ISSN 2319-8885 Vol.04,Issue.36, September-2015,

Pages:7795-7799

www.ijsetr.com

Impact of Private on Banking Sector in India – A Study in ICICI and Axis Banks in Eluru

BOTLA PRABHU BABU Assistant Professor, Dept of Management Studies, Sri Chaitanya Technical Campus, JNTUH, TS, India, E-mail: [email protected].

Abstract: Banks play a vital role in the economic development of a country. They accumulate the idle savings of the people and make them available for investment. Commercial banks are the most effective way to generate the credit flow of money in markets. Commercial banks play an important and active role in the economic development of a country. After nationalisation of banks in 1969 and 1980, the government of India has decided to allow private investment in banking sector again. The main aim is to bring banking closer to people and providing better services to clients. The Study is undertaken in Axis and ICICI Bank located in Eluru, West Godavari District, Andhra Pradesh. The aim of study is i) To understand the changing trends in banking. ii) To understand the impact of Private Banks on Banking Sector in general. iii) To understand whether Private Banks are fulfilling the Objectives they are intended to. iv) To track the development of above mentioned bank since their inception. Private Investment has helped the development and advancement of banking industry in the Country. Keywords: Private Banks, ICICI Bank, , Banking Sector.

I. INTRODUCTION investment of deposits money from the public repayable on A bank is a financial institution and a financial intermediary demand or otherwise and withdraw able by cheque, draft, that accepts deposits and channels those deposits into lending order or otherwise”. activities, either directly or through capital markets. A bank Dictionary Meaning of the Word ‘Bank’: The Oxford connects customers that have capital deficits to customers Dictionary defines a bank as “an establishment for custody with capital surpluses. In a country like India which is still in of money received from or on behalf of its customers. It’s the initial stages of economic development, a well organized essential duty is to pay their drafts on it. It’s profits arises banking system is the need of the day. If the banking system from the use of the money left employed by them”. in a country is effective, efficient and disciplined; it brings about a rapid growth in the various sectors of the economy. The Webster’s Dictionary: defines a bank as “an institution There is acute shortage of capital in India. The banks can which trades in money, establishment for the deposit, custody play an important role in promoting capital formation and in and issue of money, as also for making loans and discounts directing physical resources into desired channels. With the and facilitating the transmission of remittances from one introduction of liberalization, privatization and globalization place to another”. the role of banking sector changed dramatically. Credit is one According to Prof. Kinley: “A bank is an establishment of the critical inputs for development. So the Government has which makes to individuals such advances of money as may decided to allow Private Investment in a big way which led to the formation of New Private Sector Banks. (Old Private be required and safely made, and to which individuals entrust Sector Banks are those which were not Nationalised). money when it required by them for use”. According to the Indian Companies (Regulation) Act, II. REVIEW OF LITERATURE 1949: “the accepting, for the purpose of lending or As per Section 5(b) of the Banking Regulation Act 1949: Investment, of deposits of money from public, repayable on “Banking” means the accepting, for the purpose of lending or demand or otherwise and withdrawable by cheque, draft, investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.” order or otherwise.” The private sector banks are banking According to John Paget: “Nobody can be a banker who companies as defined in the Banking Regulation Act. does not (i) take deposit accounts (ii) take current accounts, (iii) issue and pay cheques, and (iv) Collect cheques- crossed As Per Indian Banking Companies Act: “Banking and uncrossed for its customers.” Company is one which transacts the business of banking which means the accepting for the purpose of lending or Prof Sayer: defines the terms bank and banking clearly. He defines banks as “an institution whose debts (bank deposits)

Copyright @ 2015 IJSETR. All rights reserved. BOTLA PRABHU BABU are widely accepted in settlement of other people’s debts to registered office at Ahmadabad. UTI Bank opened its each other.” According to him, “ordinary banking business registered office in Ahmadabad and corporate office in consists cash for bank deposits and bank deposits for cash, Mumbai in December 1993. The first branch was inaugurated transferring bank deposits from one person or corporation to on 2 April 1994 in Ahmadabad by Dr.Manmohan Singh, then another; giving bank deposits in exchange for bills exchange, Finance Minister of India. UTI Bank began its operations in government bonds the secured promises of business man to 1994, after the Government of India allowed new private repay and so forth”. banks to be established. The Bank was promoted in 1993 jointly by the Administrator of the Unit Trust of India (UTI- III. OVERVIEW I), Life Insurance Corporation of India (LIC), General Banks are the backbone of Financial Sector in any Insurance Corporation, National Insurance Company, The Country. Organised started with the New India Assurance Company, The Oriental Insurance establishment of The General in 1786. Next Corporation and United India Insurance Company. The Bank came the Bank of Hindustan and Bengal Bank. The East changed its name with effect from July 30, 2007, from UTI India Company established Bank of Bengal (1809), Bank of Bank Ltd. to Axis Bank Ltd. The decision to rebrand itself Bombay (1840) and (1843). These three was taken by the bank as it was allowed to use the 'UTI' banks were amalgamated in 1920 and the Imperial Bank of brand name for free till January 31, 2008, beyond which it India was formed which was Nationalised in 1955 to form had to pay royalty for using the name. . In 1969, seven subsidiary banks of the State Bank of India were nationalized. As on 31-Mar-2015, the Bank had a network of 2589 (RBI) was established in 1935. At the time of Independence branches and extension counters and 12355 ATMs. Axis there were approximately 1100 banks, mostly small. The Bank has the largest ATM network among private banks in Government of India issued an ordinance and nationalised India. It is the first commercial bank to open an ATM at a the 14 largest commercial banks with effect from the post office. It is the first bank in India to launch the EMV midnight of July 19, 1969.The need for the nationalisation Chip based credit card. It is also listed on London Stock was felt mainly because private commercial banks were not Exchange and Singapore Stock Exchange. The Bank has fulfilling the social and developmental goals of banking eight international offices with branches at Singapore, Hong which are so essential for any industrialising country. A Kong, Dubai (at the DIFC), Shanghai, and Columbo and second dose of nationalization of 6 more commercial banks Colombo and representative offices at Dubai and Abu Dhabi. followed in 1980. After Nationalisation, the banks witnessed Objectives of the Study: a huge jump in deposits and Advances. Government ownership gave the public implicit faith and immense  To understand the changing trends in banking. confidence in the sustainability of public sector banks. After  To understand the impact of Private Banks on Banking the nationalization, entry of private sector banks is restricted. Sector in general. But some of private banks (which were not nationalised)  To understand whether Private Banks are fulfilling the continued to operate such as Jammu & Kashmir bank Ltd Objectives they are intended to. (1938). To increase the competition spirit and improve the  To track the development of above mentioned bank working of public sector banks, RBI permitted the entry of branches since their inception. private sector banks in July, 1993. This led to the formation IV. RESEARCH METHODOLOGY of Private Sector Banks like HDFC (1994), ICICI (1996) etc. Sources of Data: The Study was undertaken in Axis and At present, there are 23 Private Sector Banks including two ICICI Bank branches at Eluru, West Godavari District, which have got in-principle licences from RBI. Andhra Pradesh. Both Primary data and secondary data are used. Primary data is collected from branches visit in Eluru. A. Company Profile Secondary data is collected from business journals and ICICI is the second largest bank and the largest private Internet. sector bank in India in terms of assets and Market Capitalisation. ICICI was established in 1994 by Industrial Method of Data Collection: Primary data was gathered by Credit and Investment Corporation of India (ICICI), an discussion with manager. Indian financial Institution. The Bank has a network of approximately 4,050 branches and 12,451 ATMs in India, Limitations of the study: The study is confined to the and has a presence in 17 countries including India. It is the branches located in Eluru. Hence the result may not be first bank to offer internet banking services in India. It is first applicable to other branches. Only a limited amount of data bank from Non-Japan Asia to be listed on New York Stock was considered for the article. So it may be taken as a Exchange (NYSE). The bank’s presence spans 17 countries comprehensive study of banking sector in general. including India. Initiatives: Earlier there were days when people were needed B. Company Profile Axis Bank Limited (Formerly UTI to go to banks personally and fill out forms and stand in long Bank) queues waiting for their turn to avail the services of tellers. Axis bank is the third largest private sector bank in India. This process used to be time consuming and at times a day It was Incorporated on 3rd December, 1993 under The was wasted at the banks. Illiterates were afraid to go banks as Companies Act, 1956.It offers financial services to customer they cannot fill up forms and they used to get defrauded by segments covering Large and Mid-Sized Corporates, MSME, unscourplus elements at the banks. Carrying large amounts of Agriculture and Retail Businesses. Axis Bank has its cash on salary days resulted in thefts. If the bank time is exceeded, services were refused. Public Banks have become International Journal of Scientific Engineering and Technology Research Volume.04, IssueNo.36, September-2015, Pages: 7795--7799 Impact of Private Banks on Banking Sector in India – A Study in ICICI and Axis Banks in Eluru lethargic because of their virtual monopoly. Disbursement of 2002, ICICI Bank, together with other institutions, set loans used to take months and loan seeker was required to up Asset Reconstruction Company India Limited submit a number of documents. Most times the requirement (ARCIL) in 2003, to create a facilitative environment for which loan was sought was missed. With the introduction for the resolution of distressed debt in India. ARCIL of Technological innovations by Private Sector Banks in the was established to acquire non-performing assets form of setting up of Automated Teller Machines(ATM), (NPAs) from financial institutions and banks with a Credit cards, Debit cards, Internet Banking etc banking view to enhance the management of these assets and became closer to people as it provided convenience and help in the maximisation of recovery. saved a lot of valuable time for them. Setting up of Foreign  Credit Information Bureau of India Limited: ICICI Branches made remittances between countries easier. Loan Bank has also helped in setting up Credit Information disbursement became faster with dedicated personnel for loan Bureau of India Limited (CIBIL), India's first national disbursements. A lot of other initiatives undertaken by the credit bureau in 2000. CIBIL provides a repository of Private Sector Banks particularly ICICI and Axis bank which information (which contains the credit history of helped the growth of Banking sector in general are listed commercial and consumer borrowers) to its members in below. the form of credit information reports. A. ICICI Bank  Institutional Investor Advisory Services India ICICI bank has contributed to the set-up of a number of Limited (IiAS): ICICI Bank has indirectly invested Indian institutions to establish financial infrastructure in the in Institutional Investor Advisory Services, through country over the years: ICICI Prudential Life Insurance Company, in IiAS. IiAS is a voting advisory firm aka proxy firm, dedicated  National Stock Exchange: The National Stock to providing participants in the Indian market with data, Exchange was promoted by India's leading financial research and commentary. It provides recommendations institutions (including ICICI Ltd.) in 1992 on behalf of on resolutions placed before shareholders of over 300 the Government of India companies.  Credit Rating Information Services of India Limited (CRISIL): In 1987, ICICI Ltd along with UTI set B. Axis Bank up CRISIL as India's first professional credit rating  Axis Bank launched Mobile Banking App 2.0 for its agency. retail resident Indian customers the first of its kind in  National Commodities and Derivatives Exchange India, which offers a high level of personalization. Limited: NCDEX is an online multi-commodity  Axis Bank - ISIC Forex Card' for students, is the first exchange, set up in 2003, by ICICI Bank Ltd, photo Travel Currency Card available in USD, Euro, LIC, NABARD, NSE, , CRISIL, Goldman GBP and AUD currencies. It can be used across 34 Sachs, Indian Farmers Fertiliser Cooperative million merchant locations and at over 2 Limited (IFFCO) and . million MasterCard ATMs globally.  Financial Innovation Network and Operations Pvt  Axis Bank has partnered with Visa to launch 'eKYC' Ltd: ICICI Bank has facilitated setting up of "FINO (electronic Know your customer) facility, first Cross Link to Case Link Study" in 2006, as a company organization in India to introduce Biometrics based that would provide technology solutions and services to KYC, offering convenience, speed and ease to - reach the underserved and underbanked population of registered individuals to open bank accounts. the country.  Entrepreneurship Development Institute of India: Entrepreneurship Development Institute of India (EDII), an autonomous body and not-for-profit society, was set up in 1983, by the erstwhile apex financial institutions like IDBI, ICICI, IFCI and SBI with the support of the Government of Gujarat as a national resource organisation committed to entrepreneurship development, education, training and research.  North Eastern Development Finance Corporation: North Eastern Development Finance Corporation (NEDFI) was promoted by national level financial institutions like ICICI Ltd in 1995 at Guwahati, Assam for the development of industries, infrastructure, animal husbandry, agri-horticulture plantation, medicinal plants, sericulture, aquaculture, poultry and dairy in the North Eastern states of India. NEDFI is the premier financial and development institution for the North East Fig.1. region.  Asset Reconstruction Company India Limited: It can be seen from the chart that Private Sector and Following the enactment of the Securitisation Act in Foreign Banks which have a negligible share of Assets have fared well in the last 25 years. International Journal of Scientific Engineering and Technology Research Volume.04, IssueNo.36, September-2015, Pages: 7795-7799 BOTLA PRABHU BABU V. RETURN TO SHAREHOLDERS D. Axis Bank A. ICICI Bank

Fig.2. Fig.5. B. Axis Bank The above chart shows the increasing trend of dividends over the years which show the capacity of the banks in satisfying their shareholders. E. ICICI Bank ICICI was the first private bank to set up a branch in Eluru. The Eluru branch of the ICICI was started on 11-07- 2007 During discussion with the manager it was found that when the branch was setup initially, people were a bit hesitant to conduct the banking activities with the bank as Public Sector banks were playing a dominant role in the place and it was the first time a Private Bank has setup its branch there. Some were even doubtful whether it was a genuine branch or a fictitious one. The bank was only able to conduct only little business as people were testing waters with little amount so as not to become victims of any fraud. So the bank went on a confidence building exercise which yielded good results and gradually people started accepting

Fig.3. the bank and deposits and advances stared growing. Today the branch has about 65,00,00,000 in deposits and The above chart shows that EPS has been increasing over 50,00,00,000 in advances which is a notable achievement. the years which show the improvement in business of the Bank over the years. TABLE I: C. ICICI Bank

F. Axis Bank The Eluru branch of the Axis bank was started on 18.06.2008. Today the bank has about ₹ 50,00,00,000 in deposits and ₹ 40,00,00,000 in advances which is great achievement in a short span of 7 years. The positive image private banks were making at that time helped the branch gain the confidence of customers in a short span of time. The amount spent by the bank on its rebranding exercise played a major part in bringing the bank closer to customers. The ambience was great. The customers are well received and are given prompt service. Though there were a few members at the cash counters, the queue was moving faster and it took Fig.4. hardly ten minutes for a customer to complete his International Journal of Scientific Engineering and Technology Research Volume.04, IssueNo.36, September-2015, Pages: 7795--7799 Impact of Private Banks on Banking Sector in India – A Study in ICICI and Axis Banks in Eluru transaction. There was enough seating space and ample VII. REFERENCES cooling. The employees were warm and receptive. [1] Talwar, S.P. (1999), "Banking Regulation and Corporate Governance",RSBI Bulletin, July, Vol. LIII No.7. TABLE II: [2] Srivasthava P. K., “Banking Theory and Practice”, Himalaya Publishing House, Mumbai 2000, p. 476. [3] Tannan, Mohan. 2001. Banking Law and Practice in India. New Delhi: India Law House. [4] Reserve Bank of India (2009b). Report on Trend and Progress of Banking in India 2008-2009. Oct. Advantages: Author Profile:  Private Sector Banks have brought technological Botla.Prabhu Babu, completed innovations in their products which made banking easier. MBA, LLB, working as an Assistant  They design different products for different customers professor for the department of thereby bringing banking closer to them. Management Studies in “Sri Chaitanya  Reduced beurocracy in private banks helps in faster Technical Campus”, affiliated to disbursement of loans which is the need of the hour. JNTU, Hyderabad, Email-id:  Setting up of Foreign branches made remittances easier. [email protected].  They provide employment to un-employed youth of the country.  Different initiatives taken by Private Sector banks in collaboration with Public Sector banks helped in the organised growth of the Banking sector.  Private Banks are much better when compared to NBFCs. Disadvantages:  Private Banks charge more for the services rendered which make people think twice before availing them.  Their target was Upper middle class and Rich classes. Middle class and poor, whom the government wants to bring under the organised banking, were never the target of Private Banks  High amount of minimum balances were required to be maintained in the accounts which makes middle class people shy away from these banks.  Excessive thrust on loans resulted in unnecessary haste in the disbursement of loans which lead to the increasing incidences of fraud.  Private Banks were accused of using harsh debt recovery methods which sometimes lead to suicides by defaulters.  Private Banks concentrate more on business rather on welfare.  Employees become distressed to meet the targets for deposits and loans which at times were unrealistic. VI. CONCLUSION Private Banks have come a long way since their inception in these past 20 to 25 years. Today we can do banking from the comfort of our homes. We can deposit or withdraw money during mid night hours also. With the competition from private banks, public banks are also embracing technology and becoming technologically advanced. With the introduction of new products and new ideas, they are bringing banking much closer and are making banking a pleasurable experience. The participation of Private Banks in Government Sponsored schemes, like PMBY, has increased these days. Still there are many people who don’t have access to banking. Private Banks need to develop ideas to make banking accessible for all the people and strive to make available the fruits of banking for all.

International Journal of Scientific Engineering and Technology Research Volume.04, IssueNo.36, September-2015, Pages: 7795-7799