The Indian Institute Of Business Management & Studies

Subject: Banking Management. Marks: 100

Note : Both the sections are compulsory.
Section I
CAS I : BAN!IN" ON #$ATIONS%I&
The birth of ABC Bank took place after the RB issue! gui!elines for the entr" of ne# pri$ate sector
banks in %anuar" 1&&'. Subse(uentl") the promoter of ABC Bank sought permission to establish a
commercial bank an! retaine! *+M,) a management consultant of international repute) to prepare the
groun!#ork for establishing a commercial bank. The Reser$e Bank of n!ia con$e"e! its appro$al in principle
to establish ABC Bank on -ebruar" 11) 1&&.. Thereafter) the Bank #as incorporate! un!er The Companies
Act in September 1&&.. The bank starte! its operations in /o$ember 1&&0. The ABC Bank #as promote! b"
the tenth largest !e$elopment bank in the #orl!) #hich ha! a magnificent recor! of promoting #orl!1class
institutions in n!ia. The promoter #as a strategic in$estor in a plethora of institutions) #hich ha!
re$olutioni2e! the n!ian financial markets.
*eeping in line #ith its polic" of le$eraging technolog" to !ri$e its business) ABC Bank !eplo"e!
-inacle) the e1age banking solution from nfos"s to consoli!ate its position) meet challenges an! (uickl"
sei2e ne# business opportunities. The entire -inacle rollout #as remarkable) consi!ering the fact that it #as
implemente! across all branches in a recor! timeframe of 0 months. -inacle pro$i!e! the critical technolog"
platform to propel the bank3s operations #ith ne# thrust an! !irection. The bank also implemente! *on!or 4
a treasur" front office soft#are from Reuters an! TMS 4 treasur" back office soft#are from S"nerg" 5ogin.
The achie$ement of these significant milestones #as consistent #ith ABC Bank3s continue! focus to create
customer an! sharehol!er $alue through !eplo"ment of superior technolog". n$estments in technolog" #ere
a part of the plan to put in place buil!ing blocks for creating the right organi2ational infrastructure. n future)
it #oul! help ABC Bank to consistentl" !eli$er superior pro!ucts) con$enient access channels an! efficient
ser$ice to its retail an! corporate customers. 5arge in$estments ha! been ma!e in back1en! technolog" to
strengthen processes) s"stems an! control. This) in the long run) propelle! b" a top (ualit" management
team) clearl" set ABC Bank apart from its competitors.
ABC Bank #as a pioneer an! an inno$ator in bringing state1of1the1art ser$ices to its customers. t
#as the first pri$ate bank to enter an! capture ne# markets. t #as the first n!ian Bank to pro$i!e 4 ATM
/e6t 7an information portal on ATMs89 nstant Account :pening9 Talking ATMs9 ,iftCar! 7+repai! ,ift Car!89
;as"-ill 7nstant Mobile Refill Ser$ice8 4 along #ith other ser$ices. The Bank intro!uce! a SMS alert ser$ice)
#hich ga$e the customers) up!ate! information on an" transaction. The Bank ha! collaboration #ith other
organi2ations ren!ering relate! ser$ices 4nsurance) /ational Sa$ing Certificates an! +ost office Ser$ice 4
pro$i!ing a platform to interact #ith potential customers as #ell as offering other ser$ices to its e6isting
customers. t also trie! to tap potential rural market segments) #hich ha! not been e6plore! b" an" other
pri$ate bank. A ke" achie$ement for the Bank #as that it emerge! as the highest !istributor for t#o top
1
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
Mutual -un! Schemes consistentl" in the past) thereb" !emonstrating the strength of the Bank3s !istribution
channel of T+< business. t ha! registere! huge success as a collecting bank to se$eral market +:s that
conse(uentl" le$erage! the +: financing business. t launche! a strategic B=B ;1Commerce platform #ith
B+C5 to facilitate online pa"ments from B+C5 to its !ealers) thereb" enhancing corporate business through
ne#1age technolog" an! offering Suppl" Chain -inancing Solutions. Corporate banking relationships #ere
offere! at =0 locations across the countr" an! total Banking Solutions to its corporate customers 7Anne6ure8.
The >alue Chain Management ,roup also offere! Suppl" Chain -inance Solutions to $arious
Corporates an! special pro!ucts like loan against cre!it car! recei$ables. The lifeline of ABC Bank #ere its
people) gro#ing at a $er" fast pace. The a$erage age of the emplo"ee at ABC Bank #as '1 "ears.
Appro6imatel" ?'@ of the emplo"ee strength #as in the junior management categor" 7#hich inclu!e!
trainees an! probationers8) #hile 1.@ ma!e up the mi!!le le$el management. The remaining constitute!
the senior an! top management. The $arious business units comprise! of A0@) #hile support functions
ma!e up for 1=@) an! operations for the remaining 1'@ of the total manpo#er strength of the Bank. The
bank ha! rolle!1out broa! base! grant of stock options co$ering A0@ of the emplo"ees to align their
interests #ith those of its sharehol!ers. The bank ha! a stats1of1the1art training centre at Mumbai an! e$er"
emplo"ee recei$e! on an a$erage .0 hours of training) annuall".
ABC Bank entere! /agpur market in t#o phases. n the first phase) it starte! #ith corporate banking
an! establishe! itself as the best ser$ice pro$i!er. After#ar!s) it le$erage! its strengths b" entering into
retail banking. Although) relati$el" a late entrant in the retail banking sector) it ac(uire! eas" access in the
ne# segment !ue to its bran! image in corporate banking. n retail banking) ABC Bank opte! for selecti$e
penetration base! on t#o main factors 4 $olume of business an! cre!ibilit" of the account. This enable!
them to create greater satisfaction in the customers3 min!. nitiall") it starte! #ith the criteria of an a$erage
(uarterl" cash balance of Rs =0)000 focusing on premium segment. 5ater on) to further penetrate the
market) it re!uce! the a$erage (uarterl" cash balance to Rs 0)000 an! segmente! the market on the basis
of nature of business) $olume an! number of transactions per month. n this phase) b" re!ucing the
minimum a$ailable balance) it tappe! other in!i$i!ual customer accounts !uring the course of its e6pansion.
ABC ha! al#a"s been particular about the specific nee!s of the customer an! maintaining
consistenc" in the (ualit" of pro!ucts an! ser$ices pro$i!e!. The bank emphasi2e! on !ealing #ith them on
a one1to1one basis an! pro$i!ing tailor1ma!e pro!ucts. n course of penetrating this segment) ABC bank
achie$e! great success !ue to its !eep un!erstan!ing of the nee!s an! e6pectations of local customers. :n
the other han!) some of the competitors #ho !ispla"e! gran! success in the beginning coul! not sustain it
because of a mismatch bet#een e6pectations of the customers an! !eli$er" of ser$ices. As promotion #as
mainl" through #or!1of1mouth) the bank operate! on the philosoph" that 0 satisfie! customers bring 0 ne#
customers #hereas 0 !issatisfie! customers break =0 e6isting customers. Therefore) the" focuse! about
maintaining (ualit" of ser$ices an! customer satisfaction. The bank #as $er" particular about re!ucing the
turnaroun! time in e6ten!ing its ser$ices to the customers. t also acte! as an in$estment consultant for
their in!i$i!ual customers.
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
Apart from offering Btailor1ma!e3 pro!ucts) the bank maintaine! a continuous personal relationship
#ith each of its e6isting customer) base! on their business potentials. The" took regular fee!backs from the
customers an! respon!e! sincerel" to their suggestions or complaints. The" use! to call up their premium
customers once a #eek) asking for their $ie#s on the ser$ices offere! b" the bank an! suggestions to
impro$e the same. To enable an impartial communication s"stem) the bank create! a !e!icate! e1mail < for
customers3 (ueries an! complaints) #hich establishe! a !irect link bet#een them an! corporate office. The
complaints an! (ueries recei$e! from the customers #ere then for#ar!e! to the concerne! branch offices for
imme!iate re!ressal an! branch hea!s #ere aske! to confirm the same. These complaint re!ressals forme!
an important component in performance e$aluation of the branch as #ell as the concerne! emplo"ee.
;$en though a large group promote! ABC Bank) its in!epen!ent asset base #as limite!) #hich pose!
a problem to finance large organi2ations. The limite! asset base of the bank create! hur!les in the
e6pansion of its business. n $ie# of ha$ing just t#o branches) RB gui!elines !i! not permit ABC to ha$e its
o#n currenc" chest at /agpur) thereb" affecting smooth management of har! cash. The bank ha! an
insurance co$er for a gi$en amount of cash it coul! hol!. Chen the cash inflo# increase! o$er the gi$en
limit) keeping a!!itional har! cash #ith the bank increase! risk. Therefore) it became necessar" to transfer it
to the right place. n the cit" of /agpur) ABC ha! onl" t#o branches) though its customer base #as $er"
large an! continuousl" increasing. The changing economic scenario #as e6pan!ing business opportunities for
the Bank. Butibori) a place '0 kms from /agpur) #as e6pecte! to be !eclare! as a Special ;conomic Done)
#hich #oul! attract more in!ustries an! accelerate the relate! business acti$ities in the region.
An increasing number of pri$ate an! foreign banks ha! begun entering /agpur. The promotional
acti$ities of these multinational banks increase! a#areness about pri$ate banking amongst the people in the
region. ABC Bank also planne! to e6pan! its ser$ices in cre!it car!s an! other $alue a!!e! ser$ices. Cith
the entr" of foreign an! pri$ate banks in /agpur) the scenario #as becoming more competiti$e an! comple6.
As the ne# pla"ers trie! to grab e6perience! emplo"ees at higher salaries) the emplo"ee turno$er at ABC
Bank increase!. 5ooking at the changing business scenario) the Branch Eea!) /agpur) #as #on!ering about
the strategies an! measures to be taken for sustenance an! gro#th of the bank.
'(STIONS )O# *ISC(SSION
3
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
1. Anal"2e the case) using SC:T.
Strength
-The ABC Bank was promoted by the tenth largest development bank in the world.
-ABC Bank deployed Finacle the e-age banking sol!tion "rom #n"osys to consolidate its position meet
challenges and $!ickly sei%e new b!siness opport!nities. The entire Finacle rollo!t was remarkable
considering the "act that it was implemented across all branches in a record time"rame o" & months.
-ABC Bank was a pioneer and an innovator in bringing state-o"-the-art services to its c!stomers.
-#t was the "irst #ndian Bank to provide ' AT( )e*t +an in"ormation portal on AT(s,- #nstant Acco!nt
.pening- Talking AT(s- /i"tCard +0repaid /i"t Card,- 1asyFill +#nstant (obile 2e"ill 3ervice, '
along with other services.
-These complaint redressals "ormed an important component in per"ormance eval!ation o" the branch
as well as the concerned employee.
Weakness
-The bank had a stats-o"-the-art training centre at (!mbai and every employee received on an average
45 ho!rs o" training ann!ally.
- The bank was very partic!lar abo!t red!cing the t!rnaro!nd time in e*tending its services to the
c!stomers. #t also acted as an investment cons!ltant "or their individ!al c!stomers.
Opportunity
1 The promoter o" ABC Bank so!ght permission to establish a commercial bank and retained
60(/ a management cons!ltant o" international rep!te to prepare the gro!ndwork "or
establishing a commercial bank. The 2eserve Bank o" #ndia conveyed its approval in principle
to establish ABC Bank on Febr!ary 11 1774.
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
1 8arge investments had been made in back-end technology to strengthen processes systems and
control. This in the long r!n propelled by a top $!ality management team clearly set ABC
Bank apart "rom its competitors.
1 #t was the "irst private bank to enter and capt!re new markets
1 A key achievement "or the Bank was that it emerged as the highest distrib!tor "or two top
(!t!al F!nd 3chemes consistently in the past thereby demonstrating the strength o" the Bank9s
distrib!tion channel o" T0: b!siness.
1 ABC had always been partic!lar abo!t the speci"ic needs o" the c!stomer and maintaining
consistency in the $!ality o" prod!cts and services provided.
1 Apart "rom o""ering ;tailor-made9 prod!cts the bank maintained a contin!o!s personal
relationship with each o" its e*isting c!stomer based on their b!siness potentials.
1 B!tibori a place 35 kms "rom )agp!r was e*pected to be declared as a 3pecial 1conomic
<one which wo!ld attract more ind!stries and accelerate the related b!siness activities in the
region.
Threat
1 The li"eline o" ABC Bank were its people growing at a very "ast pace. The average age o" the
employee at ABC Bank was 31 years. Appro*imately =3> o" the employee strength was in the
?!nior management category +which incl!ded trainees and probationers, while 14> made !p
the middle level management.
1 #n )agp!r by red!cing the minim!m available balance it tapped other individ!al c!stomer
acco!nts d!ring the co!rse o" its e*pansion.
1 #n co!rse o" penetrating this segment ABC bank achieved great s!ccess d!e to its deep
!nderstanding o" the needs and e*pectations o" local c!stomers. .n the other hand some o" the
competitors who displayed grand s!ccess in the beginning co!ld not s!stain it beca!se o" a
mismatch between e*pectations o" the c!stomers and delivery o" services.
1 1ven tho!gh a large gro!p promoted ABC Bank its independent asset base was limited which
posed a problem to "inance large organi%ations.
&
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
1 #n the city o" )agp!r ABC had only two branches tho!gh its c!stomer base was very large and
contin!o!sly increasing. The changing economic scenario was e*panding b!siness
opport!nities "or the Bank.
1 An increasing n!mber o" private and "oreign banks had beg!n entering )agp!r
1 @ith the entry o" "oreign and private banks in )agp!r the scenario was becoming more
competitive and comple*.
=. Comment on the strategies use! b" the bank for penetrating the /agpur market.
ABC Bank entere! /agpur market in t#o phases. n the first phase) it starte! #ith corporate banking an!
establishe! itself as the best ser$ice pro$i!er. After#ar!s) it le$erage! its strengths b" entering into retail
banking. Although) relati$el" a late entrant in the retail banking sector) it ac(uire! eas" access in the ne#
segment !ue to its bran! image in corporate banking. n retail banking) ABC Bank opte! for selecti$e
penetration base! on t#o main factors 4 $olume of business an! cre!ibilit" of the account. This enable!
them to create greater satisfaction in the customers3 min!. nitiall") it starte! #ith the criteria of an a$erage
(uarterl" cash balance of Rs =0)000 focusing on premium segment. 5ater on) to further penetrate the
market) it re!uce! the a$erage (uarterl" cash balance to Rs 0)000 an! segmente! the market on the basis
of nature of business) $olume an! number of transactions per month. n this phase) b" re!ucing the
minimum a$ailable balance) it tappe! other in!i$i!ual customer accounts !uring the course of its e6pansion.
'. Suggest strategies for sustenance an! gro#th of the bank in $ie# of the changing scenario of the
/agpur region.
A
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
Focus on non-balance-sheet-intensive products and services. To avoid r!nning a"o!l o"
to!gher capital and li$!idity re$!irements banks co!ld "oc!s on "ee-generating services
s!ch as asset management which are not a""ected by those r!les.
Expand operations in emerging markets, emphasiing retail products and services
!hile establishing beachheads in !holesale markets. Altho!gh emerging market growth
and competition will not be as strong in this scenario as in others most pro?ections still
call "or s!bstantial growth. Banks sho!ld establish a wide range o" prod!cts and services
"or an emerging middle class as well as b!sinesses while keeping a close eye on reg!latory
change.
"llocate resources evenly bet!een developed and emerging markets, !holesale and
retail. Altho!gh the scenario envisions a relatively benign economic environment
!ne*pected change co!ld er!pt at any time making diversi"ication a wise strategy. B# think
one o" the lessons that people learned thro!gh the crisis is that i" yo! are overly
concentrated in a partic!lar geography or any one partic!lar b!siness line then that
act!ally can have a very adverse impact on yo!.
#n retail banking, emphasie !ealth management. 8ow interest rates will make loans
less pro"itable making "ee-generating services s!ch as asset management and "inancial
advice more appealing. #n wealth management operations banks p!t little capital at risk.
B@e have a world where people in many developed co!ntries have increasingly grown !p
acc!stomed to "ree banking with a h!ge range o" prod!ct choice. This has made core retail
banking "or the masses operate on increasingly thin marginsC.
#n !holesale banking, allocate resources e$ually bet!een developed and emerging
markets. Beca!se o" the benign conditions in this scenario economies in developed
co!ntries will recover driving demand "or wholesale services. #n emerging markets
growth will have the same e""ect.
#nvest heavily in in%ormation technology. 1ven in this relatively nonthreatening
scenario pro"it margins will be tight. Banks will need to know their c!stomers better and
operate "ront and back o""ices at peak e""iciency. #n"ormation sho!ld be gathered and
analy%ed on a worldwide basis.
&onsider rebuilding some lines o% business that shrank during the %inancial crisis. #n
this scenario it may be possible to revive the once highly pro"itable sec!riti%ation
b!siness. Beca!se conditions will be better than in the other scenarios banks sho!ld be
able to raise capital to "!el growth.
'ecome best in class in as many categories as possible. Strive to be !idely diversi%ied
among products and services and in domestic and emerging markets. #n a B!siness as
Ds!al environment with tight margins it will be important to be at or near the top o" all
aspects o" the market as pro"it opport!nities may shi"t $!ickly and !npredictably "rom one
set o" prod!cts and services to another and "rom one part o" the world to another.
(ro! deposit-based operations, and maintain a !ide array o% retail products and
services. #n a relatively $!iet environment it can be less e*pensive to rely on deposits
than on contin!ally accessing capital markets. Attracting retail c!stomers by o""ering basic
E
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
services will create cross-selling opport!nities like lending and wealth management.
Section II
Ans+er Any si, :
1. ;6plain bu"ers cre!it an! suppliers cre!it b" gi$ing e6amples of each t"pe of cre!it. Also e6plain #ith
a case stu!".
B!yerFs credit is the credit availed by an importer +b!yer, "rom overseas lenders i.e. banks and
"inancial instit!tions "or payment o" his imports on d!e date. The overseas banks !s!ally lend the
importer +b!yer, based on the letter o" com"ort +a bank g!arantee, iss!ed by the importers bank.
#mporterFs bank or B!yers Credit Cons!ltant or importer arranges b!yerFs credit "rom international
branches o" a domestic bank or international banks in "oreign co!ntries. For this service importerFs
bank or b!yerFs credit cons!ltant charges a "ee called an arrangement "ee.
B!yerFs credit helps local importers gain access to cheaper "oreign "!nds close to 8#B.2 rates as
against local so!rces o" "!nding which are costly compared to 8#B.2 rates.
The d!ration o" b!yerFs credit may vary "rom co!ntry to co!ntry as per the local reg!lations. For
e*ample in #ndia b!yerFs credit can be availed "or one year in case the import is "or trade-able goods
and "or three years i" the import is "or capital goods. 1very si* months the interest on b!yerFs credit
may get reset.
3!ppliers Credit is A "inancing arrangement !nder which an e*porter e*tends credit to a "oreign
importer to "inance his p!rchase. Ds!ally the importer pays a portion o" the contract val!e in cash and
iss!es a 0romissory note or accepts a dra"t as evidence o" his obligation to pay the balance over a
period o" time. The e*porter th!s accepts a de"erred payment "rom the importer and may be able to
obtain cash payment by disco!nting or selling the dra"t or promissory notes created with his bank.
.ne e*ample o" s!pplier credit can be "o!nd with the e*porting o" goods "or sale in another co!ntry.
@ith this model the entity selling the goods e*tends credit to the entity that is p!rchasing the goods
with the plan o" o""ering them "or sale at a pro"it. The s!pplier may iss!e a line o" credit to the
importer ass!ming that the client can demonstrate to the s!pplier that the importer is credit worthy.
=
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
&ase Study
This was what an Asian B!yer "rom an #rish 1*porting company stated when he convinced the
1*porter to sell to them on open acco!nt terms. The Asian B!yer obtained A5 days credit which was to
be calc!lated "rom the date o" the invoice. The val!e o" the order was D3: 155 555 and the goods
were despatched and invoiced by the #rish 1*porter on the 1&th April 255A.
The payment "rom Asia was d!e on the 14th G!ne 255A. The payment event!ally arrived on the 21st
A!g!st 255A over two months late. The delay in payment cost the 1*porter D3: 1E55 as it res!lted in
his acco!nt being overdrawn by this amo!nt "or A= days at 7> per ann!m.
3o are 8etters o" Credit too 1*pensive HHH
The #rish 1*porter co!ld have insisted on receiving a con"irmed 8etter o" Credit +see glossary, thro!gh
Allied #rish Banks plc.
The "ollowing costs wo!ld have applied at that timeI
Con"irmation Fee D3: J2&5
Acceptance Commission +K 1.&> pa "or A5 days, D3: J2&5
)egotiation L 0ayment Fee D3: J1&5
.!t o" 0ocket 1*penses +estimate, D3: JA5
Total 8etter o" Credit Cost D3: JE15
#nterest Cost as a res!lt o" late payment D3: +J1E55,
'ene%it o% using )etter o% &redit *S+ ,--.
The 8etter o" Credit looks e*pensive beca!se the costs are very visible and are linked to each
transaction. The bene"its on the other hand are intangible.
@hat bene"it wo!ld the con"irmed 8etter o" Credit have provided to the 1*porterH
A /!arantee o" payment on the d!e date "rom Allied #rish Banks. +0rovided the terms and conditions
o" the 8etter o" Credit were complied with,.
)o risk o" non-payment as a res!lt o" problems with the b!yer or the Asian economy.
A de"initive date "or the receipt o" "!nds partic!larly important "or devising proper c!rrency hedging
strategies.
The opport!nity to receive the payment in advance o" the d!e date thro!gh non-reco!rse disco!nting o"
the receivable.
Concl!sion
7
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
0lease note that this case has not acco!nted "or the costs the #rish 1*porter inc!rred in chasing the debt
with the Asian b!yer. #n addition i" the 1*porter had sold his "oreign c!rrency receivable on a "orward
basis to his bank "or the original d!e date they may have inc!rred a "!rther cost in cancelling or
rearranging the "orward contract.
8etters o" Credit altho!gh appearing e*pensive do provide real and tangible bene"its to companies. #n
this case the #rish e*porter only lost D3J 1E55. ." co!rse i" the Asian b!yer had not paid at all they
wo!ld have lost the whole D3J 155555.
=. Chat is correspon!ent bankingF ;6plain briefl" the ser$ices offere! b" correspon!ent bankingF
;6plain briefl" the ser$ices offere! b" correspon!ent banks to the banks ha$ing account relationship
#ith themF ,i$e some e6amplesF
A "inancial instit!tion that provides services on behal" o" another e$!al or !ne$!al "inancial instit!tion. A correspondent
bank can cond!ct b!siness transactions accept deposits and gather doc!ments on behal" o" the other "inancial instit!tion.
Correspondent banks are more likely to be !sed to cond!ct b!siness in "oreign co!ntries and act as a domestic bankFs agent
abroad.
Wide range of services can be settled through a correspondent banking relationship, including:
payments, including telegraphic or electronic transfers and drafts
foreign exchange, including wholesale note clearances
payable through and nested accounts
cash letters and collections
managed investments and mortgage schemes
custodian account arrangements
trade finance transactions
syndicated loans.
Service offered to other banks
o Collection o" bills both :oc!mentary and Clean.
15
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
AdvisingLcon"irming o" 8LCs opened by banks
:isco!nting o" Bills drawn !nder 8LCs
(aintenance o" "oreign c!rrency acco!nts
(aintenance o" 2!pee acco!nts in #ndia
(aking "oreign c!rrency paymentsLremittance on behal" o" c!stomers o" banks.
'. ;6plain in brief) the role of Reser$e bank of n!ia in n!ian ;6change control. ;6plain the role of
;GM bank in promotion e6ports) an! !escribe briefl" facilities gi$en b" ;GM bankF ,i$e e6amples.
The 2eserve Bank o" #ndia is the controller o" e*chage i.e. it has the power to in"l!ence the vol!me o"
credit created by banks in #ndia. #t can do so thro!gh changing the Bank rate or thro!gh open market
operations. According to the Banking 2eg!lation Act o" 1747 the 2eserve Bank o" #ndia can ask any
partic!lar bank or the whole banking system not to lend to partic!lar gro!ps or persons on the basis o"
certain types o" sec!rities. 3ince 17&A selective controls o" credit are increasingly being !sed by the
2eserve Bank.
The 2eserve Bank o" #ndia is armed with many more powers to control the #ndian money market.
1very bank has to get a licence "rom the 2eserve Bank o" #ndia to do banking b!siness within #ndia
the licence can be cancelled by the 2eserve Bank o" certain stip!lated conditions are not "!l"illed.
1very bank will have to get the permission o" the 2eserve Bank be"ore it can open a new branch. 1ach
sched!led bank m!st send a weekly ret!rn to the 2eserve Bank showing in detail its assets and
liabilities. This power o" the Bank to call "or in"ormation is also intended to give it e""ective control o"
the credit system. The 2eserve Bank has also the power to inspect the acco!nts o" any commercial
bank.
As s!pereme banking a!thority in the co!ntry the 2eserve Bank o" #ndia there"ore has the "ollowing
powersI
+a, #t holds the cash reserves o" all the sched!led banks.
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
+b, #t controls the credit operations o" banks thro!gh $!antitative and $!alitative controls.
+c, #t controls the banking system thro!gh the system o" licensing inspection and calling "or
in"ormation.
+d, #t acts as the lender o" the last resort by providing redisco!nt "acilities to sched!led banks.
Export-#mport 'ank o% #ndia is the premier e*port "inance instit!tion o" the co!ntry established in
17=2 !nder the 1*port-#mport Bank o" #ndia Act 17=1.
/overnment o" #ndia la!nched the instit!tion with a mandate not ?!st to enhance e*ports "rom #ndia
b!t to integrate the co!ntry9s "oreign trade and investment with the overall economic growth. 3ince its
inception 1*im Bank o" #ndia has been both a catalyst and a key player in the promotion o" cross
border trade and investment. Commencing operations as a p!rveyor o" e*port credit like other 1*port
Credit Agencies in the world 1*im Bank o" #ndia has over the period evolved into an instit!tion that
plays a ma?or role in partnering #ndian ind!stries partic!larly the 3mall and (edi!m 1nterprises in
their globalisation e""orts thro!gh a wide range o" prod!cts and services o""ered at all stages o" the
b!siness cycle starting "rom import o" technology and e*port prod!ct development to e*port
prod!ction e*port marketing pre-shipment and post-shipment and overseas investment.
1*im Bank is managed by a Board o" :irectors which has representatives "rom the /overnment
2eserve Bank o" #ndia 1*port Credit /!arantee Corporation o" #ndia a "inancial instit!tion p!blic
sector banks and the b!siness comm!nity.
The BankFs "!nctions are segmented into several operating gro!ps incl!dingI
Corporate Banking /ro!p which handles a variety o" "inancing programmes "or 1*port
.riented Dnits +1.Ds, #mporters and overseas investment by #ndian companies.
0ro?ect Finance L Trade Finance /ro!p handles the entire range o" e*port credit services s!ch as
s!pplierFs credit pre-shipment Agri B!siness /ro!p to spearhead the initiative to promote and
s!pport Agri-e*ports. The /ro!p handles pro?ects and e*port transactions in the agric!lt!ral
sector "or "inancing.
3mall and (edi!m 1nterpriseI The gro!p handles credit proposals "rom 3(1s !nder vario!s
lending programmes o" the Bank.
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
1*port 3ervices /ro!p o""ers variety o" advisory and val!e-added in"ormation services aimed
at investment promotion.
1*port (arketing 3ervices Bank o""ers assistance to #ndian companies to enable them
establish their prod!cts in overseas markets. The idea behind this service is to promote #ndian
e*port. 1*port (arketing 3ervices covers wide range o" e*port oriented companies and
organi%ations. 1(3 gro!p also covers 0ro?ect e*ports and 1*port o" 3ervices.
Besides these the 3!pport 3ervices gro!ps which incl!deI 2esearch M 0lanning Treas!ry and
Acco!nts 8oan Administration #nternal A!dit (anagement #n"ormation 3ervices #n"ormation
Technology 8egal N!man 2eso!rces (anagement and Corporate Comm!nications.
.. The organi2ational career is a responsibilit" of the organi2ation an! the in!i$i!ual. <iscuss.
Foc!s on career not merely the ?obO is the mantra "or s!ccess"!l employers and employees. There was
time when employment with a rep!ted "irm act!ally meant li"e long employment. 0eople ascended the
hierarchy with age. The terms like career planning and career development in "act meant timely
promotions. Career progression largely was a "!nction o" e*perience in a ?ob. The idea o" employees
changing companies to carve o!t a career was almost !nheard o". 1mployees reciprocated the li"e long
employment o""er o" companies with total commitment "or the company. An opening with a good
company was considered a li"e time achievement- therea"ter it was simply a matter o" time
per"ormance and politically positioning onesel" to be at the right place at right time to go !p the ladder.
There was hardly anything "or individ!als to think beyond the ?ob they were doing as career very
nearly meant the ?ob.
A career is a se$!ence o" ?obs or positions occ!pied by an individ!al d!ring a co!rse o" time. Career is
the speciali%ation in a pro"ession which contin!es to progress in spite o" changes in ?obs. For e*ample
even when an individ!al as maintenance engineer has changed his ?obs with vario!s process ind!stries
and maintenance service providers he is still p!rs!ing a career in maintenance management. #n "act the
career plans that an individ!al n!rt!res determine the kind o" ?obs he takes !p.
:isting!ishing ?obs "rom careers and distinct "oc!s on career planning and development holds the key
to employee retention. 2ecr!iting good people is a challenge retaining them is a greater challenge in a
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
marketplace where competition is not limited to technology prod!cts and market share b!t has
penetrated into the domain o" h!man capital as well.
0. ;6plain the general architecture of an integrate! banking s"stem. Eo# is it usefulF ;6plain #ith
e6amples.
To achieve tighter integration many banks are implementing component-based architect!re. @hile
component-based architect!re leverages a bankFs core system integrated components are wrapped
aro!nd the core. The most pop!lar component-based architect!re and the hottest b!%%word in the
ind!stry is 3.A or service-oriented architect!re. The strategy is a services layer or inter"ace that
enables companies to leverage data and transaction capabilities o" e*isting systems across an
enterprise thro!gh re!sable services. As companies wrap 3.A inter"aces aro!nd legacy systems
they o"ten !se @eb-based "ront ends to access data on e*isting back ends helping to moderni%e
legacy systems and a!tomate man!al processes. OBanks have a need and desire to get all content
within core systems and deliver in"ormation across the distrib!tion channels they have. .pen @eb-
based 3.A inter"aces are speeding !p implementation times and lowering the barrier to entry "or
developing rob!st well-layered applications Ores!lting in the promise o" greater cross-system
interoperability than was generally seen in the pastO .
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
Nowever e*perts warn that 3.A may not be a silver b!llet. O@hile the promise o" 3.A is very real
some companies tend to get carried away and try to apply it across systems -- even in areas it
doesnFt need to beO As the ind!stry eval!ates its options the key is to adopt sol!tions that provide
more "le*ibility while !pholding sec!rity and data integrity. B!t regardless o" the con"ig!ration the
message is clearI Banks will need to trade in aging in"le*ible systems in order to meet c!stomer
e*pectations and "ederal reg!lations in a global marketplace. OOThe core banking systems that
s!ccess"!lly adapt to these changes will likely s!rvive as the core banking plat"orms o" the ne*t
several decades.O
(se
1&
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
?. Chat !o "ou un!erstan! b" MCRF Eo# !oes it help in clearing of instructionsF ;6plain the fiel!
structure of MCR che(ue.
(agnetic ink character recognition or (#C2 is a character recognition technology !sed primarily by
the banking ind!stry to "acilitate the processing and clearance o" che$!es and other doc!ments. The
(#C2 encoding called the (#C2 line is located at the bottom o" a che$!e or other vo!cher and
typically incl!des the doc!ment type indicator bank code bank acco!nt n!mber che$!e n!mber and
the amo!nt pl!s some control indicator. The technology allows (#C2 readers to scan and read the
in"ormation directly into a data collection device. Dnlike barcodes or similar technologies (#C2
characters can be easily read by h!mans. The (#C2 1-13B "ont has been adopted as the international
standard in #3. 1554I177& b!t the C(C-E "ont is widely !sed in 1!rope.
(#C2 characters are printed on a doc!ment in either o" the (#C2 "onts. The ink !sed in the printing is
a magnetic ink or toner !s!ally containing iron o*ide. The (#C2 te*t is passed be"ore a (#C2 reader.
The ink in the plane o" the paper is "irst magneti%ed. Then the characters are passed over a (#C2 read
head a device similar to the playback head o" a tape recorder. As each character passes over the head it
prod!ces a !ni$!e wave"orm that can be easily identi"ied by the system.
The !se o" (#C2 allows the characters to be read reliably even i" they have been overprinted or
obsc!red by other marks s!ch as cancellation stamps and signat!re. The error rate "or the magnetic
scanning o" a typical che$!e is smaller than with optical character recognition systems. For well
printed (#C2 doc!ments the OcanFt readO rate is !s!ally less than 1> while the s!bstit!tion rate
+misread rate, is in the order o" 1 per 155555 characters.
(#C2 Code 8ine 3tr!ct!re
The code line occ!rring in the 2ead Band is divided into "ive "ields with distinct delimiters separating
each "ield the details o" which are as !nderI
i. Che$!e serial n!mber o" six numeric digits preceded and "ollowed by a delimiter. The alpha-
n!meric pre"i* to the serial n!mber normally !sed by banks sho!ld be printed o!tside the code line in
close pro*imity ?!st above the read band in normal ink.
LLLLLLLLLLLLLLLLLLL LLLLLLLLLLLLLLLLLLLL
As on date the che$!e serial n!mbers sho!ld be si* n!meric digits only.
i.e "rom 555551 to 777777
3o "ar there has been no need to increase the "ield "rom si* n!meric digits to seven n!meric digits.
#t is observed that .rgani%ations tend to open new acco!nts depending on the acco!nting systems at
their end.
Nence a 3#P :#/#T 8#(#T is "ine.
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
#t is be noted that "or #nternet Banking transactions as well as b!lk !ploads che$!e n!mber is not
mandatory.
Nence a banking acco!nt can be debited by way o" che$!e or witho!t a che$!e also.
Nowever many banks as a sec!rity meas!re insist on a che$!e lea" "or branch level transactions.
&. ;6plain ho# a !igital signature is generate!F ;6plain its use #ith e6amples.
A digital signat!re relies on hashing and p!blic key cryptography. @hen yo! sign data yo! hash the
data and encrypt the res!lts with yo!r private key. The encrypted hash val!e is called a digital
signat!re.
#" yo! change the original data a di""erent digital signat!re will be generated.
To !se a 06A key to sign a "ile write a program or change this program 1*ampleI 3igning a "ile with
yo!r Cryptographic Coprocessor.
Qeri"ying a digital signat!re
Qeri"ying a digital signat!re is the opposite o" signing data. Qeri"ying a signat!re will tell yo! i" the
signed data has changed or not. @hen a digital signat!re is veri"ied the signat!re is decrypted !sing
the p!blic key to prod!ce the original hash val!e. The data that was signed is hashed. #" the two hash
val!es match then the signat!re has been veri"ied. To do this write a program or change this 1*ampleI
Qeri"ying a digital signat!re with yo!r Cryptographic Coprocessor.
10. Eo# can n!ian banks use legal recognition of !igital signature for !e$elopment of business.
#t is against this backgro!nd the /overnment o" #ndia enacted its #n"ormation Technology Act 2555
with the ob?ectives as "ollows stated in the pre"ace to the Act itsel".
Bto provide legal recognition "or transactions carried o!t by means o" electronic data interchange and
other means o" electronic comm!nication commonly re"erred to as Oelectronic commerceO which
involve the !se o" alternatives to paper-based methods o" comm!nication and storage o" in"ormation
to "acilitate electronic "iling o" doc!ments with the /overnment agencies and "!rther to amend the
#ndian 0enal Code the #ndian 1vidence Act 1=E2 the BankersF Books 1vidence Act 1=71 and the
2eserve Bank o" #ndia Act 1734 and "or matters connected therewith or incidental thereto.C
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
The #n"ormation Technology Act 2555 was th!s passed as the Act )o.21 o" 2555 got 0resident assent
on 7 G!ne and was made e""ective "rom 1E .ctober 2555.
The Act essentially deals with the "ollowing iss!esI
R 8egal 2ecognition o" 1lectronic :oc!ments
R 8egal 2ecognition o" :igital 3ignat!res
R .""enses and Contraventions
R G!stice :ispensation 3ystems "or cyber crimes.
Amendment Act 255=I Being the "irst legislation in the nation on technology comp!ters and
ecommerce and e-comm!nication the Act was the s!b?ect o" e*tensive debates elaborate reviews and
detailed criticisms with one arm o" the ind!stry critici%ing some sections o" the Act to be draconian
and other stating it is too dil!ted and lenient. There were some conspic!o!s omissions too res!lting in
the investigators relying more and more on the time-tested +one and hal" cent!ry-old, #ndian 0enal
Code even in technology based cases with the #.T. Act also being re"erred in the process and the
reliance more on #0C rather on the #TA.
11. Chat is market segmentationF Ch" is it important to a!$ertisersF Eo# is it useful for banking.
(arket segmentation is a marketing strategy that involves dividing a broad target market into s!bsets
o" cons!mers who have common needs and then designing and implementing strategies to target their
needs and desires !sing media channels and other to!ch-points that best allow to reach them.
(arket segments allow companies to create prod!ct di""erentiation strategies to target them.
#n the present marketing system market segmentation is a normal r!le and not an e*ception. #t enables
companies to e*ploit marketing opport!nities "!lly by !sing the available reso!rces and also enables
them to "ace market competition with con"idence. #t enhances marketing e""iciency o" the "irm in each
segment selected. )o segmentation means absence o" market penetration. #n short market
segmentation is an important aspect o" modem marketing management. #t is a m!st "or s!rvival and
growth in the present competitive marketing. #t "acilitates the preparation o" separate marketing
programmes "or meeting the needs o" di""erent gro!ps o" b!yers. 2ight markets "or the right prod!cts
can be provided thro!gh market segmentation.
#n brie" market segmentation is important not only "or creating cons!mers b!t also "or satis"ying them.
(arket segmentation helps matching o" market opport!nities to the reso!rces o" the corporations and
enables them to "ace market competition e""ectively. #t raises marketing e""iciency thro!gh proper
ad?!stment o" marketing mi* "or each market segment. (arket segmentation is one important element
o" modem marketing management. 3egmentation gives precise answer to the $!estion OTo whom
sho!ld we sell o!t prod!cts and what sho!ld we sell to themHO
(arket segmentation is a common marketing practice that means breaking down a larger target market
into smaller more manageable market segments to improve marketing e""iciency sales and service.
3everal common segmentation strategies e*ist. @hile small banks o"ten service local geographic areas
1=
The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
and demographics segmentation is o"ten sensible banks can o"ten best de"ine market segments based
on prod!ct bene"its when they o""er m!ltiple types o" prod!cts.
Standard 'anking
.ne o" the largest common bene"it segments o""ered by a bank is "or its standard checking and savings
banking prod!cts. (any banks promote these basic prod!cts on their website home pages. Nistorically
standard checking and standard savings acco!nts were sold separately. Nowever many banks have
attempted to bolster relationships with their standard banking c!stomers by developing packages
whereby c!stomers get added val!e by combining a checking and savings acco!nt and o"ten better
interest rates with a!tomatic checking-to-savings trans"ers. Banks o"ten target cons!mers in this
segment thro!gh traditional media like radio television newspapers and maga%ines.
/igh-end Savings
Nigh-end savings is typically a step !p "rom the standard checking and savings c!stomer. Nigh-end
savings prod!cts may incl!de higher dollar val!e money market and savings acco!nts certi"icates o"
deposits and other long-term savings prod!cts intended to derive great monetary val!e "rom c!stomers.
These prod!cts are sometimes marketed thro!gh traditional means b!t they are also o"ten marketed to
e*isting standard c!stomers who may have interest in moving !p in savings val!e at some point.
)oans
For many banks loans are a h!ge segment o" banking operations. Nome loans and a!to loans make !p
a signi"icant portion o" bank lending b!t e$!ity loans st!dent loans and personal loans are also
common. 8oan prod!cts are typically advertised separately "rom the bankFs other prod!cts. Banks may
promote home loans thro!gh local real estate p!blications or reso!rces. A!to loan o""ers make sense in
car-related media. Banks also cross promote by marketing loan prod!cts to e*isting banking c!stomers
and even o""ering better rates with b!ndled prod!cts.
#nvestment
A "ast-growing segment in traditional banks is in the investment prod!ct sector. Traditionally
individ!al investors have had to set !p separate investment acco!nts with niche investment banks. @ith
the evol!tion o" the #nternet in the early 21st cent!ry and many more people managing their own stock
bond and other investments traditional banks have e*panded signi"icantly into this sector. Again
banks can market investment sol!tions to e*isting c!stomers with b!ndled bene"its. They can also
advertise thro!gh local media b!t they may deliver more targeted messages thro!gh investment-
related p!blications.
&ommercial 0roducts
Banks segment c!stomers into two general categories be"ore breaking down those markets into prod!ct
bene"itsI cons!mers and b!sinesses. 3ome companies "oc!s entirely on cons!mer prod!cts- others do
only commercial banking. Nowever many traditional banks market to both types and o""er prod!cts in
similar areas "or b!sinesses beca!se o" their normally larger si%e and scope regarding money
management.
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The Indian Institute Of Business Management & Studies
Subject: Banking Management. Marks: 100
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