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A PROJECT REPORT ON “A COMPARATIVE STUDY ON PERSONAL BANKING SERVICES OF SBI AND ICICI”

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Page 1: sbi & icici

A PROJECT REPORT

ON

“A COMPARATIVE STUDY ON PERSONAL BANKING SERVICES OF SBI AND ICICI”

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CONTENTS

01 Introduction to the banks

02 Objective of the study

03 Methodology

04 Observation and Findings

05 Conclusion

06 Limitations

07 Bibliography

INTRODUCTION TO BANKS

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Introduction of SBI (State bank of India):

The State Bank of India, the country’s oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation – the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an ability to give the Private and Foreign Banks a run for their money. The origin of the state bank of India goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806.

The bank is operating into many businesses with strategic tie ups – Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc – each one of these initiatives having a huge potential for growth.

It is also focusing at the top end of the market, on whole sale banking capabilities to provide India’s growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.

SBI have about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with it’s over 8500 ATMs.It presently has 52 foreign offices in 34 countries across the globe. It has also 5 Subsidiaries in India – SBI Capital Markets- SBICAP Securities, SBI DFHI, SBI Factors and Commercial Services Pvt Ltd (SBI FACTORS), SBI Funds Management Pvt Ltd (SBI FUNDS) and SBI Cards & Payments Services Pvt. Ltd. (SBICPSL) - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings

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Introduction of ICICI:

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998.

ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95 billion at March 31, 2008. The Bank has a network of about 1,308 branches and 3,950 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Unites States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

INTODUCTION TO THE TOPIC

Personal Banking:-

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Personal banking refers to banking in which a person can do

transaction and deposits with the banks for their personal

expense.

OBJECTIVE OF THE STUDY

My objective was to find out the personal banking scheme of SBI and ICICI to find out the advantage of SBI over ICICI and vice-versa.

For this I have to find various scheme provided by SBI and ICICI.

METHEDOLOGY

Primary Data is taken from Mr. Amit Yadav (manager in SBI) Manoj Kumar(staff in ICICI )

Secondary data is taken by internet

VARIABLES

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PERSONAL BANKING SCHEMES:-

DEPOSITS SCHEMES LOAN

o PERSONALo CARo HOMEo EDUCATION

OBSERVATIONS & FINDINGS

SCHEMES PROVDED BY SBI:- Terms deposit scheme Recurring deposits scheme Loans

SBI SARAL Personal loan Education loan Car loan

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Home loan Medi-Plus loan

TERM DEPOSITS

Provide security, trust and competitive rate of interest. Flexibility in period of term deposit from 15 days to 10 years Affordable Low Minimum Deposit Amount: One can open a

term deposit with SBI for a nominal amount of Rs.1000/- only. Flexibility in choosing the amount one wish to invest and the

maturity period.

BENIFITS OF SCHEME:-

Safety: – SBI IS continues to deliver on its promise of safety and security

over 200 years.

Liquidity Loan /overdraft facility: One can avail a loan/overdraft against his deposit. SBI provides loan / overdraft up to 90% of deposit amount at nominal cost. So one can continue to earn interest in his deposit and still can meet his urgent financial requirements.

Premature WithdrawalInterest to be charged on premature withdrawal of term deposits at 1.00% below the rate applicable for the period deposit has remained with the Bank.Transferability- Transfer of Term Deposits between wide networks of branches without any charge.

Compounding / Flexible / Timely Payment of Interest - Under Special Term Deposit Scheme, interest accrues in account and gets compounded quarterly.

Term Deposits are available at all SBI Branches

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Easy and convenient access of information at SBI Internet Banking.

Tax Implications:

Tax Deductible at Source, as per Income Tax Act

Flexibility to convert Special Term Deposit to Term Deposit and vice versa

One can convert his special Term Deposit to a Term Deposit to

receive monthly/quarterly interest payments to match his financial

requirements.

One can also convert his Term Deposit to a Special Term Deposit,

which provides compounded rate of interest to multiply his money

faster.

RECURRING DEPOSIT:-

Recurring deposit refers to a little investment by an investor to meet his

financial goals of future (Children’s education or marriage, buy a car etc.)

Recurring deposit provides the element of compulsion to save at high

rates of interest, wide choice in period of deposit.

Features:-

Flexibility in period of deposit with maturity ranging from 12 months

to 120 months.

Low minimum monthly deposit amount.

One can start a Recurring Deposit with SBI for a monthly instalment

of Rs.100/- only.

Benefits:-

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Including all the benefits of terms deposits there are some more benefits

of recurring benefits:-

Nomination Facility is available in this scheme

one can save a monthly instalment of multiple of 10 every month

One can monitor his deposit through SBI Internet Banking or

through a passbook issued to you.

LOANS:-

Type AmountMin. Max.

Rate ofinterest

Security Eligibility

SBI SARAL Personal loan

10,000 10,00,000 17.75 Nil A person having a good profession and income

Education loan - 4,00,000

4,00,000 7,50,000

4,00,000 7,50,000

12.25%

13.75%

12.25%

Nil

Tangible collateral security

suitable third party guarantee

Graduation courses

Post graduation courses Professional courses

Other courses approved by UGC/Government/AICTE etc.

Car loan

Used vehicle

Up to 3 yearsAbove 3 years

New vehicle

- 15,00,000

- 15,00,000 - 15,00,000

16.25%16.50%

As per bank's extant instructions.

person having a income >1,00,000

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Up to 3 years12

Above 3 years3-5years5-7years

- 7,50,0007,50,000 15,00,000

- 15,00,000- 15,00,000

12.75%12.50%

12.75%13.00%

Home loan

Up to 5 years

5 to15 years

Up to 15 years

0 30,00,00030,00,000 75,00,00030,00,000 75,00,000

0 30,00,00030,00,000 75,00,00030,00,000 75,00,000

0 30,00,00030,00,000 75,00,00030,00,000 75,00,000

10.50%11.75%11.75%

10.75%12.00%12.00%

11.00%12.25%12.50%

Availability of sufficient, regular and continuous source of income for servicing the loan repayment.

Age18-60 years

Equitable mortgage of the property orOther tangible security of adequate value like NSCs, Life Insurance policies etc., if the property cannot be mortgaged

Medi-Plus loan 50,000 1,00,00050,000 2,00,00050,000 1,00,000

14.50% As per bank's extant instructions.

Govt emp. From 10 yearsself-employed professionalemployee/agent(income>3lakhs)

SCHEMES PROVDED BY ICICI:- DEPOSITS CARDS ONLINE INVESTEMENT Loans

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Personal loan Education loan Car loan Home loan Property loan

Deposits:-

ICICI BANK offers wide variety of deposit products to suit your requirements. Convenience of networked branches/ Atms and facility of e-channels like internet and mobile banking.

Some of the ICICI deposit products are :-

Saving account : -

A Savings Account for everyone with a host of convenient features and banking channels to transact through. So now you can bank at your convenience, without the stress of waiting in queues.

Life Plus Senior Citizens Savings Account:- This is a plan of ICICI bank for senior citizens, who are of 60 years and above

Young Stars Savings Account:-

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It's really important to help children learn the value of finances and money management at an early age. This is a plan for children and their future. In a tiny age Children learn how to manage their personal finances.

Recurring Deposits:-

When people don’t have so much money to invest then according to this scheme ICICI provides scheme to a person to invest a little amount of money.

CARDS :-

ICICI Bank offers a variety of cards to suit your different transactional needs. One can use these cards for shopping, traveling or any other type of payments. These cards are of many types and used for different purpose.

The different types of cards are:-

1. Credit cards : - Credit Cards give a smart way to shop, and offer flexibility and convenience in managing finances. ICICI credit cards provide a lot of exciting offers like low interest rate and high cash and credit limit.

2. Travel cards : - Travel cards give a flexibility to travel around the world. One can pay in currency of various countries for traveling with the help of this card.

3. Debit Card : - this is a most common card. This can be used for shopping, billing of

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electricity and telephony.

ONLINE INVESTEMENT:-

Along with the cards and deposits ICICI provides online investments.

With the help of online investment one can manage his finances by investing in following schemes of ICICI:-

ICICI Bank Tax Saving Bonds Government of India Bonds Investment in Mutual Funds Initial Public Offers by Corporate Investment in "Pure Gold" Foreign Exchange Services Senior Citizens Savings Scheme, 2004 Loans :-

ICICI provides various loan schemes. It is a no. one home loan and car loan provider. Along with this it provides personal and education loan.

Type AmountMin. Max.

Rate ofinterest

Security Eligibility

Personal loan 1,500000

Education loan - 4,00,000

4,00,000 7,50,000

4,00,000 7,50,000

For all 10-12%

Nil

Tangible collateral security

Graduation courses

Post graduation courses Professional courses

Other courses approved by UGC/Government/AICTE etc.

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suitable third party guarantee

Car loan - 15,00,000 11-13% As per bank's extant instructions.

person having a income >1,00,000

Home loan 0 75,00,000 11.5-12.5%

Availability of sufficient, regular and continuous source of income for servicing the loan repayment.

Equitable mortgage of the property orOther tangible security of adequate value like NSCs, Life Insurance policies etc., if the property cannot be mortgaged

ANALYSIS

ADVANTAGES OF ICICI OVER SBI:

ICICI is growing at a very fast rate with a total asset of Rs. 3,744.10 billion.

In the area of human relations, the two are taking divergent paths. SBI, which had over 1 lacks employees, has reduced headcount through a voluntary retirement scheme and is cautious about adding headcount. ICICI Bank, on the other hand, is setting up regional hubs where its workforce would be concentrated and plans to add 20,000 to its headcount every year. The group plans to add between 75,000 and 1, 00,000 employees in the next few years.

ICICI Bank is also set to outdo SBI is in its international book - An area where it has been very aggressive.

ADVANTAGES OF SBI OVER ICICI:

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SBI is the largest and oldest bank of India. Its major stocks are held by government of India. So this bank enjoys the trust of its Customers a lot.

SBI offers flexible tenures of loan repayment.

State bank of India has vast experience in the field of SME (Small and Medium Enterprises) Financing.

As it is the oldest name so it enjoys public trust a lot. SBI have four national level Apex Training Colleges and 54

Learning Centers spread all over the country the Bank is Continuously engaged in skill enhancement of its employees. Some of the training programs are attended by bankers from banks in other countries.

SBI group, which has over 10,000 branches, is planning to add another 3,000 branches.

It is also set to become the largest issuer of debit cards and is the second largest credit card issuer.

Six reasons why we currently prefer SBI over ICICI

Reason #1 - Stronger CASA base

CASA franchise of 42% provides comfort on margin sustainability for SBI.

Though CASA for ICICI will also improve from the current 27%, we believe SBI’s liability franchise will strengthen further with the opening of ~2,000 branches in FY09.

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Reason #2 – Asset-liability match of SBI is better

SBI has a better asset-liability match, with 60% of liabilities of more than 1-year maturity, while ~71% of assets have more than 1-year maturity.

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ICICI has 43% of its liabilities with more than 1-year maturity, while ~61% of assets have more than 1-year maturity.

Reason #3 - Proxy insurance plays on both

Any upside on insurance reforms can be played through SBI as well.

Cost ratios of SBI Life are better than ICICI Prudential Life due to its strong bancassurance model and better agency productivity.

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Reason #4 - SBI has more diversified loan book

While asset quality risks persist for both banks, SBI’s loan book is well diversified across a variety of segments; ICICI’s loan book is still skewed towards retail.

According to our analysis, over the next 18 months the retail segment is likely to be more vulnerable than the corporate segment.

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Reason #5 - Market share gain in favor of SBI

SBI will continue to gain market share in both advances and deposits at ICICI’s expense due to the latter’s strategy of going slow.

Advances growth for SBI as at Q1FY09 was 28% versus 13% for ICICI.

Deposit growth for SBI was at 25%, while for ICICI it was 2% as at Q1FY09.

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Reason #6 - Return ratios for SBI are better

SBI is trading at 0.94x FY10E adjusted book, while ICICI is trading at 1.0x FY10E adjusted book (assuming value of subsidiaries for SBI at INR 301 and for ICICI at INR 283 on FY10E basis).

ROE for ICICI is expected to be in the range of 8-10% in FY09-10E, while that of SBI will be in the range of 14-16%.

Key risks

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SBI’s low provisioning coverage (44%) will lead to higher provisioning cost in FY10E, considering the aggressive balance sheet growth.

For ICICI, the expectation of bad asset quality is priced in and further negative surprises look unlikely.

Like any other PSU bank, the bulk of SBI’s loan origination happens through branches where underwriting standards are stricter, unlike the DSA model that ICICI follows. Hence, while we expect NPAs to increase for SBI in FY10E and FY11E, we do not expect SBI to go through a similar experience as ICICI. Also, revised loan waiver guidelines could keep SBI’s

Q2FY09 profits muted due to higher provision requirement.

CONCLUSION:

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The gap between SBI and the rest of the bank is so wide that SBI comes out as number one on almost all counts. This includes assets, branch network, ATM network, number of employees, and size of profits. The only place that ICICI Bank has been able to upset the monolith has been in the area of market capitalization. One reason why SBI has lagged in market cap despite its size has been its inability to unlock value from its various businesses. However, there are signs that this is changing and the bank is making attempts to realize the value of its investments in the life insurance and asset management business.

SBI and ICICI are both India’s largest banks. Their growth means India’s growth. And by this competition customers will be benefited and Indian economy will get a boost.

LEARNINGS

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More flexible requirement given by this bank.

Creating an efficient and effective organization.

This live project topic gives opportunity to know about various loan schemes provided by the bank.

The study shows all the important aspects of Bank loan schemes & how this affects to current financial trends.

It also describes the core features of borrowers as well as bankers for financing loan which is a complex process.

LIMITATIONS

TIME CONSTRAINT

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I COLLECTED THE INFORMATION FROM THE MANAGER OF SBI AND STAFF OF ICICI BY PHONE I COULD NOT MEET HIM PERSONALLY

BIBLIOGRAPHY

Primary data:-

• Mr. Amit Yadav (Manager, Loan SBI)

• Mr. Manoj Kumar(Cashier, ICICI)

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Secondary data:

• Internet website :

www.Google.comwww.Statebankofindia.comwww.Icicibank.com