Arihant Jain DDM 05 10

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Jaypee Business SchoolA constituent of Jaypee Institute of Information Technology University

A- 10, Sector 62, Noida (UP) India 201 307www.jbs.ac.in

Corporate Internship Report

Internship Report submitted as a partial requirement for the award of the Dual DegreeManagement Program

Arihant Jain05104728

DDM 2005-10E-mail:[email protected]

Corporate Internship SupervisorName: Anshul Dhamija (Relationship manager)

Contact details: 9999108620Mailing Address: [email protected]

Faculty Supervisor:-Ms. Sujata Kapoor

Start Date for Internship: 1st June 2009End Date for Internship: 25th July 2009

Report Date: 31st July 2009

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Self Certification by the Intern

I hereby certify that I Arihant Jain have successfully completed my internship with ING Vysya

Bank in the month of June09 from (1 June to 25 July). This is also to certify that this report is anoriginal product and no unfair means like copying etc have been used for its completion.

Arihant JainSignature

Date

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Certificate from the Corporate Internship Providing Organization

This is to certify that Mr. has successfully completed his/her internship with us in the month of----------09 from (mention start and end date). We wish him/her all the best for all his/her future

endeavors.

Name of the Supervisor:Signature:Date:

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Acknowledgements

No task is a single person effort, same is with this project. Thus I would like to extend my sincerethanks to all those people who helped me in accomplishing my project. I owe my project success to

all faculty members, especially our Director Prof. Ravi Shanker, for providing me wonderfulopportunity and guidance. I would like to extend my special gratitude to Ms. Sujata Kapoor andMrs. Kanwal Anil my faculty supervisor for providing excellent supervision for the successfulcompletion of this project. This project provided me a platform to increase my knowledge andempowered me with a better understanding of concepts in the real world scenario. And last but notthe least special thanks to ING Vysya which accepted me in spite of my inexperience in the fieldand gave me the opportunity to work and learn with them. My special thanks are also to myCorporate Internship Supervisor Mr. Anshul Dhamija (Relationship Manager) who guided andhelped me in completing this project inspite of his busy schedule.

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Table of Contents

S. No. Topic Page Number App no of pages

( not to be included

in report)

1 Corporate Internship Objectives 6

2 Corporate Internship- Abstract 7

3 Internship Organisations Profile vis--vis its competitors

8-28

4 Industry Analysis 29-46

5 Financial Statement Analysis 47-60

6 Detailed study on the Marketing,Operations and Finance & HR functions

ORDetails of the specific field based projectassigned during the internship

61-75

7 Project - Conclusion &

Recommendations

76

8 My Take Away Key Learnings 77

9 Annexure & References 78

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Jaypee Business School

Objectives of the Corporate Internship

The purpose of Corporate Internship for a minimum time of 8 weeks is to connect theory andpractice, obtain knowledge & awareness of the functioning of various departments of the corporateand its environment which is utmost necessary for the success of the budding managers. The basicobjectives of the summer internship programme for the MBA students are:

1. To understand the business and competitive environment of ING Vysya Bank.2. To analyze and understand the financial position of ING Vysya Bank viz a viz

competitors.3. To study the Business Banking Department of ING Vysya Bank and its practices.

4. To facilitate in testing what I have learnt in the foundation courses in the first year.5. To get a feel of corporate life and its functioning & understand various interaction styles.

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ABSTRACT

I did my summer internship in ING Vysya bank. It was a business banking department and it waslocated in Karol Bagh. On the first day I met the branch manager of the bank Mr. UdayChoudhary. He assigned me my mentor who was the relationship manager of the business banking

division of ING Vysya Mr. Anshul Dhamija. In the first week he gave me two files of the companywhich he himself completed. Reading those files I learnt how banks give loans, what are theimportant documents needed to get the sanction letter. On the second week I was assigned to docold calling. I was given a data of another private bank. In my whole internship I made 15customers who gave me time to meet them. And out of those 15 I converted 1 myself with the helpof my mentor. The client is Sahib Textiles. They make ladies suits. On a daily routine , my timewas divided. From 10 to 1 pm I use to do cold calling. After lunch I used to meet all those peoplewho have approved and would like to meet me. After meeting them I used to come back to myoffice and had to report to my mentor.The client that I converted was Sahib Textiles. They make ladies suits. They needed a workingcapital of 4.25 crore. After checking there balanced sheet, profit and loss account statement and

there last six month bank account. I gave his case to my mentor, who finally approved his loan.The financials of ING Vysya is in a very healthy stage. All the ratios are showing vastimprovements, be it the capital adequacy ratio, the net profit margin. All of the financial ratios hasdone better than the previous years. There total assets, market cap have also gone up from theprevious years.The key learning that I learnt was the fact that I saw the real corporate world. What is the pressurethat each employee faces each day. I was working in a professional working environment withprofessional working people. This was my real learning. Apart from that I worked on real projects,learned how banks gives business loans to there customers. I also learnt how to communicate withdifferent types of clients. Working on the real time project made me learnt how to read a bankstatement. This internship also helped me make new friends like Mr. Uday Choudhary and Mr.

Anshul Dhamija, who were my boss. I would thank them to give me such a immense opportunityto work with them.

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COMPANY PROFILE

ING Vysya is the joint venture between ING & Vysya

ING Group

INGs mission is to be a leading, global, client-focused, innovative and low-cost provider offinancial services through the distribution channels of the clients preference in markets whereING can create value.

ING group originated in 1990, from the merger between Nationale Nederlanden NV (the largestDutch Insurance Company) and NMB Post Bank Group NV. Combining roots and ambitions, thenewly formed company called Internationale Nederlanden Group. Market circles soonabbreviated the name to I-N-G. The company followed suit by changing the statutory name toING Group N.V..

Since 1991, ING has grown from a Dutch company with some international business to amultinational with Dutch roots.

ING Group is a global financial services company of Dutch origin with 150 years ofexperience, providing a wide array ofBanking, insurance and asset management services inover 50 countries.

Over 1,20,000 employees work daily to satisfy a broad customer base: individuals,families, small businesses, large corporations, institutions and governments.

Based on market capitalization, ING is one of the 20 largest financial institutionsworldwide and in the top-10 in Europe.

ING is the number one financial services company in the Benelux home market. INGservices its retail clients in these markets with a wide range of retail-banking, insurance andasset management.

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ING Vysya Bank

CORPORATE STATEMENT

ING Vysya Bank will be an entrepreneurial integrated financial services institution whereinnovation and transformation are the way of life.

BANK PROFILE

ING Vysya Bank Limited is an entity formed with the coming together of erstwhile, Vysya bankltd, a premier Bank in the Indian Private Sector and a global financial powerhouse, ING of Dutchorigin, during Oct 2002.

The immediate benefit to ING Vysya Bank ltd was the pride of having become a member of globalfinancial services giant.

Bank has an asset base of 1313 billion euros.

It has net profit of 9.24 billion euros.

With total business turnover of over Rs.12000 crores.

It has capital adequacy of 9.8%.

Bank has an extensive network with almost 450 branches.

And has a network of more than 5000 ATMs.

Strong and loyal client base in corporate, trade and retail segment. And more than threemillion satisfied customers.

Is also a part of bankex an index launched by BSE.

Further, the presence of the group in over 50 countries, employing over 1,20,000 people, servingover 85 million customers across the globe, only multiplies the credibility, not only across thecountry but also across the globe. The pride of this global identity, the back up of a financial powerhouse and the status of being the first Indian International Bank, would also greatly enhanceproductivity, profitability resulting in improved performance for the Bank to translate into higherreturns, to all the stake holders.

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ING Vysya Bank deals in following area of Banking

Corporate Banking

Commercial Banking

Treasury management

Retail Banking

Rural Banking

Private Banking

ING Vysya life insurance

The company offers entire range of life insurance plans to meet all the financial needs of anindividual- protection, saving and investment.

With 50 branches across the country.

With sum assured of almost of Rs 800 crore.

And assets worth Rs 100 crore.

ING Vysya Mutual Fund

It aims to provide practical and secure investment opportunity to retail investors.

Operating in 15 cities.

And Rs.2800 crores plus fund house.

BUSINESS ACTIVITIES CARRIED OUT BY ING VYSYA

The various products offered by ING Vysya bank are

1) ACCOUNTS AND DEPOSITS

2) Current accounts

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3) Saving accounts4) Term deposits5) DMAT accounts

CURRENT ACCOUNT

The various sub-products in current account which ING Vysya gives are

ORANGE CURRENT ACCOUNT: In today's fast-paced world, your business regularlyrequires you to receive and send funds to various cities in the country. ING Orange CurrentAccount gives you the power of inter-city banking with a single account and access tomore than 200 cities.

ADVANTAGE CURRENT ACCOUNT: In today's fast-paced world, your businessregularly requires you to receive and send funds to various cities in the country. INGAdvantage Current Account gives you the power of inter-city banking with a singleaccount and access to more than 300 cities.

From personalized cheques that get treated at par with local ones in any city where we havea branch, to Free collection (if instruments are lodged directly) of outstation cheques(payable at branch locations), to free inter-city funds transfers of up to Rs.50 lakhs p.m.,our priority services have become the benchmark for banking industry

GENERAL CURRENT ACCOUNTS: With ING Vysya general current account you canaccess your account anytime, anywhere. Withdraw and deposit cash, issue and encashcheques, make balance enquires and ask for mini statements anytime, anywhere.

COMFORT CURRENT ACCOUNT: ING's Comfort Current Account lets you save as

much as Rs. 60,000 p.a. for remittance up to Rs. 25 lakhs. This is in addition to a range ofother attractive benefits, as well.

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SAVING ACCOUNTS

The Savings accounts are primarily meant to inculcate a sense of saving for the future and take care ofindividuals day to day banking requirements. These accounts are meant to help individual customers protecttheir money. The Savings Accounts also help individuals to handle their financial transactions through asystematic banking channel. This increases the safety as customers need not carry physical cash with them.The various products in saving accounts are

ORANGE SAVING ACCOUNT

ADVANTAGE SALARY ACCOUNT

FREEDOM ACCOUNT

GEERAL SAVING ACCOUNT

SOLO SAVING ACCOUNT SARAL SAVING ACCOUNT

ING FORMULA SAVING ACCOUNT

ASPIRA CORPORATE SALARY SOLUTION.

TERM DEPOSITS

The various term deposits are

FIXED DEPOSITS: If you believe in the long term investments and wish to earn long term interest on

your deposits, than invest in ING fixed deposits. With ING your money will not only be secured butwill earn a good interest.

CUMULATIVE DEPOSITS: With ING cumulative deposits you can invest small amounts of moneythat ends up large saving on maturity

TAX ADVANTAGE DEPOSITS: TAD is eligible for tax exemption under section 80C of the incometax act 1981. The deposit is in the form of fixed deposit or reinvestment form of 5 year duration. Therate of interest will be according to the 5 year interest rate which will be declared by RBI from timetime.

AKSHAYA DEPOSITS: your deposit with interest will be reinvested every quarter to earn a higheryield.

DEMAT ACCOUNT

With practically all trading being conducted electronically, most settlements happen through Demat(Dematerialisation of securities). The ING Demat Account offers you a secure and convenient way to keep

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cross selling the bank's retail Products and Services.

The group also crosses sells products of ING Vysya Life Insurance and ING Vysya Mutual Funds.

C&IB Group is organized on a regional basis with relationship managers covering:

Western Region and Eastern Region out of Mumbai;

Southern Region out of Bangalore, Chennai and Hyderabad; and

Northern out of Delhi

3) BANKS AND FINANCIAL INSTITUTION GROUPS:

"BFIG" works with renewed focus on the financial intermediaries in the country.

BFIG's clientele includes scheduled commercial banks i.e. nationalized, private and foreign banks, some selectlarge co-operative banks and other financial intermediaries including mutual funds, insurance companies andhousing finance companies.

The group also seeks to build relationship with banks that are not present in the country but the relationship canbe leveraged for trade and guarantee business.

The major areas of thrust for the group are fund mobilization both onshore as well as offshore, origination ofECB mandates, distribution of debt/loans, cash management services, capital market services, trade finance

related transactions, asset buyouts and sell downs, distribution of ING products to Indian banks and cross sellof financial market / asset management / insurance products etc.

4) EMERGING CORPORATES:

The "EC" manages relationships with business units engaged in Manufacturing, Processing and Servicessector. It also provides Commercial Banking Services with specific focus to Industries, relating to Diamond &Textiles."EC", also markets the bank's Products, including cross sell of Products and Services to Retail Customers ofour Corporate Clients and their Employees. Sales of Cross Border Products of ING Group and other INGentities in India are also marketed.

The wide range of products comprehensively meets the business requirements with special focus on ExportCredit, regular Working Capital Finance, Term Loans, Non Fund based limits like Letters of Credits,Guarantees and certain structured finance products.

FINANCIAL MARKET

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ING Financial Markets, based out of Mumbai is a leading player in the Indian Financial Markets providingone of the widest ranges of products for large corporate, small and medium enterprises as well as individualneeds. Supported by state-of-the-art systems and the capabilities of the ING Group, we offer competitivepricing and efficient execution across markets and a comprehensive suite of products.

Financial Markets unit is an active market maker on most rupee interest rate and currency products. Within thebank, we play a key role in the Asset Liability Management and ALM strategy. To our corporate andinstitutional clients, we offer a comprehensive range of products for transactions and risk management needsthrough the sales desks at Mumbai, Delhi, Bangalore & Chennai.The Financial Markets business is driven by a highly qualified and knowledge driven team that brings togethera deep understanding of local and global markets as well as complex financial products.

The offering in ING financial are:

1) MARKET MAKING AND TRADING: The Market Making unit provides competitive prices on all

major currency and interest rate products to the client facing Financial Market Sales teams as well as toother market participants. The product range includes the Indian Rupee, all major currencies, FXSwaps, Government of India Securities, Corporate Debt and most Rupee Interest Rate benchmarksincluding the Overnight Index Swaps and MIFOR. ING is one of the largest and most competitive pricemakers in Indian Rupee.

The Trading team is driven by knowledge, focus and discipline and seeks to find value across variouspermitted assets and instruments for the bank's proprietary account.

2) ASSET LIABILITY MANAGEMENT: The ALM unit of Financial Markets plays a pivotal role in theformulation and implementation of the bank's Asset Liability Management strategy. The ALM teammanages the banks statutory and investment portfolios. It is also responsible for managing liquidity andinterest rate risk and plays an active role in the management of Transfer Pricing within the bank.

3) FINANCIAL MARKET SALES: Financial Markets Sales team offers solutions to clients for theirvaried risk management needs.The Sales team is geographically distributed across offices in Delhi, Mumbai, Bangalore and Chennaito keep us closer to our clients. Strong client relationships acquired over the bank's 75 years of servicein the Indian markets augment our understanding of customer needs and risk managementrequirements. Our highly qualified relationship managers offer the most appropriate solutions for theseneeds drawing on the knowledge and expertise within the ING Group.

The sales team is supported at each location by information systems providing comprehensive and up-to-date market information, tools for analysis and access to research from the ING Group. The salesteams use some of the most advanced pricing systems so as to be able to structure and price across awide range of products. We also draw from the robust product and pricing capabilities of the INGGroup and its various desks across the world to offer the best solutions for our clients.

Appropriate market timing and efficient execution is a key to product delivery in Financial Markets. To

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aid this the Sales team is supported by a niche Structuring desk that, apart from helping in productstructuring based on both client needs and market opportunities, helps in efficient execution ofmandates.

AGRICULTURE AND RURAL BANKING

1) TERM LOAN: ING have identified rural banking as products and services. The term loans arecategorized in these segments.

Poultry

Dairy

Wells

Pump sets Tractors

Plantation crops

Horticulture crops

Rural housing

Rural godowns

Micro finance institutions

Swarjogar credit card.

2) SHORT TERM LOAN: short term loan are categorized into following segments

KISSAN credit card

Working capital loan to poultry

Gold loans for agriculture

Produce loans against warehouse receipts

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ORGANISATIONAL STRUCTURE

ING Vysya Bank follows a 3-tier structue

The regional offices are given more powers and jurisdiction so as to enablethemto act quickly.

Structure of a Bank Branch

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From the structure we can see how the functional relationship works in a branch. He structure alsoexplains the reporting authority for each cadre of the employees. It indicates the communicationflow in the branch with well-defined accountability on the part of the employees roles.

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COMPERATIVE ANALYSIS OF ING VYSYA BANKS SAVING ACCOUNT WITH

OTHER BANKS SAVING ACCOUNT

1) ING VYSYA V/S YES BANK

FEATURES ING VYSYA YES BANK

NO. OF PRODUCTS Two: orange savings

account and freedom

account

Two: savings account,

gold savings account.

Average quarterly account

balance

Rs.5,000 on orange, and

nil for freedom

Rs.10,000 for savings

account and Rs.100000

for gold savings

account.Fee for non maintenance

of quarterly average

balance

Rs.600 per quarter Rs.300 for savings

account and Rs.600 for

gold saving account.

Statement of account Quarterly free, and

monthly e-statement free

(if asked for).

Quarterly free for both.

ATM usage 4 free for freedom

account, unlimited free

on cirrus for orange

account holders ;un

limited from ING Vysya

Unlimited free on all the

banks in India.

Regular debit card Free for first year, then

Rs.150 there after.

Rs.149 for savings

account, free for gold

savings account.

Gold debit card Rs.799 Rs.799

D.D. Rs.50 for amt up to

Rs.10,000;Rs.2.50 per

1000 for amt up to

50,000;Rs 2 per 1000 for

Min Rs.50 then Rs.2.5

per 1000 for savings

account and Rs.1.5 per

1000 for gold savings

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amt greater than 50,000 account.

Pay order (P.O.) Same as above. 5 free for savings

account and 10 free for

gold savings account,

per yearBranch transaction Free for both the account

holders

5 transactions for

savings account and 10

transactions for gold

savings account are free

per yearPersonalized cheque books Free Free

Balance enquiry Free Free

2) ING VYSYA V/S ICICI BANK

FEATURES ING VYSYA ICICI BANK


account and freedom

account

Three: category A, B

and C.

Average quarterly account

balance


nil for freedom

Rs.5000 for A, Rs.2000

for B, and Rs.1000 for C.

Fee for non maintenance


balance

Rs.600 per quarter Rs.750 per qtr for A & B

and Rs.100 per qtr for

C.

Statement of account Quarterly free andmonthly e-statement free

(if asked for).

Free physical statementper qtr otherwise

Rs.200 per month for

physical form. Free e-

statement per month.

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ATM usage 4 free for freedom



account holders ;un


Rs.20/month for cash

withdrawal & and Rs.60

for same with non

partner banks.

Regular debit card Free for first year then

Rs.150 per annum.

Rs.99 per annum for all

the products.

D.D. Rs.50 for amt up to

Rs.10,000;Rs.2.50 per

1000 for amt up to

50,000;Rs 2 per 1000 for

amt greater than 50,000

Rs.2 per thousand

rupees or part thereof,

subject to a minimum of

Rs.50

Branch transaction Free for both Rs.2.50/

thousand, subject to

min of Rs.30

and max of Rs.10000Personalized cheque books Free 2 payable at par cheque

books of 25 leaves each

free in a quarter, Rs.50/-

for additional cheque

book of 25 leaves.

Balance enquiry Free Rs.10 with partnerbanks & Rs.25 with non

partner banks.

3) ING VYSYA V/S HDFC BANK

FEATURES ING VYSYA HDFC BANK


account and freedom

account

Three products: regular,

savings plus & savings

max; each of which are

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further divided into option

1 and 2.(I have taken

comparative product that

is option 1 of regular

savings acc.)Average quarterly

account balance


nil for freedom

Rs.5000

Fee for non maintenance


balance

Rs.600 per quarter Rs.750 per qtr.

Statement of account Quarterly free and

monthly e-statement free

(if asked for).

Monthly statements to be

Collected from branch.

Quarterly statements sent

by postATM usage 4 free for freedom



account holders ;un


First 4 withdrawals free of

cost from any cirrus

network ATM

Regular debit card Free for first year then

Rs.150 per annum.

Rs.100 plus taxes

D.D. Rs.50 for amt up toRs.10,000;Rs.2.50 per

1000 for amt up to

50,000;Rs 2 per 1000 for

amt greater than 50,000

Rs.50 for amt up to10000, Rs.75 for amt

greater than 10000 and

up to up 50000, Rs. 2.50

per 1000 or part thereof

(Min Rs.150) for amt

greater than 50000Pay order (P.O.) Same as above. Same as above.

Branch transaction Free for both Free 3 free in the qtr &Rs. 60 per additional

transaction on non-

maintenance of Min

balance (cash

deposit/withdrawal)

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Personalized cheque

books

Free Free, Rs.5 per leaf on non

maintenance of Min

balanceBalance enquiry Free Free

COMPERATIVE ANALYSIS OF ING VYSYA BANKS CURRENT ACCOUNT WITH

OTHER BANKS SAVING ACCOUNT

I) ING VYSYA V/S HDFC BANK

FEATURES ING VYSYA HDFC

Number of products Three: general,

advantage and orange

Four: plus, trade,

premium, and regular

Average quarterly

balance

Rs.10000 for general CA,

Rs.50000 for advantage

CA, & Rs.100000 for

orange CA

Rs.100000 for plus,

Rs.40000 for trade,

Rs.25000 for premium, &

Rs.10000 for regularFee for non maintenance

of AQB

Rs.750 pq for GCA,

Rs.1500 pq for ACA, &Rs.4000 pq for OCA.

Rs.6000 for plus, Rs.1200

for trade, Rs.900 forpremium and Rs.750 for

regular.Statement of account Free once in a month

(physical or e-mail)

Free once in a month

Issue of cheque book Rs.2.5 per cheque leaf for

GCA and free for others

PAP cheque books; 300

leaves free pm for plus,

200 leaves free pm for

trade, 100 leaves free pm

for premium and Rs.2 per

leaf for regularATM usage Free usage of ING Vysya,

Rs.45 on withdrawal from

other banks

Free usage of HDFC bank

ATMs.

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Issue of international

debit card

Free for 1st year, Rs.150

there after

Free for first year

Transfer from one

account to other

(intercity)

Free for all Free for all

D.D/P.O. Free as per schedule for

GCA, free up to 50 lkhs

per month then charges

as per schedule for rest,

in case of ACA and for

OCA free up to 200 lkhs

then charges as per

schedule on the greateramount.

Free up to 50 DDs per

month. Above 50

transactions, charges @

Rs. 25/- per DD for plus,

Free up to 30 DDs per

month. Above 30

transactions, charges @

Rs. 25/- per DD for trade;DD Amount Up to Rs.

50,000 charges Rs. 40/-

per DD, Above Rs. 50,000

and up to Rs. 100,000-

Rs. 25/-, Above Rs.

100,000- Free for

premium and DD Amount

Up to Rs.50,000 chargesRs.40/- per DD, Above

Rs.50,000 and up to

Rs.100,000- Rs.25/-,

Above Rs.100,000- Free

for regular.Charges for PAP cheque

payments

Rs.0.50/1000 with a min

of Rs.5 per payment in

case of GCA, free up to

cumulative value of 50

lkhs pm then same is

followed as in GCA, for

OCA free up to a


Free in the manner as

stated above.

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followed as in GCA.

Balance enquiry Rs.15 for all Rs.25 for all

2) ING VYSYA V/S YES BANK

FEATURES ING VYSYA YES BANK

Number of products Three: general,

advantage and orange

Four: CA 25, CA 75, CA

200 and CA 500.

Average quarterly

balance

Rs.10000 for general CA,

Rs.50000 for advantage

CA, & Rs.100000 for

orange CA

Rs.25000, Rs.75000,

Rs.200000 and Rs.500000

respectively for the above

products.Fee for non maintenance

of AQB

Rs.750 pq for GCA,

Rs.1500 pq for ACA, &

Rs.4000 pq for OCA.

Rs.1000, Rs.1500,

Rs.2000, and Rs.4000

respectively for the above

productsStatement of account Free once in a

month(physical or e-mail)

Free once in a month.

Issue of cheque book Rs.2.5 per cheque leaf for

GCA and free for others

Rs.2 per leaf for CA 25

and unlimited free for the

rest.ATM usage Free usage of ING Vysya,

Rs.45 on withdrawal from

other banks

Information not available.

Issue of international

debit card

Free for 1st year, Rs.150

there after

Information not available.

Transfer from one

account to other

(intercity)

Free for all Rs.25 lakhs per month

subsequent 0.50 per

Rs.1000 for CA 25, Rs.50

lakhs per month

subsequent 0.50 per

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Rs.1000 for CA 75, and

unlimited for the rest.

D.D/P.O. Free as per schedule for

GCA, free up to 50 lkhs

per month then charges

as per schedule for rest,

in case of ACA and for

OCA free up to 200 lkhs

then charges as per

schedule on the greater

amount.

DD:2 Free Per Month

Min-Rs.100 Max-Rs.5000

for CA 25, 5 Free Per

Month

subsequent Rs.1.75 per

rs.1000 or part there of

Min- Rs.100 Max-Rs.5000

for CA 75, 5 Free Per

Month subsequent

Rs.1.50 per rs.1000 or

part there of

Min- Rs.100 Max-Rs.5000

for CA 200 and free for CA

500.

PO: 2 Free Per Month

Subsequent 0.75 per

Rs.1000. Min- Rs.75 Max-

Rs.5000 for CA 25, 5 Free

Per Month. Subsequent

0.75 per Rs.1000. Min-

Rs.75 Max- Rs.5000 for

CA 75 and free for the

rest.Charges for PAP cheque

payments

Rs.0.50/1000 with a min

of Rs.5 per payment in

case of GCA, free up to

cumulative value of 50lkhs pm then same is

followed as in GCA, for

OCA free up to a



Free unlimited

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followed as in GCA.

Balance enquiry Rs.15 for all Information not available.

BANKINGINDUSTRY ANALYSIS

STRUCTURE

BANKS IN INDIA:

In India banks have separated in different groups. Each group has its own benefits and limitationoperating in India. Each has its own dedicated target market. Few of them work in rural sectorwhile others work in both rural and urban. Many of them are catering in cities. Some of them are ofIndian origin while others are of foreign origin. The banks in India are

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GROWTH TRENDS

The Indian banking market is growing at an astonishing rate, with assets expected to

reach US$1 trillion by 2010. An expanding economy, middle class, and technological

innovations are all contributing to this growth. The countrys middle class accounts for

over 320 million people. In correlation with the growth of the economy, rising income

levels, increased standard of living, and affordability of banking products are promising

factors for continued expansion. The Indian banking Industry is in the middle of an IT

revolution, focusing on the expansion of retail and rural banking. Players are becoming

increasingly customer-centric in their A approach, which has resulted in innovativemethods of offering new banking products and services. Banks are now realizing the

importance of being a big player and are beginning to focus their attention on mergers

and acquisitions to take advantage of economies of scale and/or comply with Basel II

regulation. Indian banking industry assets are expected to reach US$1 trillion by 2010

and are poised to receive a greater infusion of foreign capital, says Prathima Rajan,

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analyst in Celent's banking group and author of the report. The banking industry should

focus on having a small number of large players that can compete globally rather than

having a large number of fragmented players."

TECHNOLOGY IN BANKING

In the six decades of independence banking has evolved in four different phases. During the fourthphase important initiatives were taken with regard to improve the banking system. The entry offoreign banks resulted in a paradigm shift in the way banking was done in India. The arrival offoreign banks and private banks with there superior state of the art technology pushed the Indianbanks to adopt latest technology in market, so that they could retain there customer base.Information technology has been used under two different avenues in banking. One iscommunication and connectivity and other is Business process reengineering. Informationtechnology enables sophisticated product development, better market infrastructure,implementation of reliable techniques for control of risks and help the financial intermediariesreach geographically distant and different market.In India banks as well as other financial entities entered the world of information technology andwith Indian financial network(INFINET). INFINET, a wide area satellite network (WAN) usingVSAT(very small aperture technology) was jointly set up by Reserve Bank of India and Institutefor Development and research for banking in1999. INFINET which was initially comprised onlypublic sector banks was opened for participation by other categories of members. The informationtechnology act 2000 has given legal recognition for creation, transmission, and retention ofelectronic data to be treated as a valid proof in the court of lawThe Reserve Bank of India has assigned priority to the up gradation of technology in the banks.Substantial progress has been made for developing a modern, efficient, integrated and securepayment and settlement system for the financial service sectors. Modernization of clearing andsettlement system through MICR based cheque clearing, popularizing electronic clearing services

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(ECS) and integration of RBI-EFT scheme with funds transfer schemes of bank, introduction ofcentralized fund management system (CFMS) are significant milestones in this regard.The coverage of electronic clearing services has been significantly effective to encourage nonpaper based fund and develop a centralized facility for effective payment. The scheme forelectronic fund transfer operated by the reserve bank has been augmented and now it is present in

13 cities. The centralized fund management system (CFMS) which would enable banks to obtainaccount wise and centre wise position of their balances has been implemented in a phased mannerfrom November 2001.

Membership of INFINET has been opened to all the banks in addition to those in the public sectorbanks. At the base of all the interbank message transfers using the INFINET is the structuredfinancial messaging system (SFMS). It would serve as a secure communication carrier withtemplates for intra and interbank messages in a strict message format that will facilitate straightthrough messaging. All the interbank messages will be stored and switched to central hub atHyderabad while the intra bank messages will stored in the bank gateway. Security standards ofSFMS will match the international standards.

Information technology has immense untapped potential in banking. Strengthening the informationtechnology in banks could improve the effectiveness of asset liability of banks. Building up of arelated data base would strengthen and enhance the forecasting of liquidity of banks at the branchlevel. This could enhance the risk management capabilities of banks.

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LEGAL/ REGULATORY ISSUES RELATED TO BANKING

Banks works under various legal frameworks most important of them are, the Banking regulationact 1949, Basel II norms, RBI act, Negotiable Instruments act.

BANKING REGULATION ACT 1949

The banking regulation act was passed as banking companies act and it came into force in 16/3/49.Subsequently it was changed to Banking regulation act on 1/3/66.

BASEL II NORMS

Basel II is the second of the Basel accords which are recommendation on the banking laws andregulations issued by banking committee on banking supervision. The purpose of Basel II norms isto create international standards that banking regulators can use when creating regulations abouthow much capital does banks needs to put aside to guard against the types of financial andoperational risks banks face. Advocates of Basel II believe that such an international system canhelp protect the international financial system from many types of problem that arise should a bankor a series of banks collapse. In practice Basel II attempts to accomplish this by setting up rigorousrisks and capital management requirement designed to ensure that the banks hold capital reservesappropriate to the risks the banks exposes itself to through its investment and lending practices.Generally speaking this rules says that the greater the risk the bank exposes itself, the greater the

capital bank requires to safeguard its solvency and overall economic stability.

OBJECTIVES OF BANK REGULATION

The objectives of bank regulation, and the emphasis, vary between jurisdiction. Themost common objectives are

1. Prudential -- to reduce the level of risk bank creditors are exposed to (i.e. toProtect depositors)

2. Systemic risk reduction -- to reduce the risk of disruption resulting from

Adverse trading conditions for banks causing multiple or major bank failures3. Avoid Misuse of Banks -- to reduce the risk of banks being used for criminalPurposes, e.g. laundering the proceeds of crime

4. To protect banking confidentiality5. Credit allocation -- to direct credit to favored sectors

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GENERAL PRINCIPAL OF BANK REEGULATION

Banking regulations can vary widely across nations and jurisdictions. This section of the articledescribes general principles of bank regulation throughout the world.

MINIMUM REQUIREMENT

Requirements are imposed on banks in order to promote the objectives of the Regulator. The mostimportant minimum requirement in banking regulation is Minimum capital ratios.

SUPERVISIORY REVIEW

Banks are required to be issued with a bank license by the regulator in order to carry on business as

a bank, and the regulator supervises licensed banks for compliance with the requirements andresponds to breaches of the requirements through obtaining undertakings, giving directions,imposing penalties or revoking the bank's license.

MARKET DISCIPLINE

The regulator requires banks to publicly disclose financial and other information, and depositorsand other creditors are able to use this information to assess the level of risk and to makeinvestment decisions. As a result of this, the bank is subject to market discipline and the regulatorcan also use market pricing information as an indicator of the bank's financial health.

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BANKING STANDARDS

Recognizing that it is necessary, in the public interest, to ensure that banks evolve comprehensivecodes and standards for fair treatment of customers of banks It is necessary to have an independentwatch dog to ensure that banks deliver services in accordance with such codes and standards; It isnecessary to ensure that the institutional mechanism is autonomous, independent and effectivelymonitors and enforces the compliance of such Codes and Standards.In November 2003, RBI constituted the Committee on Procedures and Performance Audit ofPublic Services under the Chairmanship of Shri S.S.Tarapore (former Deputy Governor) to addressthe issues relating to availability of adequate Banking Services to common man. The mandate tothe Committee included identification of factors that inhibited the attainment of best customerservices and suggesting steps to improve the quality of banking services to individual customers.The Committee felt that in an effort to continuously upgrade the package of services that banks

offered to their customers there was a need of benchmarking of such services. After in depth studyat the grass root level the Committee concluded that there was an institutional gap for measuringthe performance of banks against a bench mark reflecting the best practices (Code and Standards).Therefore, the Committee recommended setting up of the Banking Codes and Standards Board ofIndia broadly on the lines of Banking Codes and Standards Board functioning in U.K.

The Banking Codes and Standards Board of India has been registered as a separate society underthe Societies Registration Act, 1860. Therefore, it would function as an independent andautonomous body. The Banking Codes and Standards Board of India is not a Department of theRBI. Reserve Bank has agreed to lend it financial support for a limited period. It is an independentbanking industry watch dog to ensure that the consumer of banking services get what they are

promised by the banks.

To ensure that the Board really functions as an autonomous and independent watchdog of theindustry, the Reserve Bank also decided to extend financial support to the Board by way ofmeeting its full expenses for the first five years. This was to enable the Board to reach its economiccritical mass that will make it truly independent in its functioning and take a view on any bankwithout its existence coming under any threat. On its part, RBI would derive supervisory comfortin case of banks which are members of the Board. In substance, the Board has been set up toensure that common man as a consumer of financial services from the banking Industry is in a noway at a disadvantageous position and really gets what it has been promised.

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MARKET ANALYSIS

THE PRODUCT MIX: The banks primarily deal in services and therefore, the formulation ofproduct mix is required to be in the face of changing business environmental conditions. Thechanging psychology, the increasing expectations, the rising income, the changing lifestyles, theincreasing domination of foreign banks and the changing needs and requirements of customers atlarge make it essential that they innovate their service mix and make them of world class. Againstthis background, we find it significant that the banking organizations minify, magnify combine andmodify their service mix.

PRODUCT PORTFOLIO: The bank professionals while formulating the product mix need toassign due weight-age to the product portfolio. By the concept product portfolio, emphasis is onincluding the different types of services/ schemes found at the different stages of the product life

cycle. The portfolio denotes a combination or an assortment of different types of productsgenerating more or less in proportion to their demand. The quality of product portfolio determinesthe magnitude of success. It is excellence of bank professionals that help them in having a soundproduct portfolio.We find the composition of a family sound, if members of all the age groups are given due place.Like this, the composition or blending of a service mix is considered to be sound, if wellestablished and likely to be profitable schemes are included in the mix. The bank professionals aresupposed to perform the responsibility of composing the same. An organization with a soundproduct portfolio gets a conducive environment and successes in increasing the sensitivity ofmarketing decisions.If the banks rely solely on their established services and schemes, the multidimensional problems

would crop up in the long run because when the well established services/schemes would startsaturating or generating losses, the commercial viability of banks would of course, be questioned.It is in this context, that we find designing of a sound product portfolio essential to an organisation.We cant deny that the product portfolio of the foreign banks is found sound since they keep theireyes moving. The innovation, diffusion, adoption and elimination processes are taken due care.The public sector commercial banks need to innovate their service and this makes a strongadvocacy in favour of analyzing the product portfolio.THE PRICE MIX

In the formulation of product mix, the pricing decisions occupy a place of outstanding significance.The pricing decisions or the decisions related to interest and fee or commission charged by banks

are found instrumental in motivating or influencing the target market. The Reserve Bank of Indiaand the Indian Banking Association are concerned with the regulations. The rate of interest isregulated by the RBI and other charges are controlled by the Indian Banking Association. To bemore specific in the Indian setting, we find this component of the marketing mix significantbecause the banking organizations are also supposed to sub serve the interests of weaker sectionsand the backward regions. The public sector commercial banks in particular are supposed to playdevelopmental role with societal approach. It is natural that this specific role of the public sectorcommercial banks complicates the problem of pricing.

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Pricing policy of a bank is considered important for raising the number of customers vis--vis theaccretion of deposits. Of course, there are a number of factors to influence the process but it is alsoright to mention that the key role in the entire process is played by the Reserve Bank of India. Tobe more specific when we find a number of domestic and foreign banks working in the Indian

economy, the Reserve Bank of India bears the responsibility of making the business environmentconductive. The non-banking organizations and foreign banks have been found attractingcustomers by offering to them a number of incentives. The potential customers or investors frametheir investment plans in the face of pricing decisions made by the banking organizations. Whileformulating the pricing strategies, the banks have also to take the value satisfaction variable intoconsideration. The value and satisfaction cant be quantified in terms of money since it differsfrom person to person, keeping in view the level of satisfaction of a particular segment, the bankshave to frame their pricing strategies. The policy makers are required to be sure that the servicesoffered by them are providing satisfaction to the customers concerned. The pricing decisions maybe to bit liberal, if the potential customers are found shifting to the non-banking investments. Inthis context, it is pertinent that pricing is used as motivational tool.

The banking organizations are required to frame two-fold strategies. First, the strategy is concernedwith interest and fee charged and second, the strategy is related to the interest paid. Since both thestrategies throw a vice-versa impact, it is pertinent that banks attempt to establish a correlationbetween the two. It is essential that both the buyers as well as the sellers have a feeling of winningas shown in figure.

The RBI has to be more liberal so that the public sector commercial banks make decisions in theface of changing business conditions. There is no doubt in it that the commercial banks bear theresponsibility of energizing the social marketing, they are also supposed to bear the social costs. Itis also right that the foreign banks have been found making the business environment morecompetitive. These emerging trends necessitate a close look on the pricing problem. The policymakers find it difficult to bring a change since the regulations of the RBI make things morecritical. The expenses are not regulated by the RBI and the banking organizations are forced toincrease the budgetary provisions. The sources of revenue are regulated which complicates the task

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of bank professionals. This makes it essential that the Reserve Bank of India, the Government ofIndia and the banking organizations thing over this complicated issue with a new vision.

PROMOTION MIXIn the formulation of marketing mix the bank professionals are also supposed to blend thepromotion mix in which different components of promotion such as advertising, publicity, salespromotion, word-of-mouth promotion, personal selling and telemarketing are given due weightage. The different components of promotion help bank professionals in promotion the bankingbusiness.Advertising: Like other organizations, the banking organizations also us this component of thepromotion mix with the motto of informing, sensing and persuading the customers. Whileadvertising, it is essential that we know about the key decision making areas so that itsinstrumentality helps bank organization both at micro and macro levels.Finalizing the Budget: This is related to the formulation of a budget for advertisement. The bank

professionals, senior executives and even the police planners are found involved in the process.The formulation of a sound budget is essential to remove the financial constraint in the process.The business of a bank determines the scale of advertisement budget.Selecting a Suitable vehicle: There are a number of devices to advertise, such as broadcast media,telecast media and the print media. In the face of budgetary provisions, we need to select a suitablevehicle. The latest developments in the print technology have made print media effective. Themessages, appeals can be presented in a very effective way.Making Possible creativity: The advertising professionals bear the responsibility of making theappeals, slogans, messages more creative. The banking organizations should seek the cooperationof leading advertising professionals for that very purpose.Instrumentality of branch managers: At micro level, a branch manager bears the responsibilityof advertising locally in his / her command area so that the messages, appeals reach to the targetcustomers of the command area. Of course we find a budget for advertisement at the apex level butthe business of a particular branch is considerably influenced by the local advertisements. If wetalk about the cause-related marketing, it is the instrumentality of a branch manager that makespossible the identification of local events, moments and make advertisements condition-oriented.Public Relations: Almost all the organization need to develop and strengthen the public relationsactivities to promote their business. We find this component of the promotion mix effective even inthe banking organizations. We cant deny that in the banking services, the effectiveness of publicrelations is found of high magnitude. It is in this context that we find a bit difference in thedesigning of the mix of promoting the banking services. Of course in the consumer goodsmanufacturing industries, we find advertisements occupying a place of outstanding significancebut when we talk about the service generating organizations in general and the bankingorganizations in particular, we find public relations and personal selling bearing high degree ofimportance. It is not meant that the banking organizations are not required to advertise but it ismeant that the bank executives unlike the executives of other consumer goods manufacturingorganizations focus on public relations and personal.Personal Selling: The personal selling is found instrumental in promoting the banking business. Itis just a process of communication in which an individual exercise his/her personal potentials, tact,

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skill and ability to influence the impulse buying of the customers. Since we get in immediate feedback, the personal selling activities energies the process of communication very effectively.The personal selling in an art of persuasion. It is a highly distinctive form of promoting sale. Inpersonal selling, we find inter-personal or two-way communication that makes the ways for a feedback. There is no doubt in it that the goods or services are found half sold when the outstanding

properties are well told. This are of telling and selling is known as personal selling in which anindividual based on his/her expertise attempts to transform the prospects into customers.Sales Promotion: It is natural that like other organisations, the banking organizations also think infavour of promotional incentives both to the bankers as well as the customers. The bankingorganizations make provisions for incentives to the bankers and call this bakers promotion. Likethis, the incentives offered to the customers are known as customers promotion. There are anumber of tools generally used in the different categories of organizations in the face of the natureof goods and services sold by them. The gift, contests, fairs and shows, discount and commission,entertainment and traveling plans for bankers, additional allowances, low interest financing andretalitary are to mention a few found instrumental in promoting the banking business.As and when the banking organizations offer new services and schemes, the tools of sales

promotion are required to be innovated. This is with the motto of stimulating the new and oldcustomers. An important thing in the very context is the changing needs and requirements ofcustomers/prospects. The bank professionals bean outstanding task of studying the competitorsstrategies which would he them in initiating the process of innovation. Here it is important tomention the promotional incentives to the customers would focus on decisions related to theselection of a tool. There are a number of considerations to streamline the process. The bankprofessionals are supposed to study the market conditions and make necessary suggestions,specially regarding the incentives.It is a blending process and bank professional have to be sure the whatever the provisions, theymake are fulfilled on priority basis. More incentives more efficiency or a vice-versa conditionsmore efficiency, more-incentives motivate bankers substantially.

THE PLACE MIX

This component of the marketing mix is related to the offering of services. The two importantdecision making areas are making available the promised services to the ultimate users andselecting a suitable place for bank branches.The selection of a suitable place for the establishment of a branch is significant with the viewpointof making the place accessible and in addition, the safety and security provisions are also foundimportant. The banking organizations are not free to open a branch since the Reserve Bank of Indiaregulates the subject of branch expansion but so far as the management of branch is concerned, thebranch managers have option to select a place which is convenient to both the parties, such as theusers and the bankers. In the Indian perspective, the protection to the banks assets and safety tothe users and bankers need due weight age. The vulnerable area or regions need adequateprovisions to make the branch safe. The management of office is also found significant with theviewpoint of making the services attractive. The furnishing, civic amenities and parking facilitiescant be overlooked.Another important decision making area is related to the offering of services. This draws ourattention on the behavioral profile of bankers. The bankers in general and the front-line-staff inparticular bear the responsibility of making available the services-promised to the ultimate userswithout any distortion often a gap is found generated by front-line-staff that makes an invasion on

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the image of bank. The bank professionals or a branch manager is required to be sure that whateverthe promise have been made regarding the quality of services are not distorted. The RBI and thedifferent public sector commercial banks are required to manage the distribution processintelligently and professionally. Thus, the place mix is found to be an important decision makingarea which requires due attention, both at macro and micro levels. If the banking organizations sell

the promises it is essential that the end users get the same without any distortion.

THE PEOPLE

Sophisticated technologies, no doubt, inject life and strength to our efficiency but theinstrumentality of sophisticated technologies start turning sour if the human resources are notmanaged in a right fashion. Generation of efficiency is substantially influenced by the quality ofhuman resources. It is against this background that a majority of the management experts make astrong advocacy in favour of developing quality people and late, the people management has beeninclude dint he marketing mix of organizations is general and the service generating organizationsin particular.Not only the public sector commercial banks but almost all the public sector organization and

albeit other government departments, of late, have been facing the problem of quality peopleresulting into inefficiency, deceleration in the rate of overall productivity and profitability or so.The front-line staff are rough and indecent, the branch mangers are helpless and even the bankershave been found involved in the unfair practices. The public sector commercial banks need toassign on overriding priority to the development of quality people majority of the management ofthe experts have realized the significance of quality people in the development of an organizationand the boardrooms are also found changing their attitudes. The first task before the bankingorganizations at the apex level is to overhaul the recruitment processes. While fixing criteria forselection, they need to assign due weight age to the ethical values. The education and trainingfacilities are required to be innovated. The process of identification and inculcation need to bemanaged carefully.The foreign banks and the private sector commercial banks reward for efficiency and at the sametime also demotivate the inefficient bankers. This helps them in improving the efficiency of eventhe inefficient people. The development of human resources makes the ways for the formation ofhuman capital. Incentives, of course, inject efficiency and the organizations offering moreincentives succeed in motivating the people.

Having better and cost-effective control over operations.

Enriching the job content of employees at all level (by reducing the drudgery of mundaneoperations and increasing the analytical content of their work).

Improving the quality of decision-making, a must in the fast changing environment.

MACRO vs MICRO ECONOMIC ANALYSIS

PROBLEMS FACED BY INDIAN ECONOMY

o FALL IN SAVINGS RATIO

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The savings ratio is the % of income that is saved not spent. A fall in the savings ratio implies thatconsumer spending is increasing; often this is financed through increased borrowing.

EFFECTS OF FALL IN SAVINGS RATIO

HIGHER LEVEL OF CONSUMPTION

This results in increase in Aggregate Demand. The increase in AD will cause anincrease in economic growth and lower unemployment. However, rising AggregateDemand may cause inflation. Inflation will occur when growth is faster than the long runtrend rate. This is now a potential problem in the India. Inflation has recently gone above12%

BOOM AND BUST

A fall in the savings ratio is usually accompanied by a rise in confidence. It is therise in confidence which encourages borrowing and consumers to run down savings.Therefore, there is always a danger that a falling savings ratio can be a precursor to a boomand bust situation.

ECONOMY MORE SENSITIVE TO INTEREST RATES

With a fall in the savings ratio interest rate changes will have a bigger effect inreducing spending. This is because levels of borrowing are higher and therefore a rise ininterest rates has a significant impact on increasing interest repayments. Also, higher rates

will not be increasing incomes from savings as much.

BALANCE OF PAYMENT

With higher levels of consumer spending, there will be an increase in imports.Therefore this will lead to deterioration in the current account. The current account deficitcould put downward pressure on the exchange rate in the long term. However, some peopleargue a fall in the savings ratio is not a problem, but, it is just a reflection of strongeconomy and booming housing market, which increases scope for equity withdrawal.

o INFLATION

Inflation is posing a serious challenge to the economic growth of India. SinceJan08 onwards, inflation in the country has surged by 8.2% to hit a 13-year high of~12%. M3 growth in the economy too continued to remain strong at 20% (in July08), wellabove the RBIs comfort level of 17%.

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The WPI inflation rate flared up during the period driven by significant increase inthe prices of commodities, primary articles and manufactured products, even though verysmall part of global crude price increase has been passed on to the Indian consumers.

o GLOBAL RECESSION

It appears that Europe, Japan and the US are entering into recession. Falling houseprices, crisis in the financial system, and lower confidence could lead to a sharp downturn,with the worst still to come. Many argue that Indias growth is not so dependent on growthin the West. However, the Indian stock markets have been hit by the global crisis. Indiasgrowing service sector and manufacturing sector would be adversely impacted by a globaldownturn.

o RISE IN CRUDE PRICES

How global crude prices would behave probably has no easy answers; however we

believe that the current challenging and uncertain macro-economic conditions does not leadIndian financials into a state of crisis. But continued rise in crude prices and its resultantimpact on inflation, interest rates and government finances has the potential to do so.Hence, crude price remains the key risk to our positive stance on the Indian financials.

In the last couple of months oil prices have surged by 45% from US$ 100 to US$145 (and now back to US$ 115). India currently imports 70% of its crude requirement,resulting in pressure on government coffers on back of rising crude prices.

o DEPRICIATING INR

Surge in crude prices has severely impacted current account deficit of the country.

This coupled with the outflow of FII investments has resulted in INR to depreciate sharplyagainst dollar further fueling inflation.

IMPACT OF ECONOMIC PROBLEMS ON INDIAN FINANCIALS

The current macro-economic conditions are expected to result in

o SLOWDOWN IN CREDIT GROWTH

o IMPACT ON MARGINS OF BANKS

o PREASURE ON CREDIT QUALITY

SLOWDOWN IN CREDIT GROWTH

While the rise in interest rates should lead to a moderation in demand for credit, Indianbanks too are exercising caution while lending. Credit growth of 18% in FY09E and 17% inFY10E vs. 22% in FY08. Risks and uncertainties in the system have increased given the highercrude and commodity prices and its inflationary impact. This would curtail consumption, whichwould impact economic growth adversely. Further higher rates will not only impact the

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profitability of Indian corporate but also impact IRRs of various proposed capex projects. Thiscoupled with elections next year could lead to some postponement of capex plans of corporate,leading to negative impact on demand for credit.

Higher rates have particularly impacted retail loan growth. As can be seen in the exhibitbelow, retail loan growth has slowed down significantly from 26.5% in FY07 to ~13% in FY08.

SLR Ratioof the system has started rising since mid FY08 and currently stands at 28.7%. Giventhe expected negative impact on credit growth.

IMPACT ON MARGINS OF BANKS

During the past 18 months, CRR has increased by 400 bps to 9.0% currently and RBI hasalso discontinued with interest payment on CRR balances. Every 50 bps hike in CRR generallynegatively impacts margins by ~5 bps. Till June08, most of the banks had restrained from hikinglending rates despite significant monetary tightening. However on account of recent measures byRBI, banks have resorted to hiking PLRs in July/August by 50-150 bps to preserve their margins.

In fact in an environment, where liquidity is tight, interest rates are at elevated levels and

risk premiums have increased, the banks tend to regain the pricing power. This would not onlyhelp the banks to adequately price in risks but also help protect their margins. Apart from hikingPLRs, banks are also resorting to reprising (in fact right-pricing) the loans that were sanctionedwell below PLRs. Significant portion of fixed rate loans would also get re-priced over the period of12-18 months.

PRESSURE ON CREDIT QUALITY

Higher lending rates are expected to impact credit quality for the banking system. Theextent of the impact on credit quality would also be bank specific given the loan mix (retail vs.

corporate), proportion of unsecured lending, credit profile of corporate loan book and industrywise exposure. Indian banks fundamentals are relatively resilient with better risk managementsystems, dramatically improved asset quality, stronger recovery mechanisms (legal provisions) andwith adequate capitalization and provisioning.

Even Certain sectors (like real estate, airlines industry) might feel the stress due to thechanging macro environment and rise in interest rates. Many companies where crude forms a keyraw material component are expected to get hit more severely. Similarly, sectors like real estateand SMEs, which are interest rate sensitive, would face higher delinquencies if interest ratesstrengthen further by 100-200 bps.

NECESSARY INITIATIVES TAKEN BY RBI & MINISTRY OF FINANCE TO

TACKLE ECONOMIC PROBLEMS

As most of economists feel that the most horrible problem which India is facing currentlyis inflation which has crossed 12%. To come out of these problems RBI and ministry of finance

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and other relevant government and regulatory entities are taking various initiatives which are asfollows...

RBI MONITORY POLICY

With the introduction of the Five year plans, the need for appropriate adjustment inmonetary and fiscal policies to suit the pace and pattern of planned development becameimperative. The monitory policy since 1952 emphasized the twin aims of the economic policy ofthe government:

o Spread up economic development in the country to raise national income and standard of

living, ando To control and reduce inflationary pressure in the economy.

This policy of RBI since the First plan period was termed broadly as one of controlled

expansion, i.e.; a policy of adequate financing of economic growth and at the same time the timeensuring reasonable price stability. Expansion of currency and credit was essential to meet theincreased demand for investment funds in an economy like India which had embarked on rapideconomic development. Accordingly, RBI helped the economy to expand via expansion of moneyand credit and attempted to check in rise in prices by the use of selective controls.

OBJECTIVES OF MONITORY POLICY

PRICE STABILITY

MONITORY TARGETTING

INTEREST RATE POLICY

RESTRUCTURING OF MONEY MARKET REGULATION OF FOREIGN EXCHANGE MARKET

WEAPONS OF MONITORY POLICY

Central banks generally use the three quantitative measures to control the volume of creditin an economy, namely:

o Raising bank rates

o Open market operations and

o Variable reserve ratio

However, there are various limitations on the effective working of the quantitative

measures of credit control adapted by the central banks and, to that extent, monetary measures tocontrol inflation are weakened. In fact, in controlling inflation moderate monetary measures, bythemselves, are relatively ineffective. On the other hand, drastic monetary measures are not goodfor the economic system because they may easily send the economy into a decline.

In a developing economy there is always an increasing need for credit. Growth requirescredit expansion but to check inflation, there is need to contract credit. In such a encounter, thebest course is to resort to credit control, restricting the flow of credit into the unproductive,inflation-infected sectors and speculative activities, and diversifying the flow of credit towards the

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most desirable needs of productive and growth-inducing sector. It should be noted that theimpression that the rate of spending can be controlled rigorously by the contraction of credit ormoney supply is wrong in the context of modern economic societies. In modern community,tangible, wealth is typically represented by claims in the form of securities, bonds, etc., or nearmoneys, as they are called. Such near moneys are highly liquid assets, and they are very close to

being money. They increase the general liquidity of the economy. In these circumstances, it is notso simple to control the rate of spending or total outlays merely by controlling the quantity ofmoney. Thus, there is no immediate and direct relationship between money supply and the pricelevel, as is normally conceived by the traditional quantity theories. When there is inflation in aneconomy, monetary restraints can, in conjunction with other measures, play a useful role incontrolling inflation.

FISCAL POLICY

Fiscal policy is another type of budgetary policy in relation to taxation, public borrowing,and public expenditure. To curve the effects of inflation and changes in the total expenditure, fiscalmeasures would have to be implemented which involves an increase in taxation and decrease ingovernment spending. During inflationary periods the government is supposed to counteract anincrease in private spending. It can be cleared noted that during a period of full employmentinflation, the aggregate demand in relation to the limited supply of goods and services is reduced tothe extent that government expenditures are shortened.

Along with public expenditure, governments must simultaneously increase taxes thatwould effectively reduce private expenditure, in an effect to minimise inflationary pressures. It isknown that when more taxes are imposed, the size of the disposable income diminishes, also themagnitude of the inflationary gap in regards to the availability of the supply of goods and services.In some instances, tax policy has been directed towards restricting demand without restricting levelof production. For example, excise duties or sales tax on various commodities may take away thebuying power from the consumer goods market without discouraging the level of production.However, some economists point out that this is not a correct way of combating inflation becauseit may lead to a regressive status within the economy.

As a result, this may lead to a further rise in prices of goods and services, and inflation canspread from one sector of the economy to another and from one type of goods and services toanother. Therefore, a reduction in public expenditure, and an increase in taxes produces a cashsurplus in the budget. Keynes, however, suggested a programme of compulsory savings, such asdeferred pay as an anti-inflationary measure. Deferred pay indicates that the consumer defers a partof his or her wages by buying savings bonds (which, of course, is a sort of public borrowing),which are redeemable after a particular period of time, this is sometimes called forced savings.Additionally, private savings have a strong disinflationary effect on the economy and an increasein these is an important measure for controlling inflation. Government policy should therefore,

include devices for increasing savings. A strong savings drive reduces the spendable income of theconsumers, without any harmful effects of any kind that are associated with higher taxation.Furthermore, the effects of a large deficit budget, which is mainly responsible for inflation, can bepartially offset by covering the deficit through public borrowings. It should be noted that it is onlygovernment borrowing from non-bank lenders that has a disinflationary effect. In addition, publicdebt may be managed in such a way that the supply of money in the country may be controlled.The government should avoid paying back any of its past loans during inflationary periods, in

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order to prevent an increase in the circulation of money. Anti-inflationary debt management alsoincludes cancellation of public debt held by the central bank out of a budgetary surplus.

Fiscal policy by itself may not be very effective in combating inflation; therefore acombination of fiscal and monetary tools can work together in achieving the desired outcome.

DIRECT MEASURES

Direct controls refer to the regulatory measures undertaken to convert an open inflationinto a repressed one. Such regulatory measures involve the use of direct control on prices andrationing of scarce goods. The function of price control is a fix a legal ceiling, beyond which pricesof particular goods may not increase. When ceiling prices are fixed and enforced, it means pricesare not allowed to rise further and so, inflation is suppressed. Under price control, producerscannot raise the price beyond a specified level, even though there may be a pressure of excessivedemand forcing it up.

In times of the severe scarcity of certain goods, particularly, food grains, government mayhave to enforce rationing, along with price control. The main function of rationing is to divertconsumption from those commodities whose supply needs to be restricted for some specialreasons; such as, to make the commodity more available to a larger number of households.Therefore, rationing becomes essential when necessities, such as food grains, are relatively scarce.Rationing has the effect of limiting the variety of quantity of goods available for the good cause ofprice stability and distributive impartiality.

Another control measure that was suggested is the control of wages as it often becomesnecessary in order to stop a wage-price spiral. During galloping inflation, it may be necessary toapply a wage-profit freeze. Ceilings on wages and profits keep down disposable income and,therefore the total effective demand for goods and services. On the other hand, restrictions onimports may also help to increase supplies of essential commodities and ease the inflationarypressure. However, this is possible only to a limited extent, depending upon the balance ofpayments situation. Similarly, exports may also be reduced in an effort to increase the availabilityof the domestic supply of essential commodities so that inflation is eased.

In general, monetary and fiscal controls may be used to repress excess demand but directcontrols can be more useful when they are applied to specific scarcity areas. As a result, anti-inflationary policies should involve varied programmes and cannot exclusively depend on aparticular type of measure only.

FINANCIAL ANALYSIS

This section will show, how ING Vysya has done financially over the last three years(2005-2008).We will calculate all the financial ratios including the banking ratios also, to show how ING Vysya

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fair up against its competitors. To do that I will be using the last three years balance sheet, profitand loss account, and cash flow statement of ING Vysya.

BALANCE SHEET FROM THE YEAR (2005-2008)

Mar '06 Mar '07 Mar '08

12 mths 12 mths 12 mths

Total Share Capital 90.72 90.90 102.47

Equity Share Capital 90.72 90.90 102.47

Share Application Money 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00

Reserves 817.41 901.60 1,323.67

Revaluation Reserves 111.54 110.78 109.52

Net Worth 1,019.67 1,103.28 1,535.66

Deposits 13,335.26 15,418.59 20,498.06

Borrowings 1,107.45 843.55 1,249.81

Total Debt 14,442.71 16,262.14 21,747.87

Other Liabilities & Provisions 1,304.29 1,920.87 2,256.39

Total Liabilities 16,766.67 19,286.29 25,539.92

Mar '06 Mar '07 Mar '08


Cash & Balances with RBI 841.65 945.81 2,263.53

Balance with Banks, Money at Call 281.68 645.89 921.23

Advances 10,231.53 11,976.17 14,649.55

Investments 4,372.34 4,527.81 6,293.32

Gross Block 676.23 681.06 706.82

Accumulated Depreciation 383.02 394.33 429.31

Net Block 293.21 286.73 277.51

Capital Work In Progress 112.20 109.24 121.70

Other Assets 634.06 794.65 1,013.06

Total Assets 16,766.67 19,286.30 25,539.90

Contingent Liabilities 10,986.42 17,462.28 32,959.36

Bills for collection 2,850.13 3,033.30 3,096.69

Book Value (Rs) 100.10 109.18 139.17

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PROFIT AND LOSS ACCOUNT FROM 2005-2008

Profit & Loss account of ING Vysya Bank ------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08


Interest Earned 1,222.43 1,401.38 1,680.44

Other Income 190.31 248.57 418.57

Total Income 1,412.74 1,649.95 2,099.01

Interest expended 741.25 859.31 1,182.05

Employee Cost 234.19 238.48 302.39

Selling and Admin Expenses 161.58 170.16 140.70

Depreciation 37.20 37.98 38.93

Miscellaneous Expenses 229.47 255.10 279.99

Preoperative Exp Capitalised 0.00 0.00 0.00

Operating Expenses 572.17 576.51 645.49

Provisions & Contingencies 90.27 125.21 116.52

Total Expenses1,403.69 1,561.03 1,944.06

Mar '06 Mar '07 Mar '08


Net Profit for the Year 9.06 88.91 154.95

Extraordinary Items 0.00 0.00 0.00

Profit brought forward -34.60 1.29 18.44

Total -25.54 90.20 173.39

Preference Dividend 0.00 0.00 0.00

Equity Dividend 0.00 5.91 15.37

Corporate Dividend Tax 0.00 1.00 2.61

Earning Per Share (Rs) 1.00 9.78 15.12

Equity Dividend (%) 0.00 6.50 15.00

Book Value (Rs) 100.10 109.18 139.17

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Transfer to Statutory Reserves -26.84 64.85 53.85

Transfer to Other Reserves 0.00 0.01 0.00

Proposed Dividend/Transfer to Govt 0.00 6.91 17.98

Balance c/f to Balance Sheet 1.29 18.44 103.53

Total-25.55 90.21 175.36

CASH FLOW STATEMENT

Cash Flow of ING Vysya Bank ------------------- in Rs. Cr. -------------------

Mar'06 Mar '07 Mar '08


Net Profit Before Tax 21.52 127.63 251.46

Net Cash From Operating Activities -202.67 308.12 1426.23

Net Cash (used in)/fromInvesting Activities

-74.90 -17.62 -35.55

Net Cash (used in)/from FinancingActivities

286.41 177.87 202.38

Net (decrease)/increase In Cash and

Cash Equivalents8.84 468.37 1593.06

Opening Cash & Cash Equivalents 1114.50 1123.33 1591.70

Closing Cash & Cash Equivalents 1123.33 1591.70 3184.76

RATIO ANALYSIS

LIQUIDITY RATIOS

Liquidity ratios measures the ability of the firm to meet its current obligations (liabilities). Themost common ratios that indicate the extent of liquidity or lack of it are

1) CURRENT RATIOS2) QUICK RATIOS

3) CASH RATIOS

CURRENT RATIOS

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Current ratio is calculated by dividing current asset by current liabilities.

Current ratio = current assetCurrent liabilities.

For ING VYSYA the current ratios for last three years are.

2005-06 2006-07 2007-08

CURRENT RATIOS 1.66 2.02 2.42

As a conventional rule current ratios of 2: 1 is considered satisfactory. Looking at the current ratiosof ING Vysya we can see that in the year 2005-06 the current ratio was 1.66, which is well below

the standard. This shows that in 2005-06 the bank was not in the position to pay it currentobligations. But in the years 2006-07 and 2007-08 the current ratio of the bank has beenimproving. This shows that the bank has higher safety now, because there are more current assetsthan current liabilities.

NET WORKING CAPITAL RATIOSNet working capital is the difference between current assets and current liabilities. It is consideredthat the bank having larger NWC has the greater ability to meet its current obligations.

Net working capital ratios = NWCNet assets

2005-06 2006-07 2007-08

NWC ratio 1.03 1.11 1.19

From the table above we can see that the net working capital ratio of the bank has been increasing,which shows that the bank is much more secured now, as it can pay its current liabilities.

PROFITABILITY RATIOS

Profitability ratios are used to asses a business ability to generate earnings as compared toexpenses over a period over a time. The various profitability ratios that we will use are

1) Return on net worth

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2) Interest spread3) Earning per share4) Net profit margin

NET PROFIT MARGIN

Net profit divided by net revenues, often expressed as apercentage. This number is an indicationof how effective a company is at cost control. The higher the net profit margin is, the moreeffective the company is at converting revenue into actualprofit. The net profit margin is a goodway of comparing companies in the same industry, since such companies are generally subjectto similar business conditions. However, the net profit margins are also a good way to to comparecompanies in different industries in orderto gauge which industries are relativelymoreprofitable. The profit margin is mostly used for internal comparison. It is difficult toaccurately compare the net profit ratio for different entities. Individual businesses' operating andfinancing arrangements vary so much that different entities are bound to have different levels of

expenditure, so that comparison of one with another can have little meaning. A low profit marginindicates a low margin of safety: higher risk that a decline in sales will erase profits and result in anet loss

2005-06 2006-07 2007-08

NET PROFITMARGIN .87 6.7 7.8

As can be seen that from the data, in 2005-06 the bet profit margin of ING Vysya was just 8.7%but in 2006-07 and 2007-08( 67% and 78%) the NPM has constantly been increasing. This showsthat the bank is converting its revenues into profit. This shows that the bank is safe and there islower risk.

RETURN ON NET WORTH/RETURN ON EQUITY

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Return on net worth is used as a measure of a financial institutions profitability. It reveals howmuch profit a company generates with the money a equity shareholders have invested. It is alsocalled return on equity.

ROE/RONW = net income 100

Shareholders equity

2005-06 2006-07 2007-08

RONW 1.11% 9.36% 11%

As can be seen from the table the return on net worth or return on equity was very less in 2005-06(1.11%), but after that in the year 2006-07 the banks ROE/RONW started increasing. Thismeans that for each rupee invested by the shareholders 9.36% was returned in the form of earning.In 2007-08 the banks RONW increased to 11%.

INTEREST SPREAD

Interest spread is the difference between the average lending rate and the average borrowing rate

for a bank or other financial institution. It is:

interest income interest earning assets) - (interest expense interest bearing liabilities

This is

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