The banking sector in India is passing through a period of structural change under the combined impact of financial sector reforms, internal competition, changes in regulations, new technology, global competitive pressure and fast evolving strategic objectives of banks and their existing and potential competitors. Until the last decade, banks were regarded largely as institutions rather akin to public utilities. The market for banking services were oligopolies and Centralized while the market place was regulated and banks were expected to receive assured spreads over their cost of funds. This phenomenon, which was caricatured as 3-6-3 banking in the united states, meaning that banks accepted deposits at 3%, lent at 6%, and went home at 3 p.m. to play golf, was the result of the sheltered markets and administrated prices for banking products. Existence of entry barriers for new banks meant that competition was restricted to existing players, who often operated as a cartel, even in areas where the freedom to price their products existed.
The market place began to change for banks in India as a result of reforms of the financial sectors initiated in the current decade. On account of policy measures introduce to infuse greater competitive vitality in the system, the banking has entered in to a competitive phase. Competition has emerged not only from within the banking system but also from non-banking institutions. Lowering of entry barriers, deregulation of interest rates and growing sophistication of customers have made banking far less oligopolistic today. Introduction of capital adequacy and other prudential norms, freedom granted to enter into new turf's and greater overlap of functions between banks and non-banks have forced banks to get out of their cozy little world and think of the future of the banking.
To meet the credit requirements of small business units, industrial unit, retail trader, artisan, Small Scale Industry (SSI) and tiny units
Functions of Commercial Banks
To change cash for bank deposits and bank deposits for cash.
To transfer bank deposits between individuals and or companies.
To exchange deposits for bills of exchange, govt. bonds, the secured and unsecured promises of trade and industrial units.
To underwrite capital issues. They are also allowed to invest 5% of their incremental deposit liabilities in shares and debentures in the primary and secondary markets.
The lending or advancing of money either upon securities or without securities.
The borrowing, raising or taking of money.
The collecting and transmitting of money and securities.
The buying and selling of foreign exchange including foreign bank notes.
Growing Privatization and Commercialization Infrastructure Sector
Today, Banks customers are better informed, more sophisticated and discerning. They also have a wide choice to choose from various banks and non-bank intermediaries. Their expectations are soaring. This is particularly true for banks corporate clientele but also applies to customers from personal segment.
This is changing profile of customer's call for a shift from product-based approach to customers-based approach. A bank aiming at maximizing customer value must, of necessity, plan for customized products. A combination of marketing skills and state-of-the-art technology should enable to bank in maximizing its profits through customer satisfaction.
In the next millennium banks will have to be more and more cautions about customer service, profitability, increased productivity, to keep face with changing banking scenario. As banks in India prepare themselves for the millenium these are the shifts in the paradigm they are likely to experience. The 21st century may see the dawn of "DARWINIAN BANKING". Only the banks could fulfill the demands of markets and changing items would survive and prosper.
Small business units, retail traders, artisans, village industries, small-scale industrial units and tiny units, professionals and self employed persons etc., contribute significantly to the growth of our economy. The entrepreneur himself manages many of the units. Very often, these entrepreneurs complain of procedural delay in sanctions and renewal of limits. They also find it difficult to cope with the demands for audited balance sheet and other statements sought by the bank from time to time for availing credit facilities. With a view to providing hassle free financial supports to the above categories of entrepreneurs who have shown commitment to run the unit successfully and who are dealing with the banks for last two years satisfactorily, new and friendly credit product namely small business credit card scheme is designed. Under the scheme, cumbersome procedural aspects relating to reviews and renewals, submission of balance sheet, stock statements and other statements are done with credit delivery made simple and easy.
1. Website of RBI, SEBI and NSE.
2. Financial Management Module of ICFAI.
3. C.S. Module (for few definitions)
4. The Economic Times (newspaper)
5. Book Reference
a. Indian Financial System
b. Advance Financial System
6. Discussion with the senior staff of PSE.