final presentation on banking & insurance

7/29/2019 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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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).



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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.



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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.



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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.


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

final presentation on banking & insurance

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