Banking sector-intro (Indian) PHASE I The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. PHASE II Nationalisation of Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. 14 major commercial banks in the country was nationalised. The second phase of nationalisation of Indian banks took place in the year 1980. Seven more banks were nationalised with deposits over 200 crores. Till this year, approximately 80% of the banking segment in India were under Government ownership. NATIONALISATION OF BANKING SECTOR The nationalisation of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. It nationalised 14 banks then.
These banks were mostly owned by businessmen and even managed by them. Central Bank of India Bank of Maharashtra Dena Bank Punjab National Bank Syndicate Bank Canara Bank Indian Bank Indian Overseas Bank Bank of Baroda Union Bank Allahabad Bank United Bank of India UCO Bank PHASE III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices. The country is flooded with foreign banks and their ATM stations.
Efforts are being put to give a satisfactory service to customers. Phone banking and Net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. BANKING SYSTEM IN INDIA In India the banks are segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few work in rural sector while others in both rural as well as urban. Many even only cater in cities. Some are of Indian origin and some are foreign players. Public sector bank Among the Public Sector Banks in India, United Bank of India is one of the 14 majorbanks which were nationalised on July 19, 1969. Its predecessor, in the Public SectorBanks, the United Bank of India Ltd. , was formed in 1950 with the amalgamation offour banks viz. Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932). •This Public Secotor Bank India has implemented 14 point action plan for strengthening of credit delivery to women and has designated 5 branches as specialized branches for women entrepreneurs.
Private sector bank •The first Private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. It is one of the fastest growing Bank Private Sector Banks in India. •IDBI ranks the tenth largest development bank in the world as Private Banks in India and has promoted a world class institutions in India. •The first Private Bank in India to receive an in principle approval from the ReserveBank of India was Housing Development Finance Corporation Limited, to set up abank in the private sector banks in India as part of the RBI’s liberalisation of theIndian Banking Industry. It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and commenced operations as Scheduled Commercial Bank in January 1995. Co operative banks in india •The Co operative banks in India started functioning almost 100 years ago. •Though the co operative movement originated in the West, but the importance of such banks have assumed in India is rarely paralleled anywhere else in the world. •The cooperative banks in India plays an important role even today in rural financing.
The businesses of cooperative bank in the urban areas also has increased phenomenally in recent years due to the sharp increase in the number of primary co- operative banks. •Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. •This exponential growth of Co operative Banks in India is attributed mainly to their much better local reach, personal interaction with customers, their ability to catch the nerve of the local clientele.
Foreign banks in india •Foreign Banks in India always brought an explanation about the prompt services tocustomers. After the set up foreign banks in India, the banking sector in India alsobecome competitive and accurative. •New policies are introduced by RBI for them –The policy conveys that foreign banks in India may not acquire Indian ones(except for weak banks identified by the RBI, on its terms) and their Indiansubsidiaries will not be able to open branches freely. Main competitors for banking sector •Post offices. •Mutual fund •Share market Insurance. •Money lenders •Family and friends Services given by banks •Demat account •Lockers •Cash management •Insurance product •Mutual fund product •Loans •ECS(Electronic clearance system) •Taxes Marketing strategies •Financing rapid industrial growth –With the Indian economy growing at a blistering pace on the back of strongindustrial and services growth, the Indian companies are looking to build upcapacity to meet future demand. –Banks play a pivotal role in financing this industrial growth. •Technological innovations & challenges Banks are aggressively adopting the latest technology in order to improve product offerings, customer service, operational efficiency and risk management systems. •Financial inclusion & Rural – Microfinance –In the quest for new markets and customer segments, as well as with the RBI directives in this area, banks are looking at the rural and unbanked segments in a new light as a huge business opportunity Convergence to a single solution provider –With pressures on the spreads and the competition in the urban markets increasing rapidly, banks need to develop new ways to sustain profitability. Banks led to a plethora of new products, hence becoming a one stop shop for all financial solutions. •Roadmap by RBI for foreign banks –The RBI has laid out a two phased roadmap for giving greater freedom to the foreign banks in India. –This has spurred the entry of several other foreign banks in India, along with acting as a signal to the domestic players to pull up their socks to face the new competitors. •Growth in retail lending –The under banked Indian population as well as the high margin on retail products makes this a very attractive market for the banks. The all-inclusive nature of this growth in terms of sectors covers all consumer segments as well as product segments. Demand for derivatives & other risk management products –The increasingly dynamic business scenario and financial sophistication also increase the need for customized exotic financial products. –The complex and peculiar nature of risks faced by the companies are passed onto the banks. –Innovative financial tools and advanced risk management methods are required by the banks to capitalize on this business opportunity. •Consolidation –The process of consolidation in India aims at ironing out these deficiencies. The Indian banking industry may soon be characterized by fewer but very competitive banks. •Basel II With the Basel II norms on Operational Risk come into force on the March 31, 2007 the banks will need more superior risk quantification and provisioning techniques. Contd. •Capital account convertibility –With the possible introduction of capital account convertibility in India, it will provide additional inflow and outflow of foreign currency. –This exposes banks to additional exchange risk apart from providing an additional source of revenue generation. •Global expansion plans Most Indian banks including the PSU banks already have branches abroad, albeit with minimal presence in terms of market share. –E. g. ICICI and SBI •SME Financing –SMEs, with the recent growth, are the new goldmine that the banks have hit upon. With a host of services ranging from bill discounting, factoring and even venture capital funding, banks are knocking at their doors, ready to customize offerings to suit their needs and acquire these customers •They are focusing on region-specific campaigns rather than national media campaigns as effective strategy for a diverse country like India. Customer-centricity also implies increasing investment in technology. •Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the major steps taken by the banks in India towards modernization. MARKETING IN BANKING Marketing approach in banking sector had taken significance after 1950 in western countries and then after 1980 in Turkey. New banking perceptiveness oriented toward market had influenced banks to create new market. Banks had started to perform marketing and planning techniques in banking in order to be able to offer their new services efficiently.
Marketing scope in banking sector should be considered under the service marketing framework. Performed marketing strategy is the case which is determination of the place of financial institutions on customers’ mind. Bank marketing does not only include service selling of the bank but also is the function which gets personality and image for bank on its customers’ mind. On the other hand, financial marketing is the function which relates uncongenitalies, differences and non similar applications between financial institutions and judgement standards of their customers.
The reasons for marketing scope to have importance in banking and for banks to interest in marketing subject can be arranged as: Change in demographic structure: Differentiation of population in the number and composition affect quality and attribute of customer whom benefits from banking services. Intense competition in financial service sector: The competition became intense due to the growing international banking perceptiveness and recently being non limiting for new enterprises in the sector. Increase in liberalization of interest rates has intensified the competition.
Bank’s wish for increasing profit: Banks have to increase their profits to create new markets, to protect and develop their market shares and to survive on the basis of intense competition and demographic chance levels. The marketing comprehension that are performed by banks since 1950 can be shown as in following five stages: 1. Promotion oriented marketing comprehension 2. Marketing comprehension based on having close relations for customers 3. Reformist marketing comprehension 4. Marketing comprehension that focused on specializing in certain areas 5.
Research, planning and control oriented marketing comprehension STRUCTURE OF BANK MARKET Marketing activities of firms begin with determination of the market that they offer their services or goods. Firms must find out the features of the market that it f anging market condition. While marketing manager is arranging the variables under firm’s control, she/he should also adopt the external variables. We could call the factors that affect banks’ market as technological developments, legal arrangements and competition.
THE MARKETING MIX IN BANKING SECTOR SERVICE Recently, banks are in a period that they earn money in servicing beyond selling money. The prestige is get as they offer their services to the masses. Like other services, banking services are also intangible. Banking services are about the money in different types and attributes like lending, depositing and transferring procedures. These intangible services are shaped in contracts. The structure of banking services affects the success of institution in long term.
Besides the basic attributes like speed, security and ease in banking services, the rights like consultancy for services to be compounded are also preferred. PRICE The price which is an important component of marketing mix is named differently in the base of transaction exchange that it takes place. Banks have to estimate the prices of their services offered. By performing this, they keep their relations with extant customers and take new ones. The prices in banking have names like interest, commission and expenses.
Price is the sole element of marketing variables that create earnings, while others cause expenditure. While marketing mix elements other than price affect sales volume, price affect both profit and sales volume directly. Banks should be very careful in determining their prices and price policies. Because mistakes in pricing cause customers’ shift toward the rivals offering likewise services. Traditionally, banks use three methods called “cost-plus”, “transaction volume base” and “challenging leader” in pricing of their services