Introduction to banking
The Banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the
matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few
years.
The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI,
HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank.
However, in the introduction part of the entire banking cosmos, the past has been well explained under three different
heads namely:
History of Banking in India
Nationalisation of Banks in India
Scheduled Commercial Banks in India
The first deals with the history part since the dawn of banking system in India. Government took major step in the
1969 to put the banking sector into systems and it nationalised 14 private banks in the mentioned year. This has been elaborated
in Nationalisationof Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India.
Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial banks. The description along with a list
of scheduled commercial banks are given on this page.
Banks In India
In India the banks are being segregated in different groups. Each group has their own benefits and limitations in
operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both
rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players.
All these details and many more is discussed over here. The banks and its relation with the customers, their mode
of operation, the names of banks under different groups and other such useful informations are talked about.
One more section has been taken note of is the upcoming foreign banks in India. The RBI has shown certain interest
to involve more of foreign banks than the existing one recently. This step has paved a way for few more foreign banks to start
business in India.
Major Banks in India
ABN-AMRO Bank
Abu Dhabi Commercial Bank
American Express Bank
Andhra Bank
Allahabad Bank
Bank of Baroda
Bank of India
Bank of Maharastra
Bank of Punjab
Bank of Rajasthan
Bank of Ceylon
BNP Paribas Bank
Canara Bank
Catholic Syrian Bank
Central Bank of India
Centurion Bank
China Trust Commercial Bank
Citi Bank
City Union Bank
Corporation Bank
Dena Bank
Deutsche Bank
Development Credit Bank
Dhanalakshmi Bank
Federal Bank
HDFC Bank
HSBC ICICI Bank
IDBI Bank
Indian Bank
Indian Overseas Bank
IndusInd Bank
ING Vysya Bank
Jammu & Kashmir Bank
JPMorgan Chase Bank
Karnataka Bank
Karur Vysya Bank
Laxmi Vilas Bank
Oriental Bank of Commerce
Punjab National Bank
Punjab & Sind Bank
Scotia Bank
South Indian Bank
Standard Chartered Bank
State Bank of India (SBI)
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Saurastra
State Bank of Travancore
Syndicate Bank
Taib Bank
UCO Bank
Union Bank of India
United Bank of India
United Bank Of India
United Western Bank
UTI Bank
Vijaya Bank
<strong>Banking services in India</strong>
With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase
of customers market. The customers have more choices in choosing their banks. A competition has been established within the
banks operating in India.
With stiff competition and advancement of technology, the services provided by banks has become more easy and convenient.
The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being
cleared in one month in the south.
This section of banking deals with the latest discovery in the banking instruments along with the polished version
of their old systems.
Financial And Banking Sector Reforms
The last decade witnessed the maturity of India's financial markets. Since 1991, every governments of India took
major steps in reforming the financial sector of the country. The important achievements in the following fields is discussed
under serparate heads:
Financial markets
Regulators
The banking system
Non-banking finance companies
The capital market
Mutual funds
Overall approach to reforms
Deregulation of banking system
Capital market developments
Consolidation imperative
Now let us discuss each segment seperately.
Financial Markets
In the last decade, Private Sector Institutions played an important role. They grew rapidly in commercial banking
and asset management business. With the openings in the insurance sector for these institutions, they started making debt
in the market.
Competition among financial intermediaries gradually helped the interest rates to decline. Deregulation added to
it. The real interest rate was maintained. The borrowers did not pay high price while depositors had incentives to save. It
was something between the nominal rate of interest and the expected rate of inflation.
Regulators
The Finance Ministry continuously formulated major policies in the field of financial sector of the country. The
Government accepted the important role of regulators. The Reserve Bank of India (RBI) has become more independant. Securities
and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) became important institutions.
Opinions are also there that there should be a super-regulator for the financial services sector instead of multiplicity of
regulators.
The banking system
Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still dominating the commercial
banking system. Shares of the leading PSBs are already listed on the stock exchanges.
The RBI has given licences to new private sector banks as part of the liberalisation process. The RBI has also been
granting licences to industrial houses. Many banks are successfully running in the retail and consumer segments but are yet
to deliver services to industrial finance, retail trade, small business and agricultural finance.
The PSBs will play an important role in the industry due to its number of branches and foreign banks facing the constrait
of limited number of branches. Hence, in order to achieve an efficient banking system, the onus is on the Government to encourage
the PSBs to be run on professional lines.
Development finance institutions
FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and equity funds.
Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-lending institutions.
Capital adequacy norms extended to financial institutions.
DFIs such as IDBI and ICICI have entered other segments of financial services such as commercial banking, asset management
and insurance through separate ventures. The move to universal banking has started.
Non-banking finance companies
In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net owned funds, has been
raised to Rs.2 crores.
Until recently, the money market in India was narrow and circumscribed by tight regulations over interest rates and
participants. The secondary market was underdeveloped and lacked liquidity. Several measures have been initiated and include
new money market instruments, strengthening of existing instruments and setting up of the Discount and Finance House of India
(DFHI).
The RBI conducts its sales of dated securities and treasury bills through its open market operations (OMO) window.
Primary dealers bid for these securities and also trade in them. The DFHI is the principal agency for developing a secondary
market for money market instruments and Government of India treasury bills. The RBI has introduced a liquidity adjustment
facility (LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out through repo auctions.
On account of the substantial issue of government debt, the gilt- edged market occupies an important position in
the financial set- up. The Securities Trading Corporation of India (STCI), which started operations in June 1994 has a mandate
to develop the secondary market in government securities.
Long-term debt market: The development of a long-term debt market is crucial to the financing of infrastructure.
After bringing some order to the equity market, the SEBI has now decided to concentrate on the development of the debt market.
Stamp duty is being withdrawn at the time of dematerialisation of debt instruments in order to encourage paperless trading.
The capital market
The number of shareholders in India is estimated at 25 million. However, only an estimated two lakh persons actively
trade in stocks. There has been a dramatic improvement in the country's stock market trading infrastructure during the last
few years. Expectations are that India will be an attractive emerging market with tremendous potential. Unfortunately, during
recent times the stock markets have been constrained by some unsavoury developments, which has led to retail investors deserting
the stock markets.
Mutual funds
The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996 and amendments thereto.
With the issuance of SEBI guidelines, the industry had a framework for the establishment of many more players, both Indian
and foreign players.
The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly Rs.70,000 crores, but
its share is going down. The biggest shock to the mutual fund industry during recent times was the insecurity generated in
the minds of investors regarding the US 64 scheme. With the growth in the securities markets and tax advantages granted for
investment in mutual fund units, mutual funds started becoming popular.
The foreign owned AMCs are the ones which are now setting the pace for the industry. They are introducing new products,
setting new standards of customer service, improving disclosure standards and experimenting with new types of distribution.
The insurance industry is the latest to be thrown open to competition from the private sector including foreign players.
Foreign companies can only enter joint ventures with Indian companies, with participation restricted to 26 per cent of equity.
It is too early to conclude whether the erstwhile public sector monopolies will successfully be able to face up to the competition
posed by the new players, but it can be expected that the customer will gain from improved service.
The new players will need to bring in innovative products as well as fresh ideas on marketing and distribution, in
order to improve the low per capita insurance coverage. Good regulation will, of course, be essential.
Overall approach to reforms
The last ten years have seen major improvements in the working of various financial market participants. The government
and the regulatory authorities have followed a step-by-step approach, not a big bang one. The entry of foreign players has
assisted in the introduction of international practices and systems. Technology developments have improved customer service.
Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an active corporate debt market and
a developed derivatives market). On the whole, the cumulative effect of the developments since 1991 has been quite encouraging.
An indication of the strength of the reformed Indian financial system can be seen from the way India was not affected by the
Southeast Asian crisis.
However, financial liberalisation alone will not ensure stable economic growth. Some tough decisions still need to
be taken. Without fiscal control, financial stability cannot be ensured. The fate of the Fiscal Responsibility Bill remains
unknown and high fiscal deficits continue. In the case of financial institutions, the political and legal structures hve to
ensure that borrowers repay on time the loans they have taken. The phenomenon of rich industrialists and bankrupt companies
continues. Further, frauds cannot be totally prevented, even with the best of regulation. However, punishment has to follow
crime, which is often not the case in India.
Deregulation of banking system
Prudential norms were introduced for income recognition, asset classification, provisioning for delinquent loans
and for capital adequacy. In order to reach the stipulated capital adequacy norms, substantial capital were provided by the
Government to PSBs.
Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash reserve ratio (CRR) brought
down in steps. Interest rates on the deposits and lending sides almost entirely were deregulated.
New private sector banks allowed to promote and encourage competition. PSBs were encouraged to approach the public
for raising resources. Recovery of debts due to banks and the Financial Institutions Act, 1993 was passed, and special recovery
tribunals set up to facilitate quicker recovery of loan arrears.
Bank lending norms liberalised and a loan system to ensure better control over credit introduced. Banks asked to
set up asset liability management (ALM) systems. RBI guidelines issued for risk management systems in banks encompassing credit,
market and operational risks.
A credit information bureau being established to identify bad risks. Derivative products such as forward rate agreements
(FRAs) and interest rate swaps (IRSs) introduced.
Capital market developments
The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were abolished and the
initial share pricing were decontrolled. SEBI, the capital market regulator was established in 1992.
Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after registration with the
SEBI. Indian companies were permitted to access international capital markets through euro issues.
The National Stock Exchange (NSE), with nationwide stock trading and electronic display, clearing and settlement
facilities was established. Several local stock exchanges changed over from floor based trading to screen based trading.
Private mutual funds permitted
The Depositories Act had given a legal framework for the establishment of depositories to record ownership deals
in book entry form. Dematerialisation of stocks encouraged paperless trading. Companies were required to disclose all material
facts and specific risk factors associated with their projects while making public issues.
To reduce the cost of issue, underwriting by the issuer were made optional, subject to conditions. The practice of
making preferential allotment of shares at prices unrelated to the prevailing market prices stopped and fresh guidelines were
issued by SEBI.
SEBI reconstituted governing boards of the stock exchanges, introduced capital adequacy norms for brokers, and made
rules for making client or broker relationship more transparent which included separation of client and broker accounts.
Buy back of shares allowed
The SEBI started insisting on greater corporate disclosures. Steps were taken to improve corporate governance based
on the report of a committee.
SEBI issued detailed employee stock option scheme and employee stock purchase scheme for listed companies.
Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given the freedom to issue
dematerialised shares in any denomination.
Derivatives trading starts with index options and futures. A system of rolling settlements introduced. SEBI empowered
to register and regulate venture capital funds.
The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating agencies as well as introducing
a code of conduct for all credit rating agencies operating in India.
Consolidation imperative
Another aspect of the financial sector reforms in India is the consolidation of existing institutions which is especially
applicable to the commercial banks. In India the banks are in huge quantity. First, there is no need for 27 PSBs with branches
all over India. A number of them can be merged. The merger of Punjab National Bank and New Bank of India was a difficult one,
but the situation is different now. No one expected so many employees to take voluntary retirement from PSBs, which at one
time were much sought after jobs. Private sector banks will be self consolidated while co-operative and rural banks will be
encouraged for consolidation, and anyway play only a niche role.
In the case of insurance, the Life Insurance Corporation of India is a behemoth, while the four public sector general
insurance companies will probably move towards consolidation with a bit of nudging. The UTI is yet again a big institution,
even though facing difficult times, and most other public sector players are already exiting the mutual fund business. There
are a number of small mutual fund players in the private sector, but the business being comparatively new for the private
players, it will take some time.
We finally come to convergence in the financial sector, the new buzzword internationally. Hi-tech and the need to
meet increasing consumer needs is encouraging convergence, even though it has not always been a success till date. In India
organisations such as IDBI, ICICI, HDFC and SBI are already trying to offer various services to the customer under one umbrella.
This phenomenon is expected to grow rapidly in the coming years. Where mergers may not be possible, alliances between organisations
may be effective. Various forms of bancassurance are being introduced, with the RBI having already come out with detailed
guidelines for entry of banks into insurance. The LIC has bought into Corporation Bank in order to spread its insurance distribution
network. Both banks and insurance companies have started entering the asset management business, as there is a great deal
of synergy among these businesses. The pensions market is expected to open up fresh opportunities for insurance companies
and mutual funds.
It is not possible to play the role of the Oracle of Delphi when a vast nation like India is involved. However, a
few trends are evident, and the coming decade should be as interesting as the last one.
Reserve Bank of India (RBI)
Kindly Take Note : Reserve Bank of India (RBI) is the central bank of the country and is different from Central Bank
of India.
The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share
capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided
into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the begining. The Government held
shares of nominal value of Rs. 2,20,000.
Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is
entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from
the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic
life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters
at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term
of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks.
The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory
basis of the functioning of the Bank.
The Bank was constituted for the need of following:
To regulate the issue of banknotes
To maintain reserves with a view to securing monetary stability and
To operate the credit and currency system of the country to its advantage.
Functions of Reserve Bank of India
The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the Reserve Bank of India.
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations.
The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent
of the Government. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The
assets and liabilities of the Issue Department are kept separate from those of the Banking Department. Originally, the assets
of the Issue Department were to consist of not less than two-fifths of gold coin, gold bullion or sterling securities provided
the amount of gold was not less than Rs. 40 crores in value. The remaining three-fifths of the assets might be held in rupee
coins, Government of India rupee securities, eligible bills of exchange and promissory notes payable in India. Due to the
exigencies of the Second World War and the post-was period, these provisions were considerably modified. Since 1957, the Reserve
Bank of India is required to maintain gold and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores
should be in gold. The system as it exists today is known as the minimum reserve system.
Banker to Government
The second important function of the Reserve Bank of India is to act as Government banker, agent and adviser. The
Reserve Bank is agent of Central Government and of all State Governments in India excepting that of Jammu and Kashmir. The
Reserve Bank has the obligation to transact Government business, via. to keep the cash balances as deposits free of interest,
to receive and to make payments on behalf of the Government and to carry out their exchange remittances and other banking
operations. The Reserve Bank of India helps the Government - both the Union and the States to float new loans and to manage
public debt. The Bank makes ways and means advances to the Governments for 90 days. It makes loans and advances to the States
and local authorities. It acts as adviser to the Government on all monetary and banking matters.
Bankers' Bank and Lender of the Last Resort
The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking Companies Act of
1949, every scheduled bank was required to maintain with the Reserve Bank a cash balance equivalent to 5% of its demand liabilites
and 2 per cent of its time liabilities in India. By an amendment of 1962, the distinction between demand and time liabilities
was abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit liabilities.
The minimum cash requirements can be changed by the Reserve Bank of India.
The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial
accommodation in times of need or stringency by rediscounting bills of exchange. Since commercial banks can always expect
the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's
bank but also the lender of the last resort.
Controller of Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created
by banks in India. It can do so through changing the Bank rate or through open market operations. According to the Banking
Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular
groups or persons on the basis of certain types of securities. Since 1956, selective controls of credit are increasingly being
used by the Reserve Bank.
The Reserve Bank of India is armed with many more powers to control the Indian money market. Every bank has to get
a licence from the Reserve Bank of India to do banking business within India, the licence can be cancelled by the Reserve
Bank of certain stipulated conditions are not fulfilled. Every bank will have to get the permission of the Reserve Bank before
it can open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank showing, in detail, its assets
and liabilities. This power of the Bank to call for information is also intended to give it effective control of the credit
system. The Reserve Bank has also the power to inspect the accounts of any commercial bank.
As supereme banking authority in the country, the Reserve Bank of India, therefore, has the following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and qualitative controls.
(c) It controls the banking system through the system of licensing, inspection and calling for information.
(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.
Custodian of Foreign Reserves
The Reserve Bank of India has the responsibility to maintain the official rate of exchange. According to the Reserve
Bank of India Act of 1934, the Bank was required to buy and sell at fixed rates any amount of sterling in lots of not less
than Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate
fixed at lsh.6d. though there were periods of extreme pressure in favour of or against
the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve Bank has the responsibility
of maintaining fixed exchange rates with all other member countries of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of India's reserve
of international currencies. The vast sterling balances were acquired and managed by the Bank. Further, the RBI has the responsibility
of administering the exchange controls of the country.
Supervisory functions
In addition to its traditional central banking functions, the Reserve bank has certain non-monetary functions of
the nature of supervision of banks and promotion of sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation
Act, 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks, relating to licensing
and establishments, branch expansion, liquidity of their assets, management and methods of working, amalgamation, reconstruction,
and liquidation. The RBI is authorised to carry out periodical inspections of the banks and to call for returns and necessary
information from them. The nationalisation of 14 major Indian scheduled banks in July 1969 has imposed new responsibilities
on the RBI for directing the growth of banking and credit policies towards more rapid development of the economy and realisation
of certain desired social objectives. The supervisory functions of the RBI have helped a great deal in improving the standard
of banking in India to develop on sound lines and to improve the methods of their operation.
Promotional functions
With economic growth assuming a new urgency since Independence, the range of the Reserve Bank's functions has steadily
widened. The Bank now performs a varietyof developmental and promotional functions, which, at one time, were regarded as outside
the normal scope of central banking. The Reserve Bank was asked to promote banking habit, extend banking facilities to rural
and semi-urban areas, and establish and promote new specialised financing agencies. Accordingly, the Reserve Bank has helped
in the setting up of the IFCI and the SFC; it set up the Deposit Insurance Corporation in 1962, the Unit Trust of India in
1964, the Industrial Development Bank of India also in 1964, the Agricultural Refinance Corporation of India in 1963 and the
Industrial Reconstruction Corporation of India in 1972. These institutions were set up directly or indirectly by the Reserve
Bank to promote saving habit and to mobilise savings, and to provide industrial finance as well as agricultural finance. As
far back as 1935, the Reserve Bank of India set up the Agricultural Credit Department to provide agricultural credit. But
only since 1951 the Bank's role in this field has become extremely important. The Bank has developed the co-operative credit
movement to encourage saving, to eliminate moneylenders from the villages and to route its short term credit to agriculture.
The RBI has set up the Agricultural Refinance and Development Corporation to provide long-term finance to farmers.
Classification of RBIs functions
The monetary functions also known as the central banking functions of the RBI are related to control and regulation
of money and credit, i.e., issue of currency, control of bank credit, control of foreign exchange operations, banker to the
Government and to the money market. Monetary functions of the RBI are significant as they control and regulate the volume
of money and credit in the country.
Equally important, however, are the non-monetary functions of the RBI in the context of India's economic backwardness.
The supervisory function of the RBI may be regarded as a non-monetary function (though many consider this a monetary function).
The promotion of sound banking in India is an important goal of the RBI, the RBI has been given wide and drastic powers, under
the Banking Regulation Act of 1949 - these powers relate to licencing of banks, branch expansion, liquidity of their assets,
management and methods of working, inspection, amalgamation, reconstruction and liquidation. Under the RBI's supervision and
inspection, the working of banks has greatly improved. Commercial banks have developed into financially and operationally
sound and viable units. The RBI's powers of supervision have now been extended to non-banking financial intermediaries. Since
independence, particularly after its nationalisation 1949, the RBI has followed the promotional functions vigorously and has
been responsible for strong financial support to industrial and agricultural development in the country.
RESERVE BANK OF INDIA ADDRESS
Reserve Bank of India,
Central Office,
Shaheed Bhagat Singh Road,
Mumbai - 400 001.
Website of Reserve Bank of India
www.rbi.org.in
<strong>Easy Banking</strong>
This section is fully dedicated to the Tech Banking. A decade before, it was tough to belief that banking secctor
will be at a finger tip. Now its possible. A mobile hand set with a connection is the only instrument needed to make a gateway
to your banking transaction, the latest innovation of technology.
Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the major steps taken by the banks
in India towards modernisation. With all these devises and systems, there is a complete freedom to experience.
Check your account, transfer your fund, make payments and what more, do anything of everything what has been followed
in physical banking since ages. But this time no standing for hours in front of cash counter and no time boundation in withdrawing
your own money.
Automated Teller Machine (ATM)
The first bank to introduce the ATM concept in India was the Hongkong and Shanghai Banking Corporation (HSBC). It
was in the year 1987. Now, almost every commercial banks gives ATM facilities to its customers.
The first bank to cross 1,000 marks in installing ATMs in India is ICICI. SBI is following the concept of 'ATMs in
Quantity'. But Private Sector Banks have taken the lead. ICICI, UTI, HDFC and IDBI counts more than 50% of the total ATMs
in India.
Public Sector Banks are also taking the installation of ATMs seriously for Indian market. They are either setting
up their own ATM centres or entering into tie-ups with other banks. The Corporation Bank has the second largest network of
ATMs amongst the Public Sector Banks in India.
The Indian banks have also come up with a 'Swadhan' scheme. Under this scheme, the banks can use each other's ATM
at a cost, usually Rs. 35 extra from their customers. The main feature of 'Swadhan Card' are as follows:
No exchange fee charged to change an old ATM card for a Swadhan card.
Rs. 3,000 fixed as the ceiling on withdrawal.
Exception made for select customers who can withdraw up to Rs10,000. Still, this is lower than the average withdrawal
of Rs15,000 by regular ATMs.
IBA gives banks the discretion to decide a higher maximum amount for withdrawal.
Transactions conducted through any of the member banks appear on a bank statement, which is given only by your own
bank.
All transactions conducted in any of the member banks appear on the bank statement, but only your own bank will provide
this.
Note :- No overdraft facility is available on Swadhan cards.
How 'Swadhan Card' works
All informations and transactions are routed among member institutions through a switch. The switch transmits the
information and/or data to bank which has issued the card or to its processor, which on the other hand either approves or
declines the transaction request and notifies the switch. The decision of the card-issuing bank's is then routed by the switch
to the processor of the ATM, which completes the transaction. The accounts among members are settled and account balances
are transmitted at the end of the day to each member institution.
Cost of setting ATM center
Approximately Rs.1mn it takes for the setting of an ATM center. Rs.1.2-1.4mn per annum is needed for its maintenance.
To keep the cost in equilibrium position, there should be around 250-300 transactions per day per ATM.
To overcome or to reach the break-even point, the banks are always encouraging its customers to use the ATMs. Banks
like HDFC and Citibank even charge penalty if a customer visits the branch.
NCR India and HMA Die bold are the main two players in this market to set up ATMs in India. The market, according
to them is whopping 100% and they are very optimistic to see 30,000 ATMs in India very soon.
