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Project Report Changing Face of Current Account of ICICI Bank, HDFC Bank and Standard Chartered Bank


Project Report Changing Face of Current Account of ICICI Bank, HDFC Bank and Standard Chartered Bank :

What is Banking System :

The bank in the framework of value creation and value network concepts, can be viewed as a firm operating through different layers:

(1) Access or Distribution Layer - the study of bank customer behavior can provide useful insights into customer utilization of different access media (offices and branches, ATM, Internet etc);

(2) Payment Mediation Layer - money can be transferred between different owners and/or places through various transfer mechanisms (cash, ATM, payment and credit cards etc);

(3) Capital Mediation Layer - pooling of funds and their redistribution according to customers' needs;

(4) Risk Mediation Layer - the banks pool customers with different risk characteristics and manage overall network risks, primarily systematic risk. It is important that both the bank and the customers can benefit from the development of relationships in the value creation process.

Banking (and individual banks as firms) will probably face essential structural changes in the nearest future. Lewellyn pointed out three main reasons why the changes in the financial sector are likely to be so substantial

(1) A powerful combination of various pressures operating on the industry (competitive pressures, globalization, consumer changing trends, competition coming from the capital market etc.);

(2) Some of the pressures (especially new technology) challenge the core of financial business;

(3) Competition is not only intensifying but (as entry barriers are declining) coming from new types of competitors. It seems that the pressures are more evident in wholesale banking (competition from markets has been more powerful), but they are developing also in retail banking and the differences are eroding.

It becomes increasingly important to identify and enumerate changing customer needs. The customers' satisfaction should be the central element of the bank mission and one of the priority objectives of long-term customer-oriented strategy. Especially important is to study customers' satisfaction and bank services quality in emerging market economies where banks are behaving as growth-oriented firms in the tight struggle for obtaining a bigger market share. Understanding of client's desire, needs and demands is an important input to the elaboration of an efficient marketing strategy.

Commercial Banks Introduction :

Commercial banks are the oldest, biggest, and fastest growing financial intermediaries in India. They are also the most important depositories of public saving and the most important disbursers of finance. Commercial banking in India is a unique system, the like of which exists nowhere in the world. The truth of this statement becomes clear as one studies the philosophy and approaches that have contributed to the evolution of the banking policy, programmes and operations in India, This however is too big a subject to be discussed here in detail. We will therefore confine ourselves to presenting only an outline of the said philosophy and approaches, and discussing the actual working of banks in detail.

The banking system in India works under the constraints that go with social control and public ownership. Not only the public sector banks but also the private sector and foreign banks are required to meet targets in respect of sectoral deployment of credit, regional distribution of branches, and regional credit-deposit ratios. The operations of banks have been determined by Lead Bank Scheme, Differential Rate of Interest Scheme, Credit Authorisation Scheme, inventory norms and lending systems prescribed by the authorities, the formulation of the credit plans,


Banking Operations Theoretical Basis :

Balancing Profitability with Liquidity Management

Commercial banks ordinarily are simple business or commercial concerns which provide various types of financial services to customers in return for payments in one form or another, such as interest, discounts, fees, commission, and so on. Their objective is to make profits. However, what distinguishes them from other business concerns (financial as well as manufacturing) is the degree to which they have to balance the principle of profit maximisation with certain other principles.

In India especially, banks are required to modify their performance in profit-making if that clashes with their obligations in such areas as social welfare, social justice, and promotion of regional balance in development. In any case, compared to other business concerns, banks in general have to pay much more attention to balancing profitability with liquidity. It is true that all business concerns face liquidity constraint in various areas of their decision-making and, therefore, they have to devote considerable attention to liquidity management. But with banks, the need for maintenance of liquidity is much greater because of the nature of their liabilities.

Banks deal in other people's money, a substantial part of which is repayable on demand. That is why for banks, unlike other business concerns, liquidity management is as important as profitability management. This is reflected in the management and control of reserves of commercial banks.

Management of Reserves

The banks are expected to hold voluntarily a part of their deposits in the form of ready cash which is known as cash reserves; and the ratio of cash reserves to deposits is known as the (cash) reserve ratio. As banks are likely to be tempted not to hold adequate amounts of reserves if they are left to guide themselves on this point, and since the temptation may have extremely destabilising effect on the economy in general, the Central Bank in every country is empowered to prescribe the reserve ratio that all banks must maintain. The Central Bank also undertakes, as the lender of last resort, to supply reserves to banks in times of genuine difficulties. It should be clear that the function of the legal reserve requirements is two-fold: (a) to make deposits safe and liquid, and (b) to enable the Central Bank to control the amount of checking deposits or bank money which the banks can create. Since the banks are required to maintain a fraction of their deposit liabilities as reserves, the modern banking system is also known as the fractional reserve banking.

Creation Of Credit

Another distinguishing feature of banks is that while they can create as well as transfer money (funds), other financial institutions can only transfer funds. In other words, unlike other financial institutions, banks are not merely financial intermediaries. This aspect of bank operations has been variously expressed. Banks are said to create deposits or credit or money, or it can be said that every loan given by banks creates a deposit. This has given rise to the important concept of deposit multiplier or credit multiplier or money multiplier. The import of this is that banks add to the money supply in the economy, and since money supply is an important determinant of prices, nominal national income, and other macro-economic variables, banks become responsible in a major way for changes in economic activity. Further, as indicated in Chapter One, since banks can create credit, they can encourage investment for some time without prior increase in saving.

Basis and Process of Credit Creation

Let us briefly discuss the basis and process of creation of money by banks. In modern economies, almost all exchanges are effected by money. Money is said to be a medium of exchange, a store of value, a unit of account. There is much controversy as to what, in practice in a given year, is the measure of supply of money in any economy. We do not need to go into that controversy here. Suffice it to say that every one agrees that currency and demand deposits with banks are definitely to be included in any measure of money supply. Thus, apart from the currency issued by the government and the Central Bank, the demand or current or checkable deposits with banks are accepted by the public as money. Therefore, since the loan operations of banks lead to the creation of checkable deposits, they add to the supply of money in the economy. To recapitulate, the money-creating power of banks stems from the fact that modern banking is a fractional reserve banking, and that certain liabilities of banks are accepted (used) by the public as money.

Special Role Of Banks

As said earlier, commercial banks have a special role in India. In fact, many financial experts even abroad have, of late, been emphasizing the special place that banks hold in their countries also. The "privileged role" of the banks is the result of their unique features. For example, the liabilities of banks are money, and, therefore, they are an important part of the payments mechanism of any country; they also have access to the discount window of the RBI, call money market (as both borrowers and lenders), and the deposit insurance. It would be difficult to eliminate such distinctive features of banks in the near future. There is also an important question as to whether they should be wiped out, and, if it is done, whether it would not have adverse consequences on the financial system.

For a financial system to mobilize and allocate savings of the country successfully and productively, and to facilitate day-to-day transactions, there must be a class of financial institutions that the public views as safe and convenient outlets for its savings. In virtually all countries, the single dominant class of institutions that has emerged to play this crucial role as both the repository of a large fraction of the society's liquid savings and the entity through which payments are made is the commercial banks. The structure and working of the banking system are integral to a country's financial stability and economic growth.

Bank lending is specially important for companies. The theory of financial contracting under asymmetric information holds that information-intensive and information-problematic firms submit to the tight and detailed loan covenants so as to reduce agency costs. They delegate the tasks of monitoring and renegotiating debt contracts to financial intermediaries because these tasks are costly and the intermediaries are in a better position to reduce the costs. Intermediaries are more efficient in monitoring debt contracts because they are unlikely to free-ride on information-production by others as they have a larger stake, and they can renegotiate contracts more cheaply than the dispersed debenture holders. The public bond covenants tend to set their conditions on events that are relatively easy to verify, viz., a major change in capital structure or a downgrading of credit rating. In contrast, the intermediary loan contracts are conditioned by performance measures such as working capital and net worth, which are less easily controlled by the managers.

Further, the violation of a financial covenant often triggers financial distress. When this happens, banks can restructure the terms of contracts, viz., wave covenants, extend maturity, extend more loans, and require more collateral. Such flexibility reduces the cost of financial distress. Information asymmetries and free riding by bondholders, on the other hand, may force the financially distressed firms into inefficient spending cutbacks, and even bankruptcy. It has been found in the US that the firms' stock prices rise after an announcement that they have received bank loans, while they fall in response to announcement of a public bond offering.

Similarly, there are reasons why loans from even other financial institutions may not be a perfect substitute for bank loans. The economies of scope between deposit taking and lending give banks an information advantage over finance companies and other financial institutions. The deposit history of firms may inform banks about the credit risk involved in lending to these firms. Information on deposits activity may also make it easier for banks to monitor working capital covenants.

The phenomenon of "compensating balances" can mostly exist only in the case of banks, and not other institutions. The lending and deposit-taking activities of banks are complementary, and, go to build up banking relationship which increases the availability of funds to the firms, which, in turn, enables them to partially avoid taking more expensive trade credit. Personal relationships are far less important in borrowing from other financial institutions than from banks. Moreover, significant differences in collateral requirements exist between banks and other financial institutions. All such differences effectively segment the market for business lending, and make bank loans highly unsubstitutable.

Indian Banking System

The Indian banking system has a very wide reach and deep presence in metropolises, cities, semi-urban areas, and the remotest corners of the rural areas with its vast number of branches. It is one of the largest banking systems in the world. It has been rightly claimed in certain circles that the diversification and development of the Indian economy are in no small measure due to the active role banks have played in financing economic activities of different sectors They have been playing an important role in developing mutual funds, merchant banks, Primary Dealers, asset management companies, and debt markets. They operate as issuers, investors, underwriters, and guarantors in financial markets. By their participation, banks influence the growth and liquidity of debt markets. They would help in securitisation of debt market. They hold about 60 per cent of debt stock of government securities, and they account for more than 50 per cent of the issuance of bonds through public issues and private placements.

Because of such considerations, the important position which banks have historically come to occupy in India should not be unwittingly destroyed or undermined in the name of promoting equity culture. Otherwise, monetary authorities would find it more and more difficult to achieve the goal of stability of the financial system and of the prices. The banking reforms, therefore, must aim not only at profitable banking but also at a viable, sound, safe, and social banking.

Marketing of Banking Services

Marketing can be defined as a Social and Managerial process by which individuals & groups obtain what they need and want through creating offering and exchanging products of value with others.

However, marketing in banking aspect refers to the business of forging an maintaining consumer (including corporate customer) - financial relationship.

Earlier bankers had little understanding or regard for marketing Banks did not have to make a case for checking accounts, savings , loans or safe deposit vaults. The bank building was created in the image of a Greek temple, calculated to impress the public with the bankís importance & solidity one lending officer arranged his office, so that a prospective buyers could sit across his massive desk on a lower chair. The office window was located behind the officerís back and the sun would pour in on the hapless client, who tried to explain why he / she needed a loan. This was the bankís posture before the age of marketing.

Marketing came into banks not in the form of marketing concept, but in the form of advertising and sales promotion. The banks have learnt that while attracting people to a bank is easy, converting them into loyal customers is hard. Thus, they have begun to formulae programmes to please the customer. Bankers have learned to smile. The banks interiors have been redesigned to produce a warm and friendly atmosphere. Even the outside Greek - temple - type architecture has been changed.

Banks have found a new competitive tool when they began to segment their markets and innovate new products for each target segment.

Bank marketing is incomplete in the absence of marketing analysis, planning, implementation and control. The importance of these aspects can be well understood by looking at the following example :- One large bank, which had achieved sophistication in advertising, friendliness, segmentation, innovation and positioning, nevertheless lacked good systems of marketing planning and control. In each financial year, they submitted their targeted goals, usually 10 % higher than the previous yearís goals. They also requested a budget increase of 10 %. However, no rationale / plans accompanied these submissions. The top management was satisfied with the officers who achieved their goals. One loan officer, judged to be good performer, retired and replaced by younger man who proceeded to increase the loan amount by 50%, the following year. The bank painfully learnt to conduct marketing research and measure the potentials of its various markets. Further it failed to set quota and to develop appropriate management incentive systems.

Changing Trends in Banking Industry :

Stage 1:

Stage 2 :

Stage 3:

Stage 4 :

Bank marketing is the aggregate of functions, directed at providing services to satisfy customersí financial (and other) needs and wants, more effectively and efficiently than the competitors. Keeping in view the organizational objectives of the bank marketing helps in achieving the organizational objectives of the bank. Indian banks have dual organizational objectives- objective to make profits and social objective, which is a developmental role particularly in the rural areas. Foreign banks do not have so much commitments towards the latter and base their efforts around their profit motive. However, the marketing concept is essentially the same for both foreign and Indian banks and its all about the following few key success factors of the banking industry :-

Marketing is an organizational philosophy. For a service industry like banks, it needs to be understood by the whole organisation, from the person working at the counter to the chief executive. The first and foremost step in this concept is to have a whole hearted commitment to customer orientation by all the employees.

Changing Face of Current Account of Banks

Profitability and services offered to cooperates

Let us see what is a current account?

Money transactions are at the heart of most business relationships. Your bank's support and services can make all the difference in closing a deal, and maintaining goodwill with business associates.

The ICICI Bank Current Account gives you access to a large network of branches across India. We also give you 4 direct access channels to your account - the phone, mobile, Internet and through the ATM. So you can do your banking at your convenience, not your banks.

Current Account

ICICI Bank Ltd., one of the largest scheduled commercial banks in India.

ICICI Bank Ltd. was promoted by ICICI (a leading financial institution established in 1955 at the initiative of Government of India and World Bank) in the year 1994. The Bank was first in India and Second in Asia to be listed on New York Stock Exchange. Recently, ICICI Bank has been selected as the Best Bank in India by Business Standard.

In view of the constantly evolving business milieu, the ICICI group has taken a unique step with the reverse merger of ICICI with ICICI Bank. This event marks the beginning of the metamorphosis of two of the most respected and powerful companies in India into a Universal Bank, with a blend of offerings unmatched in the financial sector.

Features of the Current Account

Anywhere Banking-With an unparalleled set of network branches across India, ICICI bank offers you anywhere banking in the truest sense of the term.This current account in one center can be operated from any other designated branches across any other center.

A cheque deposited in your account in any other center will be credited to your account much faster.

You can deposit or withdraw cash from any of the designated ICICI branches.

You can also transfer funds across accounts in ICICI bank.

Multi-city cheque facility: To transfer funds to any other city you no longer need to get drafts made. Instead you will be issued two separate chequebooks for local and out station use. This will enable you to save draft commission. Cheques will be payable at par at designated ICICI Bank branches across the country. There will be no limit to the value of cheque issued on a single day at RBI clearing centres as per annexure.

Upcountry cheque collection-Cheques payable at a remote location will be credited to the account by ICICI Bank through its tie up with the correspondent bank.

Pay Orders and Demand drafts-With ICICI Bank current account you can draw pay order in more than 125 centers and draw demand drafts in more than 500 centers.

Inward Remittance- can be done in any of the currencies mentioned in annexure 1 through our correspondent banks mentioned there in. The remittances would be charged at a rate of 250/- per transmission irrespective of the amount

Door-Step banking-Cash Delivery and Cash Pickup will be provided along with the current account at no additional cost.

Free 'Infinity' - Internet Banking - Access your account information, transfer funds between own accounts with ICICI Bank, track transactions, print statement of accounts, report loss of ATM card, submit a cheque book request and give a stop payment instruction. Future enhancements include request for demand drafts and pay orders, utility bill payment such as payment of telephone bills, electricity bills etc.

Infinity not only offers remote access to one's account but also immediacy and transparency in transactions. No matter what the geographical distance is, you are only a mouse click away from ICICI Bank.

For an online tour of the various features of Infinity, please visit our web-site 

Free Mobile Banking - Access your account information, Account balance track transactions, and View statement of accounts (last five transactions), put a checkbook request. Request for account statement. Future enhancements include Credit card transaction, overdrawn amount.

Phone Banking - We have call center toll free 9818178000 for following services Balance Enquiry, Chequebook request, and PIN regeneration, Dial a draft and host of other facilities.

Free monthly Account Statement on Email

Sweep is the only current account which gives returns over a qualified balance maintained by the customer. The product was launched last year, it comes with several added benefits to the customers. The objective is to enhance the customer ease in investing in mutual funds through our bank branches. The objective of the mutual fund sweep facility (MFSF). MFSF account is a strong technology based effort which enables amounts beyond a particular balance in the account to be swept to specify MF units. The facility also enables immediate and online redemption of units from the account.

The facility enables customers to invest in units of liquid plans of mutual funds and also offers liquidity by allowing auto-redemption of the units over various banking channels. For this purpose banks have tied up with mutual funds for automatic investments in their units.


Project Report Changing Face of Current Account of ICICI Bank, HDFC Bank and Standard Chartered Bank

Statement of Objectives

The following survey was mainly done with an objectives to know the state of mind of an individual who is opening a current account with ICICI BANK and also analyses the services provide by the H.D.F.C and STANDARD CHARTERED BANK.


Title : Project Report Changing Face of Current Account of ICICI Bank, HDFC Bank and Standard Chartered Bank

Pages : 76

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