COMPREHENSIVE STUDY OF INDIAN BANKING SYSTEM
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The introduction and application of the concept of customer services entered in a welcoming wayin India only after independence. The banking system in India has come a long way during thelast two centuries. Its growth was faster and the coverage wider since 1969. In 1969a majorposition of banking sector was entrusted to the public sector. This process continued andembraced few private banks in 1980.The transfer of ownership of banks from the public to private was aimed at entrusting the bankswith greater responsibilities for the economic development of India by taking banking services tothe masses and taking special care of the weaker section of the society and the priority sector ofthe economy. Though the number of banks offices magnitude and the variety of their operationshas grown considerably during the period of near about three decades, but it appears that thebanking sector has entered into serious among customers.For overcoming this problem, banking industry should seek introspection and adopt refinedmanagement techniques. It has been endeavor of this study to analyze the present state of variousbanks keeping in view the primary data has been collected regarding the present state of loanschemes in various banks by using a questionnaire.
The Indian Economy is driven by strong fundamentals with GDP growth at 9.1% for H1 FY07 –strongest growth in any six months since H1 FY04 and uptrend in Industrial Cycle with AverageIndex of Industrial Production growth at 10.2% being the strongest run in the past 11 years.On political front, the Indian Government has signed nuclear deal with America indicatingIndia’s importance in the global context opening up many opportunities. Along with this,Chinese President Hu is expected to visit India. This will improve trade and other ties betweentwo of the fastest growing economies.In Capital Market, Strong foreign inflows with Portfolio flows of nearby USD 9.2bn took BSESensex to 14,000 + (50% higher) compared to FY 05-06. The Indian corporate raised USD 6bnby issuing Initial public offer in India and abroad. High Credit growth at 30%, it continued thetrend of last 5 years where it has averaged around 25% and lastly M&A activity which was at itspeak with sectors beyond IT and Pharma making global & domestic acquisitions.
The high growth sectors are Power where power ministry and local private playersannounce 9 ultra mega projects (4,000 MW each) provides visibility on power & infrafront.
Retail - a Point of inflection with major Indian corporate announcing plans, entry ofworld majors like Wal-Mart & foreign investment allowed in single brand retail and RealEstate with major huge build-out plans and Special Economic Zone policy of governmentis major driver of growth.
Banking in which Banks are allowed to raise hybrid capital which opens new avenues forfunding credit growth.As such, the report focus on change factors in Banking Industry as this industry is expected tohave major impact on Indian Economy.
In India, given the relatively underdeveloped capital market and with little internal resources,firms and economic entities depend, largely, on financial intermediaries to meet their fundrequirements. In terms of supply of credit, financial intermediaries can broadly be categorized asinstitutional and non-institutional. The major institutional suppliers of credit in India are banksand non-bank financial institutions (that is, development financial institutions or DFIs), otherfinancial institutions (FIs), and non-banking finance companies (NBFCs). The non-institutionalor unorganized sources of credit include indigenous bankers and money-lenders. Informationabout the unorganized sector is limited and not readily available.An important feature of the credit market is its term structurea) Short-term credit(b) Medium-term credit© Long-term credit.While banks and NBFCs predominantly cater for short-term needs, FIs provide mostly mediumand long-term funds.