which towers over its
TOP TEN GLOBAL AND INDIAN BANKS AND THEIR ASSETS

Specify the unit of measurement International Bank Misuho Financial Group Citigroup USB Credit Agricole Group HSBC Holdings Dcutsche bank BNP Paribas Mitsubishi Tokyo Financial Group Sumitomo Mitsui Financial Group Royal Bank of Scotland 950 806 Indian Overseas Bank Syndicate Bank 11 10 975 Union Bank of India 13 1,285 1,264 1,121 1,105 1,034 1,015 989 State Bank of India ICICI Bank Punjab National Bank Canara Bank Bank of Baroda Bank of India Central Bank of India 91 28 23 22 19 19 14 Size of assets Indian Banks Size of assets
19%
22%
4% 5%
6% 24% 18%
The Reserve Bank of Indias roadmap for the presence of Foreign in India could, if actually implemented, herald a significant change in the competitive dynamics of Indian Banking. The proposed road map subsidiary route and envisages two district phase of change. India through the wholly owned also opens appropriate for acquisitions of weak banks that RBI deems appropriate for consolidation. The second phase will being from April 2009, When foreign banks may be permitted to acquire controlling stakes in privately owned Indian Banks. The central Bank calls it a two - track and gradualist approach One track is consolidation of banks in the Public and Private sectors. The second track is the gradual enhancement of the presence of Foreign Banks in a synchronized manner and shaping up the bank internally with respect with to target markets and customers, business model and competitive banking
market will lead to efficiency gains that will benefit the entire economy. There is still debate in banking circles on whether these will be full scale invasion by Foreign Banks after 2009 or will it merely mean that the Foreign Banks that are already in will expand more aggressively than in then Past? It is to soon to tell but must take A few things for granted. Foreign Banks will let up their presence in Indian within a few years. They will challenges the local Banks with their global reach skills, technology and products.
CHAPTER -12 RATEGIES OF BANKS FOR FUTURE AFTER LOBALIZATION

The strategy each player should would depends on the unique positioning that the player finds itself in. So one has to assess its position along specific dimensions. There are
STRATEGIES FOR FUTUTRE
CUSTOMER Products Customers Geographies Brand & Positioning STRATEGIC Present strategy Growth aspiration
CAPABILITY Processes Technology Operations Knowledge Management
COMPETITION Competitive Actions Change in landscape
FISCAL Investment Capital Adequacy Profitably
MARKETS :The banks should assess their positioning with respect to products and services, target markets pen etration and reach in terms of geography.
CAPABILITY :Banks would need to assess their positioning in terms of their internal capabilities that includes technology, efficient processes, enabling structure and capable human resources and determine their competitiveness in market place.
FISCAL :Fiscal health can be known by answering the following question:Is there adequate capital from a regulatory perspective ? Are there profitability concerns ? Is there adequate capital for growth ?
STRATEGIC :Strategic aspiration of the bank should also be taken into consideration. Ultimately growth has to be linked to the level up to which the bank can bear risk.
COMPETITION :The above four dimensions are internal to bank Competitive movements can set bank all the planning done, if strategies by competitors are not factored in. What do public Sector grants that currently have 74% of the current market has to rise to the challenge. There are 3 things that PSB have to do before 2009:They II have to strengthen their capital base. They will have improve their operating efficiency since high intermediation costs remain a significant problem in India. They II have to target new business opportunities that lie beyond bread and butter business like working capital & trade Finance : Personal Financial Service] treasury & risk Management.
100 80 60 40 20 0 1s Qtr 2ndQtr 3rdQtr 4thQtr t Es at Wes t N orth

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1 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

TYBCOM (BANKING AND INSURANCE) Vth Sem

2 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

TYBCOM (BANKING AND INSURANCE) Vth Sem

3 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

TYBCOM (BANKING AND INSURANCE) Vth Sem

4 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

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5 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

INDIA : RECOVERY FROM CRISIS (Per cent except as indicated)

Foregin Exchange 5.8 Reserves (end year, in billion US $)

* Quick Estimates - @ Revised Estimates - # Provisional - NA-Not available

TYBCOM (BANKING AND INSURANCE) Vth Sem

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CHAPTER -4 BANKING SECTOR REFORMS TOWARDS GLOBALISATION

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CHAPTER -5 IMPACT OF GLOBALISATION

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11 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

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12 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

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15 IMPACT OF GLOBLISATION ON INDIAN BANKING SECTOR

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CHAPTER -6 GLOBALIZATION CHALLENGES. NEED FOR NEW OUTLOOK

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CHAPTER -7 MEASURES TAKEN BY INDIAN BANKING SYSTEM

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CHAPTER 10CHAGES IN INDIAN BANKING SYSTEM

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CHAPTER 11 :INDIAN BANKINGAFTER GLOBLISATION

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MERGERS OF BANKS SINCE - 1991

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Source : Indain banks associeation.