GLOBALISATION OF UNIVERSAL BANKING

GLOBALISATION OF UNIVERSAL BANKING

PROJECT ON

GLOBALISATION OF UNIVERSAL BANKING

SUBMITTED TO

PROF. SEEMA KAPOOR

SUBMITTED BY

HEMALI PANCHAL SONAL SALIAN HIBA SHAIKH NADEEM KHOJA SALMAN SHAIKH

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GLOBALISATION OF UNIVERSAL BANKING

ACKNOWLEDGEMENT We would firstly like to thank our Institution & sincere thanks to Principal Prof. A. E. Lakdawala and Vice Principal Prof. Kamala for providing us support and giving us an opportunity for doing the B&I course and completing this project. We would also like to extent our profound and sincere gratitude to our project guide Prof. Seema Kapoor who has guided our project with her vast fund of knowledge, advice and constant encouragement. We kindly appreciate her implicit and valuable contribution in drawing up this project. We also thank all our colleagues without who this project would have not been completed. Thank you all for your contribution towards the project whether big or small and will forever be indebted to each and every one of you.

GLOBALISATION OF UNIVERSAL BANKING

INTRODUCTION TO BANKING SYSTEM

INDIA: BANKING The Indian economy has grown robustly during 2006/07 for the fourth year in succession. Real Gross Domestic Product (GDP) growth accelerated due to an unprecedented consumption boom which arose from improvements in income dynamics alongside favorable demographics and spending patterns. This growth has been supported by the momentum in the services and manufacturing sectors. 'India: Banking' covers the sector overview, total assets, deposits and credits, deposit and lending interest rates, financial institutions profit and loss, capital adequacy and non- performing loans in India banking sector. It also covers the market trends and outlook, mobile banking, foreign direct investment, implementation of Basel II, industry consolidation, plus the comparative matrix and SWOT of the industry leading players: Canara Bank, Punjab National Bank, State Bank of India, ICICI Bank and HDFC Bank. BANKING SYSTEM: INTRODUCTION

The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years. The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank. However, in the introduction part of the entire banking cosmos, the past has been well explained under three different heads namely: History of Banking in India Nationalization of Banks in India Scheduled Commercial Banks in India

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The first deals with the history part since the dawn of banking system in India. Government took major step in the 1969 to put the banking sector into systems and it nationalized 14 private banks in the mentioned year. This has been elaborated in Nationalization Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial banks. In banking, a merchant bank is a financial institution primarily engaged in offering financial services and advice to corporations and wealthy individuals on how to use their money. The term can also be used to describe the private equity activities of banking.

DEFINITION AND CONCEPT OF UNIVERSAL BANKING

DEFINITION OF UNIVERSAL BANKING Universal Banking is a multi-purpose and multi-functional financial supermarket (a company offering a wide range of financial services e.g. stock, insurance and realestate brokerage) providing both banking and financial services through a single window. As per the World Bank, "In Universal Banking, large banks operate extensive network of branches, provide many different services, hold several claims on firms(including equity and debt) and participate directly in the Corporate Governance of firms that rely on the banks for funding or as insurance underwriters". In a nutshell, a Universal Banking is a superstore for financial products under one roof. Corporate can get loans and avail of other handy services, while can deposit and borrow. It includes not only services related to savings and loans but also investments. However in practice the term 'universal banking' refers to those banks that offer a wide range of financial services, beyond the commercial banking functions like Mutual Funds, Merchant Banking, Factoring, Credit Cards, Retail loans, Housing Finance, Auto loans, Investment banking, Insurance etc. This is most common in European countries. For example, in Germany commercial banks accept time deposits, lend money, underwrite corporate stocks, and act as investment advisors to large corporations. In Germany, there has never been any separation between commercial banks and investment banks, as there is in the United States.

THE CONCEPT OF UNIVERSAL BANKING

GLOBALISATION OF UNIVERSAL BANKING

The entry of banks into the realm of financial services was followed very soon after the introduction of liberalization in the economy. Since the early 1990s structural changes of profound magnitude have been witnessed in global banking systems. Large scale mergers, amalgamations and acquisitions between the banks and financial institutions resulted in the growth in size and competitive strengths of the merged entities. Thus, emerged new financial conglomerates that could maximize economies of scale and scope by building the production of financial services organization called Universal Banking. By the mid-1990s, all the restrictions on project financing were removed and banks were allowed to undertake several in-house activities. Reforms in the insurance sector in the late 1990s, and opening up of this field to private and foreign players also resulted in permitting banks to undertake the sale of insurance products. At present, only an 'arm's length relationship between a bank and an insurance entity has been allowed by the regulatory authority, i.e. IRDA (Insurance Regulatory and Development Authority). The phenomenon of Universal Banking as a distinct concept, as different from Narrow Banking came to the forefront in the Indian context with the Narsimham Committee (1998) and later the Khan Committee (1998) reports recommending consolidation of the banking industry through mergers and integration of financial activities.

EMPIRICAL BACKGROUND OF UNIVERSAL BANKING:

The entry of banks into the realm of financial services was followed very soon after Liberalization in the economy. Since the early 1990s, structural changes of profound magnitude came to be witnessed in global banking systems. Large scale mergers, amalgamations and acquisitions among the banks and financial institutions resulted in the growth in size and competitive strengths of the merged entities. There thus emerged new financial conglomerates that could maximize Economies of Scale and Scope by building the production of financial services organization called Universal Banking.

GLOBALISATION OF UNIVERSAL BANKING

By the mid 1990s, all the restrictions on Project Financing were removed and banks were allowed to undertake several activities in house. Reforms in the insurance sector in the late 1990s, and opening up of this field to private and foreign players also resulted in permitting banks to undertake sale of Insurance products. At present, only an 'arms length' relationship between a bank and insurance entity has been allowed by the regulatory authority, i.e.-IRDA (Insurance Regulatory & Development Authority). The phenomenon of Universal Banking as a distinct concept, as different from Narrow Banking came to the forefront in the Indian context with II Narsimham Committee (1998) and later the Khan Committee (1998) reports recommending consolidation of the banking industry through mergers and integration of financial activities.

THE NEED BEHIND THE ADVENT OF UNIVERSAL BANKING

Liberalization and the banking reforms have given new avenues to Development Finance Institutions (DFIs) to meet the broader market. They can avail the options to involve in deposit banking and short term lending as well. DFIs were set up with the objective of taking care of the investment needs of industries. They have build up expertise in Merchant Banking and Project Evaluation. So, saddled with obligations to fund long gestation projects, the DFIs have been burdened with serious mismatches between their assets and liabilities of the balance sheet. In this context, the Narsimham Committee II had suggested DFIs should convert into banks or Non-Banking Finance Companies. Converting of these DFIs into Universal Banks will grant them ready access to cheap retail deposits and increase the coverage of the advances to include short term working capital loans to corporates with greater operational flexibility. At that time DFIs were in the need to acquire a lot of mass in their volume of operations to solve the problem of total asset base and net worth. So, the emergence of Universal Banking was the solution for the problem of banking sector.

A SOLUTION OF UNIVERSAL BANKING COUPLED WITH SWOT 7

GLOBALISATION OF UNIVERSAL BANKING

The solution of Universal Banking was having many factors to deal with which further categorized under Strengths, Weaknesses, Opportunities and Threats.

1. Strengths: Economies Of Scale The main advantage of Universal Banking is that it results in greater economic efficiency in the form of lower cost, higher output and better products. Various Reserve Banks Committees and reports in favor of Universal Banking, is that it enables banks to exploit economies of scale and scope. It means a bank can reduce average costs and thereby improve spreads if it expands its scale of operations and diversifying activities. Profitable Diversions By diversifying the activities, the bank can use its existing expertise in one type of financial service in providing other types. So, it entails less cost in performing all the functions by one entity instead of separate bodies. Resource Utilization A bank possesses the information on the risk characteristics of the clients, which it can use to pursue other activities with the same client. A data collection about the market trends, risk and returns associated with portfolios of Mutual Funds, diversifiable and non diversifiable risk analysis, etc are useful for other clients and information seekers. Automatically, a bank will get the benefit of being involved in Research. Easy marketing on the foundation a of Brand name A bank has an existing network of branches, which can act as shops for selling

GLOBALISATION OF UNIVERSAL BANKING

products like Insurance, Mutual Fund without much efforts on marketing, as the branch will act here as a parent company or source. In this way a bank can reach the remotest client without having to take recourse ton an agent. One stop shopping The idea of 'one stop shopping' saves a lot of transaction costs and increases the speed of economic activities. It is beneficial for the bank as well as customers. Investor friendly activities Another manifestation of Universal Banking is bank holding stakes in a firm. A bank's equity holding in a borrower firm, acts as a signal for other investors on to the health of the firm, since the lending bank is in a better position to monitor the firm's activities. 2. Weaknesses: Grey area of Universal Bank The path of Universal Banking for DFIs is strewn with obstacles. The biggest one is overcoming the differences in regulatory requirements for a bank and DFI. Unlike banks, DFIs are not required to keep a portion of their deposits as cash reserves. No expertise in long term lending In the case of traditional project finance an area where DFIs tread carefully, becoming a bank may not make a big difference. Project finance and Infrastructure Finance are generally long gestation projects and would require DFIs to borrow long term. Therefore, the transformation into a bank may not be of great assistance in lending long-term. NPA problem remained intact The most serious problem of DFIs have had to encounter is bad loans or Non Performing Assets (NPA). For the DFIs and Universal Banking or installation of cutting-edge-technology in operations are unlikely to improve the situation concerning NPAs. Most of the NPAs came out of loans to commodity sectors, such as steel, chemicals, textiles, etc. the improper use of DFI funds by project promoters, a sharp change in operating environment and poor appraisals by DFIs combined to destroy the viability of some projects. So, instead of improving the situation

GLOBALISATION OF UNIVERSAL BANKING

Universal Banking may worsen the situation, due to the expansion in activities banks will fail to make thorough study of the actual need of the party concerned, the prospect of the business, in which it is engaged, its track record, the quality of the management, etc. ICICI suffered the least in this section, but the IDBI has got worst hit of NPAs, considering the negative developments at Dabhol Power Company (DPC) 3. Threats: Big Empires Universal Banking is an outcome of the mergers and acquisitions in the banking sector. The Finance Ministry is also empathetic towards it. But there will be big empires which may put the economy in a problem. Universal Banks will be the largest banks, by their asset base, income level and profitability there is a danger of 'Price Distortion'. It might take place by manipulating interests of the bank for the self interest motive instead of social interest. There is a threat to the overall quality of the products of the bank, because of the possibility of turning all the strengths of the Universal Banking into weaknesses. (e.g. - the strength of economies of scale may turn into the degradation of qualities of bank products, due to over expansion. If the banks are not prudent enough, deposit rates could shoot up and thus affect profits. To increase profits quickly banks may go in for riskier business, which could lead to a full in asset quality. Disintermediation and securitization could further affect the business of banks. 4. Opportunities: To increase efficiency and productivity Liberalization offers opportunities to banks. Now, the focus will be on profits rather than on the size of balance sheet. Fee based incomes will be more attractive than mobilizing deposits, which lead to lower cost funds. To face the increased competition, banks will need to improve their efficiency and productivity, which will lead to new products and better services.

To get more exposure in the global market In terms of total asset base and net worth the Indian banks have a very long road to travel when compared to top 10 banks in the world. (SBI is the only Indian bank to

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appear in the top 100 banks list of 'Fortune 500' based on sales, profits, assets and market value. It also ranks II in the list of Forbes 2000 among all Indian companies) as the asset base sans capital of most of the top 10 banks in the world are much more than the asset base and capital of the entire Indian banking sector. In order to enter at least the top 100 segment in the world, the Indian banks need to acquire a lot of mass in their volume of operations. Pure routine banking operations alone cannot take the Indian banks into the league of the Top 100 banks in the world. Here is the real need of universal banking, as the wide range of financial services in addition to the Commercial banking functions like Mutual Funds, Merchant banking, Factoring, Insurance, credit cards, retail, personal loans, etc. will help in enhancing overall profitability. To eradicate the 'Financial Apartheid' A recent study on the informal sector conducted by Scientific Research Association for Economics (SRA), a Chennai based association, has found out that, 'Though having a large number of branch network in rural areas and urban areas, the lowest strata of the society is still out of the purview of banking services. Because the small businesses in the city, 34% of that goes to money lenders for funds. Another 6.5% goes to pawn brokers, etc. The respondents were businesses engaged in activities such as fruits and vegetables vendors, laundry services, provision stores, petty shops and tea stalls. 97% of them do not depend the banking system for funds. Not because they do not want credit from banking sources, but because banks do not want to lend these entrepreneurs. It is a situation of Financial Apartheid in the informal sector. It means with the help of retail and personal banking services Universal Banking can reach this stratum easily.

PROS AND CONS OF UNIVERSAL BANKING

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The solution of Universal Banking was having many factors to deal with, which can be further analyzed by the pros and cons.

ADVANTAGES OF UNIVERSAL BANKING Economies of Scale. The main advantage of Universal Banking is that it results in greater economic efficiency in the form of lower cost, higher output and better products. Many Committees and reports by Reserve Bank of India are in favour of Universal banking as it enables banks to explit economies of scale and scope. Profitable Diversions. By diversifying the activities, the bank can use its existing expertise in one type of financial service in providing other types. So, it entails less cost in performing all the functions by one entity instead of separate bodies. Resource Utilization. A bank possesses the information on the risk characteristics of the clients, which can be used to pursue other activities with the same clients. A data collection about the market trends, risk and returns associated with portfolios of Mutual Funds, diversifiable and non diversifiable risk analysis, etc, is useful for other clients and information seekers. Automatically, a bank will get the benefit of being involved in the researching. Easy Marketing on the Foundation of a Brand Name. A bank's existing branches can act as shops of selling for selling financial products like Insurance, Mutual Funds without spending much efforts on marketing, as the branch will act here as a parent company or source. In this way, a bank can reach the client even in the remotest area without having to take resource to an agent.

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One-stop shopping. The idea of 'one-stop shopping' saves a lot of transaction costs and increases the speed of economic activities. It is beneficial for the bank as well as its customers. Investor Friendly Activities Another manifestation of Universal Banking is bank holding stakes in a form: a bank's equity holding in a borrower firm, acts as a signal for other investor on to the health of the firm since the lending bank is in a better position to monitor the firm's activities. DISADVANTAGES OF UNIVERSAL BANKING Grey Area of Universal Bank. The path of universal banking for DFIs is strewn with obstacles. The biggest one is overcoming the differences in regulatory requirement for a bank and DFI. Unlike banks, DFIs are not required to keep a portion of their deposits as cash reserves. No Expertise in Long term lending. In the case of traditional project finance, an area where DFIs tread carefully, becoming a bank may not make a big difference to a DFI. Project finance and Infrastructure finance are generally long- gestation projects and would require DFIs to borrow long- term. Therefore, the transformation into a bank may not be of great assistance in lending long-term. NPA Problem Remained Intact. The most serious problem that the DFIs have had to encounter is bad loans or NonPerforming Assets (NPAs). For the DFIs and Universal Banking or installation of cutting-edge-technology in operations are unlikely to improve the situation concerning NPAs.

UNIVERSAL BANKING IN INDIA

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In India Development financial institutions (DFIs) and refinancing institutions (RFIs)were meeting specific sectoral needs and also providing long-term resources at concessional terms, while the commercial banks in general, by and large, confined themselves to the core banking functions of accepting deposits and providing working capital finance to industry, trade and agriculture. Consequent to the liberalisation and deregulation of financial sector, there has been blurring of distinction between the commercial banking and investment banking. Reserve Bank of India constituted on December 8, 1997, a Working Group under the Chairmanship of Shri S.H. Khan to bring about greater clarity in the respective roles of banks and financial institutions for greater harmonization of facilities and obligations .Also report of the Committee on Banking Sector Reforms or Narasimham Committee(NC) has major bearing on the issues considered by the Khan Working Group. The issue of universal banking resurfaced in Year 2000, when ICICI gave a presentation to RBI to discuss the time frame and possible options for transforming itself into an universal bank. Reserve Bank of India also spelt out to Parliamentary Standing Committee on Finance, its proposed policy for universal banking, including a case-by-case approach towards allowing domestic financial institutions to become universal banks. Now RBI has asked FIs, which are interested to convert itself into a universal bank, to submit their plans for transition to a universal bank for consideration and further discussions. FIs need to formulate a road map for the transition path and strategy for smooth conversion into a universal bank over a specified time frame. The plan should specifically provide for full compliance with prudential norms as applicable to banks over the proposed period.

SALIENT OPERATIONAL AND REGULATORY ISSUES OF RBI TO BE ADDRESSED BY THE FIs FOR CONVERSION INTO A UNIVERSAL BANK

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Reserve requirements Compliance with the cash reserve ratio and statutory liquidity ratio requirements (under Section 42 of RBI Act, 1934, and Section 24 of the Banking Regulation Act, 1949, respectively) would be mandatory for an FI after its conversion into a universal bank. Permissible activities Any activity of an FI currently undertaken but not permissible for a bank under Section 6(1) of the BRAct, 1949, may have to be stopped or divested after its conversion into a universal bank. Disposal of non-banking assets Any immovable property, howsoever acquired by an FI, would, after its conversion into a universal bank, be required to be disposed of within the maximum period of 7 years from the date of acquisition, in terms of Section 9 of the BRAct. Composition of the Board. Changing the composition of the Board of Directors might become necessary for some of the FIs after their conversion into a universal bank, to ensure compliance with the provisions of Section 10(A) of the B. R. Act, which requires at least 51% of the total number of directors to have special knowledge and experience. Prohibition on floating charge of assets. The floating charge, if created by an FI, over its assets, would require, after its conversion into a universal bank, ratification by the Reserve Bank of India under Section 14(A) of the B. R. Act, since a banking company is not allowed to create a floating charge on the undertaking or any property of the company unless duly certified by RBI as required under the Section. Nature of subsidiaries If any of the existing subsidiaries of an FI is engaged in an activity not permitted under Section 6(1) of the B R Act , then on conversion of the FI into a universal bank, delinking of such subsidiary / activity from the operations of the universal bank would become necessary since Section 19 of the Act permits a bank to have subsidiaries only for one or more of the activities permitted under Section 6(1) of B.R. Act. Restriction on investments An FI with equity investment in companies in excess of 30 per cent of the paid up share capital of that company or 30 per cent of its own paid-up share capital and

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reserves, whichever is less, on its conversion into a universal bank, would need to divert such excess holdings to secure compliance with the provisions of Section 19(2) of the BR Act, which prohibits a bank from holding shares in a company in excess of these limits. Connected lending Section 20 of the B. R. Act prohibits grant of loans and advances by a bank on security of its own shares or grant of loans or advances on behalf of any of its directors or to any firm in which its director/manager or employee or guarantor is interested. The compliance with these provisions would be mandatory after conversion of an FI to a universal bank. Licensing An FI converting into a universal bank would be required to obtain a banking license from RBI under Section 22 of the B. R. Act, for carrying on banking business in India, after complying with the applicable conditions. Branch network An FI, after its conversion into a bank, would also be required to comply with extant branch licensing policy of RBI under which the new banks are required to allot at least 25 per cent of their total number of branches in semi-urban and rural areas. Assets in India An FI after its conversion into a universal bank, will be required to ensure that at the close of business on the last Friday of every quarter, its total assets held in India are not less than 75 per cent of its total demand and time liabilities in India, as required of a bank under Section 25 of the BR Act. Format of annual reports After converting into a universal bank, an FI will be required to publish its annual balance sheet and profit and loss account in the forms set out in the Third Schedule to the B R Act, as prescribed for a banking company under Section 29 and Section 30 of the B. R. Act. Managerial remuneration of the Chief Executive Officers On conversion into a universal bank, the appointment and remuneration of the existing Chief Executive Officers may have to be reviewed with the approval of

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RBI in terms of the provisions of Section 35 B of the B. R. Act. The Section stipulates fixation of remuneration of the Chairman and Managing Director of a bank by Reserve Bank of India taking into account the profitability, net NPAs and other financial parameters. Under the Section, prior approval of RBI would also be required for appointment of Chairman and Managing Director. Deposit insurance. An FI, on conversion into a universal bank, would also be required to comply with the requirement of compulsory deposit insurance from DICGC up to a maximum of Rs.1 lakh per account, as applicable to the banks. Authorized Dealer's License Some of the FIs at present hold restricted AD license from RBI, Exchange Control Department to enable them to undertake transactions necessary for or incidental to their prescribed functions. On conversion into a universal bank, the new bank would normally be eligible for full-fledged authorized dealer license and would also attract the full rigour of the Exchange Control Regulations applicable to the banks at present, including prohibition on raising resources through external commercial borrowings. Priority sector lending . On conversion of an FI to a universal bank, the obligation for lending to "priority sector" up to a prescribed percentage of their 'net bank credit' would also become applicable to it. Prudential norms. After conversion of an FI in to a bank, the extant prudential norms of RBI for the all-India financial institutions would no longer be applicable but the norms as applicable to banks would be attracted and will need to be fully complied with.

THE FUTURE TREND OF UNIVERSAL BANKING IN DIFFERENT COUNTRIES 17

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Universal banks have long played a leading role in Germany, Switzerland, and other Continental European countries. The principal financial institutions in these countries typically are universal banks offering the entire array of banking services. Continental European banks are engaged in deposit, real estate and other forms of lending, foreign exchange trading, as well as underwriting, securities trading, and portfolio management. In the Anglo-Saxon countries and in Japan, by contrast, commercial and investment banking tend to be separated. In recent years, though, most of these countries have lowered the barriers between commercial and investment banking, but they have refrained from adopting the Continental European system of universal banking. In the United States, in particular, the resistance to softening the separation of banking activities, as enshrined in the Glass-Steagall Act, continues to be stiff. In Germany and Switzerland the importance of universal banking has grown since the end of World War II. Will this trend continue so that universal banks could completely overwhelm the specialized institutions in the future? ARE THE SPECIALIZED BANKS DOOMED TO DISAPPEAR? THIS QUESTION CANNOT BE ANSWERED WITH A SIMPLE "YES" OR "NO" The German and Swiss experiences suggest that three factors will determine future growth of universal banking. First Universal banks no doubt will continue to play an important role. They possess a number of advantages over specialized institutions. In particular, they are able to exploit economies of scale and scope in banking. These economies are especially important for banks operating on a global scale and catering to customers with a need for highly sophisticated financial services. As we saw in the preceding section, universal banks may also suffer from various shortcomings. However, in an increasingly competitive environment, these defects will likely carry far less weight than in the past. Second Although universal banks have expanded their sphere of influence, the smaller specialized institutions have not disappeared. In both Germany and Switzerland, they are successfully coexisting and competing with the big banks. In Switzerland, for example, the specialized institutions are firmly entrenched in such areas as real estate lending, securities trading, and portfolio management. The

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continued strong performance of many specialized institutions suggests that universal banks do not enjoy a comparative advantage in all areas of banking. Third Universality of banking may be achieved in various ways. No single type of universal banking system exists. The German and Swiss universal banking systems differ substantially in this regard. In Germany, universality has been strengthened without significantly increasing the market shares of the big banks. Instead, the smaller institutions have acquired universality through cooperation. It remains to be seen whether the cooperative approach will survive in an environment of highly competitive and globalized banking.

CASE STUDY: ICICI GEARING TO BECOME A UNIVERSAL BANK

ICICI envisages a timeframe of 12 to 18 months in converting itself into a Universal Bank. ICICI has received favourable response from Indian investors and FIIs on its move to merge with ICICI Bank and become a universal bank. ICICI was the first one to propagate universal banking as an ideal concept for the DFIs to support industries with low cost funds. In August, ICICI executive director Kalpana Morparia said that ICICI has to obtain a separate banking license from RBI for becoming a universal bank. It can avoid the stamp duty burden by first converting ICICI into bank, instead of going for a direct merger of ICICI into ICICI Bank. We have created fire walls and functioning as separate legal entities only for complying with statutory obligations, she noted. There is clear demarcation in the operation of ICICI and the bank. The bank takes care of liabilities of less than one year by offering short-term loans to corporates and personal loans. Medium to long-term products like home loans, auto loans are handled by the parent; absolute coordination between them while marketing the products exists. Crisil has reaffirmed its triple A rating for ICICI and FIIs also expects its profit margins to improve after the merger due to the access to low cost deposits & the scope to increase income from fee-based activities. She said ICICI has started increasing its international presence and associating closely with NRI community in various countries. ICICI InfoTech is based in US & has an office in Singapore. ICICI Securities has been registered as a broking firm in the US.

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ICICI Bank is leveraging on strong network of 400 branches and extension counters & 600 ATMs for offering products to NRIs; NRIs can transfer their money to 200 locations in India by internet. The payment will be made within 72 hours. It also offers loan products for helping their relatives in India. Besides, the Visa card helps them to withdraw cash through the ATM network. Morparia said NPA of banks in India are < 10 per cent of GDP when compared to emerging economies like China, Korea & Thailand. It should not be compared with developed countries like Europe and US. ICICIs gross NPA comes to Rs 6,000 crore. Asked about a approach to resolve the problem, she said if the units are viable, it supported financial restructuring, mergers. If these options arent possible and the units are not viable, it will go in for one time settlement. Because of law, once the units are referred to BIFR, the lenders were unable to enforce securities, she pointed out.

CONCLUSION
The development of universal banks has to in line with the policy direction of central bank, because it is important to keep the stability of financial system and the economy as whole. There are three important areas that must be concerned related to universal bank operations, such as: the strengthened of capital and advanced risk management system. Consequently, in order to manage universal bank, people need to be aware about the unique of the risk type in universal banking. Furthermore, policy maker must also consider about the implication of universal banks in financial system.

WEBLIOGRAPHY 20

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www.gktoday.in http://www.authorsden.com/visit/viewArticle.asp?id=8673 http://www.indianmba.com/Occasional_Papers/OP157/op157.html http://www.freelists.org/post/sbinews/Universal-Banking-The-Road-Ahead-FromIndiainfolinecom http://www.investopedia.com/terms/u/universalbanking.asp#ixzz1h04swYfd http://www.indianmba.com/Faculty_Column/FC405/fc405.html http://www.befi.in/news/Impact%20of%20Globalisation%20-%20Final.pdf

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