final presentation on banking & insurance
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Banking and Insurance
sector
Growth in the Indian context
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ACKNOWLEDGEMENTWe would like to express our gratitude to RIZVI college
who gave us the opportunity to undertake this project.
We would like to thank our colleagues to help in our
research work.I want to thank them for all their help, support, interest
and valuable hints.
Especially, we would like to give our special thanks
to our parents who supported us morally and
financially.
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INDIAN BANKING SECTOR
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WHAT IS BANK?
A banker or bank is a financial institution
whose primary activity is to act as a payment
agent for customers and to borrow and lend
money.
An institution where one can place and
borrow money and take care of financial affairs;
A branch office of such an institution.
The first modern bank was founded in Italy in
Genoa in 1406, its name was (Bank of St.
George).
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FUNCTIONS OF BANKS
Accepting Deposits from public/others
(Deposits).
Lending money to public (Loans).
Transferring money from one place to
another (Remittances).
Acting as trustees.
Keeping valuables in safe custody.
Government business.
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TYPES OF BANKS
Public sector Banks
Private sector Banks
Co-operative Banks
Development Bank/Financial institutions
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Public sector Banks
Some Public Sector Banks in India:
Central Bank of India
Corporation BankDena Bank
Bank of India
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
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Private sectors BanksOld generation private banks
New generation private banks
ICICI Bank
IDBI Bank Axis bank
Foreign banks operating in India
HSBC BANK
CITI BANK
ABN-AMRO BANK
STANDARD CHARTED BANK
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Upcoming foreign bank in India
RBS(ROYAL BANK OF SCOTLAND GROUP)
INDUSTRIAL AND COMMERCIAL BANK OF
CHINA
Scheduled co-operative banks
Non-scheduled bank
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CO-OPERATIVE BANKS
The Co operative banks in India started functioning almost 100years ago. The Cooperative bank is an important constituent of theIndian Financial System.They are setup to provide easy loans tofarmers or other persons to set up his buisness.They are non profitable banks.
Cooperative banks in India finance rural areas under:FarmingCattle
Milk
Hatchery
Personal finance
Some example of co-operative banks in India-
IDBI BANK(INDUSTRIAL DEVELOPMENT BANK OF INDIA)
IFCI BANK(INDUSTRIAL FINANCE COOPERATION OF INDIA)
APEX BANK
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Development Banks/FinancialInstitutions
These banks are mainly used for devolopingindustries and countries
Some Examples-Federal Bank
HDFC Bank
HSBC
ICICI
Bank Indian Overseas Bank
ING Vysya Bank
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The Reserve Bank of India(RBI)
History:-
Become operational on April 1,1935
Nationalized in the Year 1949.
Major objectives:-
Regulate the issue of banknote.
Maintain reserves with a view to securing monetarystability.
To operate the credit and currency system of the country toits advantage.
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Functions of RBI
The fuctions are classified into three heads:-
Traditional functions
Promotional functions
Supervisory functions
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Traditional functionsMonopoly of currency notes issue
Banker to the Government (both the central
and state)
Fight against economic crisis and ensures
stability of Indian economy.
Controller of ForEx and credit
Maintaining the external value of domestic
currency
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Promotional functions
Extension of the facilities for the smallscale industries
Innovating the new banking business
transactions.
Extension of the facilities for the provision
of the agricultural credit through NABARD
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Supervisory functions
Granting licence to Banks.
Periodical review of the work of the
commercial banks.Control the non-banking finance
corporation.
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HOW IT CONTROLS BANK &ECONOMY
TOOLS:-
CRR( CASH RESERVE RATIO): 5.5%
REPO RATES(RR):7.5%
REVERSE REPO RATE(RRR): 6.0%
STATUTORY LIQUIDTY RATIO (SLR):24%
BANK RATE: 6.0%
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A Glimpse of Banking sector
Phase-1
Early phase from 1786 to 1969 of Indian Banks
Phase-2
Nationalization of Indian Banks and up to 1991
prior to Indian banking sector Reforms
Phase-3
New phase of Indian Banking System with theadvent of Indian Financial & Banking Sector
Reforms after 1991
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Challenges faced by Indianbanks Lack of product expertiseTraditionally focused on limited range of products
Primarily for corporate clients
Need for acquiring skills in
Retail, structured finance
Lack of distribution expertiseReliance on branch channel and human intervention
Relatively high unit cost of delivery given smalltransaction sizes
Limited use of technologyAcross both customer-facing and
internal functions
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Continued
Inefficient capital allocation
Competition in market
Post office
Insurance
Financial Institution
Foreign Banks
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Ways Ahead
Technological Advancement
Rural Banking
Improving Risk Management
Developing a flexible model for rapidscale-up at optimal cost
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FACTS AND FIGURES Indian banking sector has 6th rank in all over the world.
SBI has 6500+ ATMs all over the country. ICICI bank has 3500+ ATMs all over the country.
RBI had printed 6,39,948 lakhs crore notes till 6TH Nov2008.
IN Indore SBI has 45+ ATMs .
SBI provides the facility and it is tie with 9200+ banks touse their ATMs.
Acc. To business magazine survey the no. of ATMs grew28% yearly.
Inspite of it India has 23+ ATMs per million people,
China has 55+ ATMs and South Korea has 1600+ ATMsper million people.
Transaction done through ATMs is around 70,000 crorein a year.
ICICI bank has largest no. branches in foreign also.
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Present scenario
Banking industry has been undergoing a rapid transformation.
Banks today are market driven and market responsive.
With the entry of new players and multiple channels, customers (both corporate and
retail) have become more discerning and less "loyal" to banks. This makes itimperative that banks provide best possible products and services to ensure
customer satisfaction.
They have been managing a world of information about customers - their profiles,
location, needs, requirements, cash positions, etc.
Furthermore, banks have very strong in-house research and market intelligence units
in order to face the future challenges of competition, especially customer retention.
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INTRODUCTION:
Insurance = Collective bearing ofRisk.
Basic Human trait is to be averse
to the idea of risk taking.
ORIGIN AND GROWTH OF
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ORIGIN AND GROWTH OF
INSURANCE SECTOR:
Insurance in modern form originated in theMediterranean during the 13th century. (The earliest
references to insurance- found in Babylonia, the
Greeks and the Romans).
Marine insurance is the oldest form of insurancefollowed by life insurance and fire insurance.
The history of life insurance in India dates back to 1818
when it was conceived as a means to provide for
English Widows.
A higher premium was charged for Indian lives than the
non-Indian lives (considering to be more riskier for
coverage).
ORIGIN AND GROWTH OF
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ORIGIN AND GROWTH OF
INSURANCE SECTOR:
Oriental life Insurance Company was incorporated atCalcutta in 1818, followed by Bombay Life AssuranceCompany in 1823 and Triton Insurance Company forGeneral Insurance in 1850. By 1938 there were 176insurance companies.
Insurance regulation formally began in India through
the passing of two acts
the Life Insurance companies Act of 1912 and
the Provident Fund Act of 1912. However the first comprehensive legislation was
introduced with the Insurance Act of 1938 that
provided strict state control over insurance business
in the country.
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The business of India Insurance grew at a fasterplace as competition amongst the Indian companies
intensified.
The decision of nationalization of life insurance
business took place in 1956 when 245 Indian andforeign insurance provident societies were first
merged and then nationalized.
It paved the way towards the establishment of one
nationalized monopoly corporation called LifeInsurance Corporation (LIC)
ORIGINANDGROWTHOFINSURANCESECTOR:
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Nationalization was justified on the grounds that itwould create the much needed funds for rapid
industrialization and self-reliance in heavy industries.
General Insurance followed suit and 1968;
The Insurance Act was amended to allow for socialcontrol over the general insurance business.
Subsequently in 1973, non-life insurance business
was nationalized and the General Insurance Business
(Nationalization) Act, 1972 was promulgated.
ORIGINANDGROWTHOFINSURANCESECTOR:
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Till end of FY 1999-2000, two state-run insurance
companies, namely, Life Insurance Corporation (LIC) and
General Insurance Corporation (GIC) were the
monopoly insurance providers in India.
Under GIC there were four subsidiaries
National Insurance Company Ltd.
Oriental Insurance Company Ltd.
New India Assurance Company Ltd.
United India Assurance Company Ltd.
ORIGINANDGROWTHOFINSURANCESECTOR:
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In fiscal 2000-01, the Indian federal government
lifted all entry restrictions for private sector
investors.
Foreign investment insurance market was also
allowed with 26 percent cap.
GIC was converted into India's national reinsure
from December, 2000
All the subsidiaries working under the GIC umbrella
were restructured as independent insurance
companies.
ORIGINANDGROWTHOFINSURANCESECTOR:
INSURANCE SECTOR
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INSURANCE SECTORREFORMS
In 1993, Malhotra Committee- headed by formerFinance Secretary and RBI Governor R.N. Malhotra-
was formed
To evaluate the Indian insurance industry and
recommend its future direction.
The Malhotra committee was set up with the objective
of complementing the reforms initiated in the financial
sector.
INSURANCE SECTOR
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The reforms were aimed at: Creating a more efficient and competitive financial
system suitable for the requirements of the economy
Keeping in mind the structural changes currently
underway and Recognizing that insurance is an important part of the
overall financial system where it was necessary to
address the need for similar reforms.
INSURANCE SECTORREFORMS
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Competition
Private Companies with a min paid up capital of
Rs.1bn should be allowed to enter the sector.
No Company should deal in both Life and General
Insurance through a single entity.
Foreign companies may be allowed to enter the
industry in collaboration with the domestic
companies.
Postal Life Insurance should be allowed to operate
in the rural market.
Structure
Government should take over the holdings of GIC
and its subsidiaries.
All the insurance companies should be given
greater freedom to operate.
Only one State Level Life Insurance Company
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Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be setup.
Controller of Insurance- a part of the Finance
Ministry- should be made independent.
Investments
Mandatory Investments of LIC Life Fund in
government securities to be reduced from
75% to 50%.
GIC and its subsidiaries are not to hold more
than 5% in any company
Customer Service
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The Committee:
Emphasized that in order to improve the customer
services and increase the coverage of insurance
policies, industry should be opened up to competition. Felt the need to exercise caution as any failure on the
part of new players could ruin the public confidence in
the industry.
Felt the need to provide greater autonomy to insurancecompanies in order to improve their performance and
enable them to act as independent companies with
economic motives.
Proposed setting up an independent regulatory body-The Insurance Regulatory and Development Authority.
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1912 - The Indian Life Assurance Companies Actenacted as the first statute to regulate the life
insurance business.
1928 - The Indian Insurance Companies Act enactedto enable the government to collect statistical
information about both life and non-life insurance
businesses.
1938 - Earlier legislation consolidated and amendedto by the Insurance Act with the objective of
protecting the interests of the insuring public.
1956 - 245 Indian and foreign insurers and provident
societies taken over by the central government andnationalized. LIC formed by an Act of Parliament, viz.
LIC Act, 1956, with a capital contribution of Rs. 5
crore from the Government of India.
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1907 - The Indian Mercantile Insurance Ltd. set up,the first company to transact all classes of general
insurance business.
1957 - General Insurance Council, a wing of theInsurance Association of India, frames a code of
conduct for ensuring fair conduct and sound business
practices.
1968 - The Insurance Act amended to regulateinvestments and set minimum solvency margins and
the Tariff Advisory Committee set up.
1972 - The General Insurance Business
(Nationalization) Act, 1972 nationalized the generalinsurance business in India with effect from 1st
January 1973.
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107 insurers amalgamated and groupedinto four companies viz.:
The National Insurance Company Ltd.
The New India Assurance Company
Ltd.
The Oriental Insurance Company Ltd.
The United India Insurance Company
Ltd.
MILESTONES IN GIC
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C
ONTR
IBUTO
RS
Life Insurers:
Allianz Bajaj Life Insurance Co. Ltd.
AMP Sanmar Assurance Co. Ltd.
Birla Sun Life Insurance Co. Ltd.
Dabur CGU Life Insurance Company Pvt. Ltd.
HDFC Standard Life Insurance Co. Ltd.
ICICI Prudential Life Insurance Co. Ltd.
ING Vysya Life Insurance Co. Pvt. Ltd.
Life Insurance Corporation of India.
Max New York Life Insurance Co. Ltd.
Metlife India Insurance Co. Pvt. Ltd.
Om Kotak Mahindra Life Insurance Co. Ltd.
SBI Life Insurance Co. Ltd.
Tata AIG Life Insurance Co. Ltd.
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Non-Life Insurers:
Bajaj Allianz General Insurance Co. Ltd.
ICICI Lombard General Insurance Co. Ltd.
IFFCO Tokyo General Insurance Co. Ltd.
National Insurance Co. Ltd.
New India Assurance Co. Ltd.
Oriental Insurance Co. Ltd. Reliance General Insurance Co. Ltd.
Royal Sundaram Alliance Insurance Co. Ltd.
Tata AIG Life Insurance Co. Ltd.
United India Insurance Co. LtdReinsurers:
General Insurance Corporation of India.
C
ONTR
IBUTO
RS
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CONTRIBUTION TO GROWTH: Currently, the insurance sector size is estimated at
Rs.500 billion. On account of intense marketing strategies adopted by
private insurance players, the market share of state
owned insurance companies like GIC, LIC and others
have come down to 70% in last 4-5 years from over97%.
The private insurance players despite the sector is still
regulated has been offering rate of return (RoR) to its
policy holders which is estimated at about 35% asagainst 20% of domestic insurance companies.
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CONTRIBUTION TO GROWTH: LIC and GIC have limited number of policies to offer to
their subscribers Private insurance companies offer many policies and
the premium amount as well as the maturity period is
much competitive as against those of government
insurance companies. The private sector insurance players have started
exploring the rural markets in which until recently, the
state owned companies had the monopoly.
Indias life insurance premium, as a percentage ofGDP is 1.8%
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FUTURE OF THE SECTOR:
Indian insurance sector is likely to register
unprecedented growth of 200% and attain a size of Rs.2000 billion by 2009-10
A private sector insurance business will achieve a
growth rate of 140% as a result of aggressive marketing
technique being adopted by them against 35-40%growth rate of state owned insurance companies.
In rural markets, the share of private insurance players
would increase substantially as these have been able to
generate a faith among their rural consumers.
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-EMERGING AREAS:
Demand for Pension Plans
Two relatively modern trends affect life insurancebusiness in India significantly:
Joint Family System and
elderly are increasingly having to fend for
themselves
Separateness of Banking and Insurance
Bancassurance
Role of Information Techno-logy
Using Postal Network
Creating Insurance awareness
Innovative Products
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