HISTORY OF BANKING - FULL HISTORY

                                          CHAPTER-1

1.      INTRODUCTION

1.1 INDUSTRY PROFILE:- 

HISTORY OF BANKING

According to history, Babylonians had developed a Banking system.  The great temples were powerful of the Greek Banking institutions.  In ancient Greece and Rome, the practice of granting credit was widely prevalent.  People used cheques and drafts to settle their accounts. Manu, the ancient Hindu law giver has written exhaustive regulations governing credit. He talks about credit installments, interest on loans and commercial papers. During the early periods, although banking business was mostly done by private individuals, many countries established private banks. A public bank was established in Barcelona in 1941.  During 1407, the bank of Genoa was established. The Bank of Amsterdam was established in 1609 to meet the needs of the merchants of the city.  It accepted deposits which could be drawn on demand.

English Banking may correctly be attributed to the London gold smiths.  They received their customer’s valuables and funds for safe custody and issue receipts. These notes, in course of time, became payable to bearer of demand and hence enjoyed considerable circulation.  However, in the course of time, gold smiths were ruined.  This led to the growth of private banking and establishment of “Bank of England” in 1694.

In India, banking existed even during Vedic period.  The books of Manu contain references regarding deposits, pledges, policy of loans and rate of interest.  Although, the business of banking is old, Banking Institutions have since changed in character and content.  Banks play an important role in the economic development of the country.  The entire commercial and industrial activities are well knitted with the banks.  One cannot imagine the cessasion of the banking activities even for a day.  There may be an economic crisis in the country if the banks stop functioning for some days.

In the early days, the banking business was confined receiving of deposits and lending of money.  But the modern bankers undertake wide variety of functions to assist their customers.  In countries like United Kingdom, Banking development preceded industrial development and in United States of America, the Banking development followed the industrial development.  But in many other countries including India, the development has almost been simultaneous.  The peculiarly of Indian Banking is that the banks were started, funded and managed by industrialists to enable them get adequate finance for their businesses or industries.  We can see a direct relationship between banks and the business houses.  The Tata group was associated with Central Bank of India; House of Birla with United Commercial Bank and similarly Rajahs of Chettinad with Indian Bank etc.

Most of the traditional bankers were interested in developing their industries and business units. So there has been an organized development is such banking activities.  Such banks were concentrating in the urban areas.  The vast majority of the rural population was governed only by unorganized group of bankers like indigenous banks and moneylenders.  It would be easier to classify the banks on the basis of their functions:

1.      Central Banks

2.      Commercial Banks

3.      Co-operative Banks

4.      Industrial Banks

5.      Development Banks

6.      Exchange Banks

7.      Agricultural Banks

8.      Indigenous Banks

9.      Regional Rural Banks

Banking system is the driving force for all Economic activities. Banks through their control over the volume of money in circulation influences Production, Consumption and Distribution.  Banks play an active role in the Economic Progress of a country, as they are the major instrument behind the mobilization of resources, investment and on the operation efficiency of the various segments of the economy

The Significance of the Banking system in the process of Economic Development is picturised in the following.

ü    Creation and controlling the circulation money.

ü    Promoting infrastructural facilities.

ü    Capital formation.

ü    Rural Development

ü    Provides long-term loans and micro credits.

ü    Entrepreneurial development

ü    Balancing international trade

ü    Facilitating with a good medium of exchange (cheque system).

ü    Assistance to agriculture and SSI.

ü    Acting as a bridge between various sector.

ü    Instrument to implement to monetary policy.

ü    Catalyst to social change

ü    Mobilising savings

ü    Incentive to investment.

ü    Controlling trade cycle.

DEFINITION OF BANK:

The banking regulation act 1949. A Bank is a company which accepts deposits of money from the public, for the purpose of lending or investment, repayable on demand or otherwise.

DEFINITION OF BANKER:

According to SIR JOHN PAGET, “No person or body, Corporate otherwise, can be a banker who does not  (i) take deposit accounts; (ii) take current accounts; (iii) issue and pay cheques and (iv) collect cheques, crossed and uncrossed, for his customers”.

DEFINITION OF CUSTOMERS:

According to SIR JOHN PAGET, “To constitute a customer, there must be some recognizable course or habit of dealing in the nature or regular banking business”.

1.      To be a customer, the person should have some sort of an account with the bank.

2.      He should also have had a few transactions with the bank (i.e. Deposits/Withdrawals).

FUNCTIONS OF BANKING INDUSTRY:

1.      The borrowing, raising or taking of money;

2.      The lending or advancing of money either upon security or without security;

3.      The drawing, Making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, promissory notes, drafts, bill of lading, railway receipts, warrants, debentures, certificates, scripts and other instruments and securities whether transferable or not;

4.      The granting and issuing of letters of credit, travelers cheque and circular notes;

5.        The buying, selling and dealing in bullion and specie;

6.      The buying and selling of foreign bank notes;

7.      The acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, obligations, securities and investments of all kinds;

8.      The purchasing and selling of bonds, scripts and other forms of securities on behalf of constituents or others;

9.      The negotiating of  loans and advances;

10.  The receiving of all kinds of bonds, scripts or valuables on deposits or for safe custody or otherwise;

11.  The providing of safe deposit vault;

12.  The collecting and transmitting of money and securities and they are acting as a miscellaneous functions also for their valuable customers.

SAVINGS ACCOUNT:

An account opened by a customer to make a deposit and withdrawal of small sums of money is known as ‘savings account’. This account can be opened for individuals, nontrading, organizations, permitted institutions, etc., Minimum balance is Rs.500 with cheque book.  The account may be operated either single or joint. No restrictions on the number and the amount of deposit of cash.  Passbook, nomination, standing instructions, cheque collection facilities, etc., are available.

CURRENT ACCOUNT:

A Special type of bank account opened by traders, businessmen, corporate bodies and others who operate the account frequently is known as a current account.

AUTOMATIC TELLER MACHINES (ATM):

The ATMs have revolutionsed the banking system in the country.  Some Foreign Banks have introduced Automatic Teller Machines (ATMs) to facilitate their customers to withdraw and deposit cash without any waiting time.  The credit cardholders can also withdraw emergency cash from the ATMs at various centers in the country at any time- day and night.

INTERNET BANKING:

Banking transaction that takes place in a virtual ambience on the website of a banking company or a financial institution is termed as ‘Internet Banking’. The essence of Internet Banking lies in on-line access by customers of banking and financial services.

MOBILE BANKING:

Mobile Banking is the kind of banking and financial service that fives a real-time mobile access to customers on the move is called ‘Mobile Banking’, the service being offered through ‘Mobile Phones’.

SMS BANKING SERVICES:

SMS stands for ‘Short Messaging Services’. The service enables the mobile banking customers to access SMS server through their mobile phone.  SMS server provide message inputs (query or request) from mobile phone to the personal server of the Internet Banking Company. The Customer can avail the following services under the SMS banking:

1.      Making balance inquiry.

2.      Making query of the last five transactions.

3.      Sending mail to the banks’ Relationship Officer.

4.      Changing SMS password.

5.      Opting out of SMS.

POS (POINT OF SALES):

Point-of-Sale Transfer facilitates payment for purchases with a debit card, which also may be the ATM card.  The process is similar to using a credit card, with some important exceptions. While the process is fast and easy, a debit card purchase transfers money, fairly, quickly from the customer’s bank account to the merchant’s account.

OVERDRAFT:

A fluctuating account that indicates the aggregate amount by which a depositor has overdrawn the account, is known as ‘overdraft’.  Available to the current account holders of high standing and integrity, the arrangement enables a customer to draw over and above the balance standing on the credit of the account.  The banker insists on securities such as shares, debentures, Government papers, life insurance policies, etc.  Besides, personal security plays an important role in the extension of overdraft facility.

CALL CENTRES:

Call Centers are workstations that act as a nucleus of the functioning of the telephonic banking system operated through fully computer-integrated telephone system. The telephone system is linked to the workstations.  In offering the best possible and efficient telephone banking service, call centers play a significantly primary role.  Call centers constitute locations where telephone operators are based, who represent the bank in every respect and the people operating the service have a real personality because their voice is representing the bank.  Call centers maintain a comprehensive database of the bank’s customers.

NATIONAL ELECTRONIC FUND TRANSFER (NEFT):

A method of fund transfer mechanism, which facilitates transfer of funds between banks and users, is called ‘Electronic Funds Transfer’ The scheme of NEFT  was introduced by the RBI with a view to helping banks offer their customers money transfer service from account-to-account of any bank branch to any other bank branch, both inter-city and intra-city.  The method allows for both interbank and intra bank funds transfer (money transfer between the branches of the same bank).

REAL TIME GROSS SETTLEMENT (RTGS):

'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time. 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable.

CASH CREDIT:

Cash credit is a credit given in cash to business firms. It is essentially a drawing account against credit granted by the bank.  It is operated in the same way as a current on which an overdraft is sanctioned.  The borrower has an option to operate the account within the stipulated limit as an when required.  Cash credits are generally allowed against the pledge or hypothecation of goods, against book debts or personal security.

GOLD:

Gold is considered to be one of the most precious metals in the world. It is identified by its rich, yellow coloring and bright. Once it is processed, it will be melted down either to be formed into bullion or to be made into jewelry.

1.1.1 KEY PLAYERS IN THE INDUSTRY:

1.      State bank of India

2.      Punjab National Bank

3.      Indian Bank

4.      Co-operative Bank, Pondicherry

5.      Bharathiar Grama Bank

6.      Canara Bank

7.      ICICI Bank

8.      UCO Bank

9.      Syndicate Bank

1.2 COMPANY PROFILE

Indian Overseas Bank (IOB) was founded in February 10th of the year 1937 by Shri.M.Ct.M.Chidambaram Chettyar, a pioneer in many fields Banking, Insurance and Industry with the twin objectives of specialising in foreign exchange business and overseas banking. Indian Overseas Bank (IOB) is a leading bank based in Chennai India.  IOB had the distinction of simultaneously commencing operating in three branches at Karaikudi, Chennai and Yangon (Myanmar). Since IOB aimed to encourage overseas banking foreign exchange operations, it soon opened its branches in Penang and Singapore.  Indian Overseas Bank has an ISO certified in-house Information Technology department, which has developed the software that 900 branches use to provide online banking to customers. At the dawn of Independence IOB had 38 branches in India and 7 branches abroad. The Products & Services of the bank includes NRI Services, Personal Banking, Forex Services, Agri Business Consultancy, Credit Cards, Any Branch Banking and ATM Banking. Saga of the IOB is covered into four categories, such as Pre-nationalisation era (1947- 69), at the time of Nationalisation (1969), Post - nationalisation era (1969-1992) and Post-Reform Period - Unprecedented developments (1992 & after). In Pre-nationalisation era (1947- 69), IOB expanded its domestic activities and enlarged its international banking operations. As early as in 1957, the Bank established a training centre, which has now grown into a Staff College at Chennai with 9 training centres all over the country.IOB was the first Bank to venture into consumer credit. It introduced the popular Personal Loan scheme during this period. In 1964, the Bank made a beginning in computerisation in the areas of inter-branch reconciliation and provident fund accounts. In 1968, IOB established a full-fledged department to cater exclusively to the needs of the Agriculture sector. Today, Indian Overseas Bank  boasts of a vast domain in banking sector with over 1400 domestic branches and 6 branches overseas.

1.2.1 ORGANISATIONAL STRUCTURE:

 

Figure 1.2.1: Organization Structure of IOB

1.2.2 IOB VISION AND MISSION STATEMENT:

VISION:

“To be among the top five nationalised banks in terms of business volumes and sustained profitability with global recognition guided by high standards of governance and ethics; and emerge as the “Most Preferred Banking Partner” to unlock value to all its stakeholder”.

CORE VALUES:

·        Customer centricity.

·        Good people to grow with.

·        Touching Hearts and Spreading Smiles.

·        Honesty, Integrity, Fairness & Transparency.

·        Build leaders for industry.

·        Innovation & Risk Appetite.

·        Green Banking.

MISSION: 

·        Deliver the best of competitive products in terms of Quality, Range, Utility and cost effectiveness.

·        Optimize out HR resources through training, exposure, Mentoring and incentive, relying on the “Soft touch” instead of the “Big stick”.

·        Develop quality bankers who would rise to be future leaders of the industry.

·        Contribute to country’s economic growth through dedicated efforts and customer focus.

·        Streamline the process of service delivery from time to time to meet emerging requirements.

·        Nurture a climate of creative problem-solving to resolve customer’s grievances with alacrity ensuring that the bank is regarded as customer centric.

·        Emphasize a policy-oriented and rule-driven culture of compliance to meet evolving requirements.

·        Engineer CRM (Customer Relationship Management) and in sights gained for further enhancement of products and service quality.

·        Expand IT infrastructure to deliver all banking services from “one tap” irrespective of customer location.

1.2.3 SWOT ANALYSIS:

STRENGTH:

·        Capital strength

·        Strong communication.

·        Well established and continuously expanding geographical foot prints.

·        Overseas banking expertise

·         Strong foreign exchange operations

·        Dedicated IT department

·        Banking schemes with social approach like agriculture seed bank

·         Offers services like Loans, Credit Cards, Savings, Investment vehicles

WEAKNESSES:

·        Lack of visible goodwill among this generation.

·        Less penetration in India

·         Few no. of branches across the country as compared to other brands

·         Low visibility in advertising and branding

OPPORTUNITIES:

·        Structure of the industry, Market size and growth rate is huge potential in Indian Market.

·        Innovative products and services

·        Can open up branches worldwide.

·        Expansion into rural areas and retail banking

·        Doing aggressive marketing in order to improve brand value

THREATS:

·        High degree of competition

·        Fluctuations in government policies and Political environment.

·        Developing Indian economy.

·        Changes of exchange rates (commission) for a transaction from one Bank to another.

·        Economic crisis and fluctuating markets

·        Highly competitive environment and Stringent Banking Norms laid by RBI

1.2.4 BRANCH PROFILE:

·        INDIAN OVERSEAS BANK, Villianur.

·        Villianur branch was started at 13^th July 2012.

·        Key People of the Branch:

Ø      R.CHITRA RAJAVEL (Senior manager)

Ø      P. VIJAYALAKSHMI (Assistant manager)

Ø      N. DHANDAPANY (Chief cashier)

Ø      T. KODHANDAPANI (Cashier)

·        Products:

Ø      Loans, Credit Card Savings, S.B, C.D, Cash Credit, Online Transaction etc.

·        Branch code: 2959

·        IFSC – Code No: IOB000295

·        Email: villianurbr@ponsco.iobnet.co.in

1.2.5 ORGANISATIONAL SET UP:

	IOB Villianur Branch

 

                                                                                                                                   

 

Figure: 1.2.4 Organization Structure of IOB Villianur Branch

1.2.6 PRODUCT AND SERVICES:

1.      SAVING BANK

         i.            CORPORATE SALARY ACCOUNT

       ii.            STUDENT A/C

      iii.            PLATINUM

     iv.            SB REGULAR

       v.            SB NO FRILLS

     vi.            SB  GOLD-I

    vii.            SB GOLD-II

  viii.            SB SILVER-I

     ix.            SB SILVER-II

i.     CORPORATE SALARY A/C

Ø      60 Cheque leaves per annum.

Ø      IOB International VISA debit card

Ø      RTGS/NEFT facility

Ø      Internet banking facility

Ø      Mobile banking facility.

Ø      Personal accident Insurance cover for Rs.1 lac

Ø      Zero balance Account.

Ø      Withdrawal Up to Rs.50,000 per day in ATMs.

Ø      Overdraft facility.

ii.      STUDENT ACCOUNT

ELIGIBILITY: Students from 16 years of age and above.

MINIMUM BALANCE: Rs. 500/-

MAXIMUM AMOUNT: Rs. 50,000/- (Max. Amount restriction will be removed after the account holder attains the age of 18 years.)

iii.    IOB PLATINUM ACCOUNT:

ELIGIBILITY:  All individual including those employed in reputed companies, among software, public, private sector,  government etc.,

MINIMUM BALANCE: 750/-

iv.      REGULAR SAVINGS BANK ACCOUNT:

ELIGIBILITY:  Individuals / joint account/ clubs / associations/ trust/ Govt. bodies/ educational institutions/ associations and other Non trading organisations, Minors above 10 years of age.

MINIMUM BALANCE:  Rs. 100 (without cheque) and Rs. 500 (with cheque) for rural & semi-urban branches; Rs. 500 (without cheque) and Rs.1000 (with cheque) for urban and metro branches.

INTEREST: 3.5% (payment every half year)

v.  SB – NO FRILLS ACCOUNT:

ELIGIBILITY: Individual above 10 years of age and pensioners, joint account permitted.

MINIMUM BALANCE:  Only Rs. 5. Withdrawal only through withdrawal slip. No cheque books issued.

INTEREST: 3.5%. Balance not to exceed Rs. 50,000 at any time and total credit not to exceed Rs.1 lac.

vi.    SB GOLD – I:

ELIGIBILITY:  All individuals including professionals such as Doctors, Lawyers, C.A., Executives working in MNC, software companies, public/private sector and business people, High net worth individuals, CEOs, IAS and IPS.

MINIMUM BALANCE: Quarterly average balance not less than Rs. 50,000.

vii.  SB – GOLD II

ELIGIBILITY:  All individuals including professionals such as Doctors, Lawyers, C.A., Executives working in MNC, software companies, public/private sector and business people, High net worth individuals, CEOs, IAS and IPS.

MINIMUM BALANCE: Quarterly average balance not less than Rs.1,00,000/-

     viii. SB SILVER – I

ELIGIBILITY: All individuals including those employed in reputed companies, among software, public/private sector, Govt.

MINIMUM BALANCE: Quarterly average balance not less than Rs. 5000 to be eligible for concessions.

ix. SB SILVER – II

 ELIGIBILITY: All individuals including those employed in reputed companies, among software, public/private sector, Govt.

MINIMUM BALANCE: Quarterly average balance not less than Rs. 25,000 to be eligible for concessions.

2.  CURRENT DEPOSITS:

                                i.            CD – SUPREME

                              ii.            CD - CLASSIC

                            iii.            CD – SUPER

i. IOB SUPREME CURRENT ACCOUNT:

ELIGIBILITY:  Proprietary,/Partnership firms, clubs, Societies etc.,

MINIMUM BALANCE: Rs. 7,500/-

ii. IOB-CD CLASSIC:

ELIGIBILITY: Proprietary concern, Partnership firm, HUF, Limited companies, corporations, SMEs, Trusts, Societies, clubs, Association, Local Bodies, Govt. Departments subject to RBI directives.

MINIMUM BALANCE REQUIREMENT: The average daily balance in the current account during last three months should not be less than Rs.1 lakh.

iii. IOB-CD SUPER:

ELIGIBILITY: Proprietary concern, Partnership firm, HUF, Limited companies, corporations, SMEs, Trusts, Societies, clubs, Association, Local Bodies, Govt. Departments subject to RBI directives

MINIMUM BALANCE: The average daily balance in the account over the last three months should not be less than Rs.5 lakh.

3.      TERM DEPOSITS:

                        i.            Reinvestment deposit scheme

                      ii.            Fixed deposits

                     iii.            Recurring deposits

                    iv.            Education deposits

                      v.            Easy deposits

                    vi.            Vardhan scheme

                   vii.            Floating rate deposits

                 viii.            Tax saver scheme

i.        REINVESTMENT DEPOSIT

OBJECTIVE: Reinvest interest earned on deposit.                                                                                                        END USE: Meet future expenditure like children’s education, Marriage.                                                                     MODE OF DEPOSITS: Minimum Rs. 1000, initial deposits in multiples of 100. Renewals any amount.

Ø      Deposits accepted for 6 months to 10 years.

Ø      Interest compounded quarterly and paid at maturity.

ii.      FIXED DEPOSIT

OBJECTIVE: Invest fixed amount of money for a fixed period at a higher rate of interest.                                     END USE: Retention of savings for a future use.                                                                                                   MODE OF DEPOSITS: MINIMUM Rs.1000, in multiples of 100.

Ø      Variables deposit periods, ranging from 6 months to 120 months.

Ø                                           Interest payable once in 6 months.

iii.    RECURRING DEPOSIT

OBJECTIVE: Invest small amounts of money regularly.                                                                                Meant for salaried individual, small trader, housewife, student or rural saver.                                                                                    END USE: Obtain a higher sum of money at a future date to meet financial obligations.                                      MODE OF DEPOSIT: Minimum Rs. 50/m, in multiples of 5.

Ø      Deposit period ranging from 6 months to 120 months

Ø      Interest at rate applicable for Fixed Deposit; quarterly compounding of interest.

iv.    EDUCATION DEPOSIT

OBJECTIVE : invest small amounts of money regularly.

·        Salaried individual, small trader, rural saver, professional and self employed. 

                                                      

END USE: Obtain a large sum of money at a future date for higher education of children.                           MODE OF DEPOSIT: 63 months and 84 months.

Ø      Repayment in one Lump sum or 3 annual installments for 63 month deposit.

Ø      Repayment in 4 annual installments for 84 month deposit to pay for the annual school/college fees.

v.      EASY DEPOSIT

OBJECTIVE: Save money in flexible and convenient monthly installments.

·        Salaried individuals, Professionals, small traders, students, housewives.

  MODE OF DEPOSIT: minimum Rs. 100. Higher deposits in multiples of 10, maximum 10,000/-.

Ø      Monthly interest depending on the minimum balance in account between the 10^th and the last day of the month.

Ø      Choice of minimum amount every month from Rs.100 to Rs. 1000/-

vi.    VARDHAN SCHEME

OBJECTIVE: Special deposit scheme for senior citizens – Any individual above 60 years of age.      

MODE OF DEPOSIT: Minimum Rs. 5000, Rs.100pm for recurring deposit. Minimum period 15 days, Maximum 120 months for Recurring deposit minimum 6 months and maximum 120 months.

vii.  FLOATING RATE DEPOSIT

ELIGIBILITY: Any individual, single or jointly.

PERIOD OF DEPOSIT:3 to 10 years

AMOUNT: Minimum 1 lakh, Multiples of 10000 thereafter

INTEREST: Reset on 1^st March and 1^st September every year.

Table 1.2.6: Floating rate for deposits

PERIOD		FLOATING RATE OF INTEREST %
3 TO 5 YEARS		6.48%
5 TO 10 YEARS		6.76%

viii.            TAX SAVER SCHEME

TARGET:  Self employed/ Salaried individuals

AMOUNT: Maximum of Rs. 1,00,000, minimum Rs. 10,000.

PERIOD: 5 to 10 years.

INTEREST: 7.50%.

·        No loans against deposits.

·        No premature closure.

4.      INSURANCE PRODUCTS

            I.         IOB NRI Shield

          II.         IOB Jeevan

        III.         IOB Personal Accident Insurance

        IV.         IOB Health Care Plus

          V.         Vidya Suraksha

        VI.         Vidya Jyothi with Suraksha

      VII.         Liability Insurance

5.      IOB FINE GOLD

o       IOB Fine Gold – 999.9 Pure Gold from PAMP, Switzerland.

o       Packed in attractive, temper proof CERTICARDS form PAMP, Switzerland.

o        Available in 2,4,8,20 gram coins, and 50 & 100 gram rectangular bars.

6.      NEW SCHEMES UNDER AGRI DIRECT

1.      IOB Urban Horticulture Scheme

2.      IOB  Agri Transport

3.      IOB Green Credit

7.      RETAIL CREDIT SCHEMES

Ø      SAHAYIKA (To meet Social commitments Like Marriage etc).

Ø      PENSIONER’S LOAN SCHEME (To meet personal expenses).

Ø      SUBHAGRUHA (Housing finance for Resident individuals).

Ø      HOME IMPROVEMENT SCHEME (Loan for Repair/Renovation of homes).

Ø      HOME DECOR SCHEME (For interior decoration/furnishing of existing homes).

Ø      HOME LOAN FOR NRIs (Loan for Non-Resident Indians of India Origin).

Ø      PUSHPAKA (Loans to buy car or two wheeler).

Ø      LIQUIRENT (Loan against Rent Receivables).

Ø      CLEAN LOAN (Loan for salaried employees to meet personal and domestic expenses).

Ø      VIDYA JYOTHI (Education loan for both in India or Abroad).

Ø      IOB AKSHAY (Loan against Life Insurance).

Ø      SANJEEVINI (Loan for Medical practioners to construct hospitals / Purchase of equipments).

Ø      EASY TRADE (Loans to Retail Traders).

Ø      COMMERCIAL CASH CREDIT AGAINST JEWELLERY (Loan for other than agricultural purposes against primary security of Jewellery).

Ø      AGRICULTURE JEWEL LOAN (Loan for agricultural purposes against primary security of jewellery).

8.      NRI ACCOUNTS

I.       FOREIGN CURRENCY (NON RESIDENT) ACCOUNT:

Foreign Currency (Non resident) (FCNR) accounts can be opened by non resident Indian and persons of Indian origin with nomination facility.

II.    NON RESIDENT EXTERNAL (NRE) ACCOUNT:

NRE Accounts are Indian rupee denominated accounts that can be maintained as savings, current or term deposit.

III.  NON RESIDENT ORDINARY (NRO) ACCOUNT:

NRIs and PIOs – meant for bonafide local banking transactions denominated in rupees, not involving any violation of the provisions of FEMA.

IV.   RESIDENT FOREIGN CURRENCY (RFC)ACCOUNT:

RFC can be maintained by NRI who has returned home for permanent settlement, after staying abroad for minimum one year.

9.      IT RELATED PRODUCTS:

        I.            INTERNET BANKING

     II.            IOB MOBILE BANKING

   III.            POS MACHINE

  IV.            INTERNET PAYMENT GATEWAY

I.          INTERNET BANKING

Ø      For individuals and corporate users.

Ø      Query and account services: Balance enquiry, last few transactions, statement of account etc.,

Ø      Funds transfer to:

o       Accounts within our bank

o       Accounts with other banks.

Ø      Payment of direct taxes.

Ø      Payment of indirect taxes.

Ø      College fees for students.

Ø      Credit card payment: Register and pay credit card dues online.

Ø      Bill payments: Electricity, Mobile top-up, Insurance premia etc.

Ø      Payment of loan EMIs, RD installments.

II.       IOB MOBILE BANKING

Ø      Customer should have a mobile phone with any of following three features enabled: SMS, GPRS AND J2ME.

Ø      Must be a SB/CD/CC account holder of bank.

TYPES OF SERVICES OFFERED:  SMS/ GPRS.

SERVICES: Balance Enquiry, Last few transactions, Funds Transfer ( Rs. 5000 per day, Goods/Services- Rs. 10,000 per day.)

III.    POS MACHINE

Both credit and debit cards for payment has increased in all major metros and tier II cities. More shops and malls are coming up daily in cities and payments through cards are invariably accepted in all establishments.  The card payment is easy mode of payment for the shops/ establishments and major share of sale transactions are made through cards only nowadays. Now our bank has also entered “Card Payment Acquiring Business” under tie up with VISA International and M/s. Bank tech India (P) Ltd.

                           

1.2.6 COMMISSION STRUCTURE:

Table 1.2.6: Commission structure

MONTHLY TRANSACTION VALUE	COMMISSION PAYABLE
Above Rs.25 lakhs	1.45%
Rs.15 lakhs to 25 lakhs	1.5%
Rs.10 lakhs to 15 lakhs	1.6%
Rs 5 lakhs to 10 lakhs	1.7%
Less than Rs.5 lakhs	1.8%

INTERNET PAYMENT GATEWAY

Payment Gateway = Virtual POS Machine on internet.

Debit card customers to pay a very nominal fee than what they are paying now – 1.6 to 2.45%

RESEARCH OBJECTIVE:

1.3  STATEMENT OF THE PROBLEM:

            The study examines the demographic profile of the respondents and this Study will help me to understand the customer’s satisfaction about banking services and products. This study will help bank to understand, how a customer selects, organizes and interprets the Quality of service and product offered by banks. The market is more aware and realistic about investment and returns from financial products. In this background this study tries to analyze the customer satisfaction towards banking services in INDIAN OVERSEAS BANK. 

1.4  OBJECTIVES:

Ø      To find out the differences among perceived service and expected service.

Ø      To understand customer’s preferences.

Ø      To access the degree of satisfaction of the customers

Ø      To analyze which products is most preferred by the customers.

Ø      To know the most preferred financial institution by the customers.

Ø      To know the work culture and environment of the banking sector.

Ø      To evaluate the awareness about various products.

Ø      To study the various factors affecting while taking different products of the bank.

1.5  SCHEME OF THE CHAPTER:

Ø      CHAPTER-1: Introduction

Ø      CHAPTER-2: Review of literature

Ø      CHAPTER-3: Research methodology

Ø      CHAPTER-4: Data analysis and interpretation

Ø      CHAPTER-5: Conclusion

        

                                         CHAPTER-2

2.REVIEW OF LITERATURE

SHAHIN A.  &  SAMEA M. (2010).  Developing the Service Quality and satisfaction level in General banking. Some survey evidence, “Business Management and Strategy”. Objective of this study is finding the best and comprehensive model in measuring customer satisfaction and preference towards in banking sector.  Using secondary sources and work of other researchers is base of this study.  This survey  was based on difference between perception and expectation of service from bank staff. Service quality is the best tool for marketing to find and analyze information about customer needs, wants, and perceptions about services. This information will help to identify problems and make strategic plans in order to improve quick and efficient services, profitability, and overall performance by bank staff with high quality. During recent decades, scientists attempted to find the perfect model in measuring service quality that cover all the factors and answer to this area of necessity. There are many models suggested by researchers and all models have their own advantages and disadvantages. Scientists are not unanimous about any of these service quality models. Service quality models have different dimensions regarding the field of banking sector. However, service is the most common model used by researchers but it is not comprehensive and suitable for different applications. The hierarchical model has covered weaknesses of other models. It has strong structure and specifies the factors of customer perspective as well. Moreover, Hierarchical measurement considers services outcomes, the most advantageous approach to service quality assessment to date (Pollack, 2009). Finally, by this review of literature we can conclude that the Service Quality is the most important for the bankers and helpful for measurement and to collect the right information and make the right decisions.

Dr.CHAISOMPHOL CHAOPRASERT, “Customer’s satisfaction, preference and quality of service improvement in the Retail Banking Industry”.  Objective of the study is about the satisfaction level and the relationship between service quality in personnel counter services and electronic services. This research will seek to close the gap in this field of study Secondly, customer’s expectations and needs for services have substantially. As customers become better educated, they demand new products, better and more reliable delivery, as well as more responsive services. As a consequence, to improve competitiveness, banks have to understand customer needs and expectations and satisfy their customers by providing better products and services. Moreover, the economic crises, especially the Asian crisis, have greatly impacted on banking profit margins and also on customers’ confidence in banking institutions. As a result, banking customers have not felt confident with local financial institutions and have moved their deposits and transacted their financial business with reputable institutions from overseas.  As a result, banking customers have not felt confident with local financial institutions and have moved their deposits and transacted their financial business with reputable institutions from overseas. In the future, there may be new target groups that banks need to focus on and the regulations, especially for electronic banking. For this study 300 questionnaires are used. The results of this study illustrated that banks have to maintain the standard of their convenience/accuracy and efficiency. In addition, they need to improve their customisation, feedback/complaints and queue management by reallocating their resources. One point of interest, though, was that although the performance of the electronic banking service was not accepted as being of a high standard, 52.9 per cent of respondents were satisfied with the personal service and manual transaction. 

PRABHA RAMSEOOK-MUNHURRUN and PERUNJODI NAIDOO, (2011) Services Marketing (32:247-264). “Customers satisfaction and perspectives of service quality in Banking Industry”. A survey was carried out in order to measure and test the relationships between the service quality dimensions, satisfaction, and behavioral intentions. The questionnaire was divided into four parts. The first and second parts were designed to measure the expectations and perceptions of respondents respectively. The third part of the questionnaire measured respondents’ satisfaction and behavioral intentions. using a 5-point Likert scale ranging from 1 (strongly disagree) to 5 (strongly agree). The last part of the questionnaire captured the respondents’ demographic information. Demographic breakdown of the sample presents the frequencies and percentages of the respondents divided according to gender, age, education, and personal monthly income. The majority of the respondents were male (66.1%). As for the age distribution, most of respondents were under 40 years of age and the majority of them were in the age group of 18_30 years old (57.4%). It is generally acknowledged that the younger generation prefers Internet banking compared to older age groups. The education level of the respondents was above secondary school, and most of them were holders of bachelor degrees (54.6%). The majority of the respondents earned between Rs10000–Rs24999 ($295–$735) per month (54.1%), which is considered as the middle-income group in Mauritius. The findings of the study provide important insights to banks while framing their banking strategies and policies. This study identified 18 attributes that are important to customers under four dimensions: Reliability– Responsiveness, security, ease of use, and accessibility. Only one dimension, security, was found to have remained the same as the original construct. The banking service quality dimension in this study was found to be accessibility, followed by Reliability–Responsiveness, security, and ease of use. The negative scores across these dimensions clearly show that there is room for service quality improvement. The results provide empirical evidence that the four banking service quality dimensions identified are distinct constructs in Mauritius. The banking service dimensions such as Reliability– Responsiveness and accessibility were found to be a predictor of customer satisfaction. Security and ease of use were not contributing significantly towards overall satisfaction, and this indicates that customers feel that banks fail in providing the services on these two dimensions satisfactorily. When it comes to predicting customers’ behavioral intentions, the results of this study suggested that security is most important for banking service.    The Reliability–Responsiveness dimension indicates that banks should provide customers with accurate and prompt services. The findings of this study are supported by Wolfinbarger and Gilly (2003), who found that reliability ratings were the strongest predictor of customer satisfaction and the third strongest predictor of behavioral intentions. Bankers need to provide a high level of service quality, as this is likely to result in high levels of satisfaction and favorable behavioral intentions. To deliver superior banking service quality, banks must first understand how customers perceive and evaluate banking services.

ASHOK NAGAR and SHWETA RAMEJA, “study of Customers Perceptions towards services of commercial Banks”.  Some survey evidence,   The Indian journal of commerce. Volume 63, No4, [Oct-Dec. 2010]. Sample size 100. The study was of an exploratory nature.  Prompt service is the main concern for respondents for holding accounts in particular banks as 44.8% of the respondents have shown their concern for the same, while convenient location is also considered important by 30.8% respondents.  The fact that the bank is a public, private or foreign does not have a bearing on their on their decision to hold accounts in a particular bank as only 6% respondents agreed to this. Use of RTGS is mainly done by businessmen in the district being 70% out of 100, while other segments are using the facility to a certain level being 21.5% out of remaining sample of 400 respondents. 62.4% of respondents are of the view that use of technology in banks is the most important change occurred in banking in the last decade, followed by relationship with customers and work environment. Entry of foreign bank in the district has positively affected the spirit of competition in the banking scenario.  Major affect was seen the increase in efficiency of service of banks, followed by introduction of innovative products and technology up gradation.  About 60%-70% of employees are of the view that innovative products have benefited the banks to a great extent.

ANTREAS ATHANASSOPOULOS (Athens Laboratory of Business Administration (ALBA), Athens, Greece). “Investigate the behavioral of customer satisfaction on Banking Industry”.  Physical evidence is also recognised for its importance on the performance ratings of individual banks. It is important to note that issues of a tangible nature are better linked to consumer memory ultimately gain higher importance on the behavioural customer responses. It is also evident that having two factors of a tangible nature, reliability and physical evidence, with such high effects indicates that the customer feedback reflects their medium and long-term memory and are not instant reactions to recent contacts with the banks’ personnel. Furthermore, the case of physical evidence draws to a large extent predetermined and not variable levels of satisfaction since having decided upon the bank you do business with it means you are to a large extent satisfied from issues of physical evidence. Product innovation in services has been found in previous research as being a quite important element of customer satisfaction. In this research, product innovation has been found to have a significant effect on the behavioural responses of customers. This effect, however, was found to be of less importance compared to other service satisfaction characteristics such as employee competence, physical evidence and service reliability. It must be borne in mind, however, that in a competitive market where its customers are not known for their demanding character for product innovations (see Athanassopoulos, 1999), it seems that the case of innovation-based competition will take some more time before it becomes a driving force of the behaviour of individual customers. In any case, the positive effect on behavioural responses is a satisfactory result by its own means. Our study was to examine the impact of customer satisfaction on customers’ behavioural responses. Our study is one of the first in marketing to investigate such effects. Overall, the results provide strong support for the notion of direct effects of customer satisfaction on the behavioural responses of customers. More specifically, our findings indicate that when customers assess customer satisfaction to be high, they: decide to stay with the existing service provider; and subdue their negative behavioural intentions. Finally, data from longitudinal studies would be particularly useful for capturing the process dynamics of the relationship between customer satisfaction and behavioural responses.

                                                      CHAPTER-3

                                      3. RESEARCH DESIGN

3.1 TYPE OF PROJECT

Design of the study: - Descriptive study

Descriptive studies involve describing the characteristics of a particular situation, event or case.

 This is a descriptive study as the factors influencing customer’s satisfaction and preference towards Indian Overseas Bank was studied.

3.2 TARGET RESPONDENTS AND SAMPLE SIZE

The target is the customers who are having Account in the IOB, Villianur branch. Total population is 1800 in that I have collected data from 100 customers. Convenience sampling method is used to collect data from the respondents.

SAMPLING DESIGN:

 A Convenience sampling method was adopted, and a sample size of 100 was selected from the population of Villianur (Pondicherry) town.

3.3 LIMITATIONS

Customer’s satisfaction and preference towards General Banking with reference to IOB, Villianur. Duration for the project is three month. This study is based on Primary and Secondary data, which was collected from bank’s Customer and Records.  Hence, it is subject to measurement of service quality of employees and satisfaction level and preference of customers. Respondents may give biased answers for the required data. Some of the respondents did not like to respond.

Respondents tried evade give response to some statements by simply answering “Neutral” to most of the statements. This was one of the most important limitations faced, as it was difficult to analyse and come at a right conclusion.

3.4 DATA COLLECTION

The method of data collection adopted for the study is both primary and secondary data.

A)    The primary data collected, is though questionnaire, which was collected from individuals from the study area.

B)    The secondary data was collected through company department records.

3.5 ANALYTICAL TOOLS

The Statistical Package used for this study is SPSS and Ms Excel 2007. The data collected are classified, analysis and tabulated. The statistical tools are applied for the analysis of the data. The tools used are:

Ø      Percentage analysis

Ø      Chi-Square Test

Ø      Kruskal wallis test

Ø      One - way anova

Ø      T- test

Percentage Analysis:

Percentage refers to a special kind of ratio and it describes relationships.

Chi-Square Analysis (χ 2):

It used to test the significance of discrepancy between experimental values and the critical values obtained from a hypothesis. This test is used for testing hypothesis when distribution of the population is non-known and when nominal data is to be analyzed.

                    

                                                                                                        

                                                                                 

                                                 O = Observed frequency.

                                          E = Expected frequency.

One way Anova:

Analysis of variance (ANOVA) is the separation of variance ascribable to one group of causes from the variance ascribable to other group”. It is nothing but an arithmetical procedure used to express the total variation of data as the sum of its non-negative components.

Kruskal Wallis Test:

A non-parametric method for one-way analysis of variance used to determine if three or more samples originate from the same distribution. The Kruskal-Wallis test essentially a standard one-way analysis of variance, with ranks assigned to the data points replacing the data points themselves, and is similar to the Mann-Whitney U test, but applicable to more than two sample groups.

n_j = number of items in sample j

R_j = sum of the all items in sample j

k = number of samples

n = n₁ + n₂+....................+n_k, the total number of observations in all samples

APPENDIX

CUSTOMER SATISFACTION SURVEY

Dear Sir/Madam,

            Please take a few minutes of your time to complete this Customer Satisfaction Survey. Your comments will help me gauge how well the Bank performs in all facts of its interaction with you. Please fill this Questionnaire only if you are a customer of the Bank.

Demographic Details

1.      Employment Status

	Public		Private		Self-Employed/Business
	Agriculture		Retired		Others ______________

2.      Income (Monthly)

	Less than 10,000		10,001 – 20,000		20,000 – 40,000
	40,000 – 75,000		Greater than 75,000

3.      Age

	Under 20		21 – 35 Years		36 – 50 Years
	50 – 60 Years		Above 60 Years

4.      Gender

	Male		Female

Main Questionnaire

1.      How long did you have to wait to finish your work at the bank today?

	Immediate		Under 5 Minutes		Between 5-10 minutes
	Over 10 minutes

2.      When do you think of the bank what comes first in your mind?

	Financial Stability		Customer Service		Image & Reputation
	Proximity of Branches		Access to other channels		Personalised Service

3.      Do you think this branch provides you quick and efficient services?

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

4.      Do you think this bank has more formalities while opening an Account?

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

5.      Do you think this bank provides various innovative schemes to customers?

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

6.      Do you use the following Products?

		Yes		No
Savings A/c
Current A/c
Loans / Advances
Gold Purchase
Credit Card
Demand Draft
Over Draft
Deposits

7.      What is the most important reason for you to maintain the relationship with the bank? (Chose only one option)

	Financial Stability		Customer Service		Image & Reputation
	Proximity of Branches		Access to other channels

8.      How often do you use the following Channels?

		Weekly		One in 2 Weeks		Once a Month		Rarely		Never
Branch
ATM
POS
Internet Banking
Mobile Banking
Call Centre
NEFT
RTGS
Online Transaction
(Phone/EB/Ticket)

9.      Are you aware about all the above products and services offered by this Branch?

	Aware		Not Aware

If not aware, Mention the Services you would be interested in

10.  Would you recommend this branch of IOB to others?

	Absolutely Will		Often Will		Sometimes Will
	Absolutely Will Not		No Response

11.  What is the primary reason that will make you to change your Bank?

	Service Quality		Transaction/Request time		Interest Rate & Fees
	Financial Stability		Proximity of Branched		Others

12.  Are you satisfied with the services of the bank?

	Highly Satisfied		Satisfied		Neutral
	Dissatisfied		Highly Dissatisfied

13.  Please mark whether one the following have incurred during your transaction?

		Very Often		Frequently		Rarely		Very Rarely		Never
Delay in Deliverables
Errors in Transactions
Insufficient Technical Reports
Communication Difficulties
Improper Behaviour of Staff

           

14.  Please rate the following about the bank staff you have interacted with.

		Excellent		Good		Average		Fair		Poor
Availability on time
Offered to help - Friendly
Answered your Queries
Has good Knowledge of Product/ Service
Offered the correct advice
Addressed your requirement in full

15.  What is the first bank that comes to mind when you think of banking sector?

	IOB		Other Nationalised Bank		Other Private Banks

Name of the Bank, if other than IOB _________________________________

16.  Would you recommend this bank to your Friends, Relatives, Associates etc.,

	Yes		No

Name
Address