Tuesday, June 16, 2020

Why destroy God's gift?ift?

  • Yesterday I was shocked.Why anybody have takeing decision for destroying oneself? I  there are 3 important needs at the same time'
   1. At least one shoulder to say
        Everything to him/her
    2.Drink a glass of water and
    3 Full confidence  on God or            Godess and parents.

Monday, January 7, 2013

BANK FINANCING IN INDIA



In general term finance means management of money for your expenses. Finance is also a money budget management.  In broad term finance is the science of funds management. The field of finance deals with how money is spent and budgeted. It also deals the concepts of time, money and risk and how they are interrelated. Finance includes saving money and often includes lending money. The general areas of finance are business finance, personal finance, and public finance. Finance is used by individuals as personal finance, by governments as public finance, by businesses as corporate finance, as well as by a wide variety of organizations. Finance is the need of the today world economy. A financial system is a network of financial institutions, financial markets, financial instruments and financial services to facilitate the transfer of funds. The system consists of savers, intermediaries, instruments and the ultimate user of funds. The level of economic growth largely depends upon and is facilitated by the state of financial system prevailing in the economy. Efficient financial system. India has a financial system that is regulated by independent regulators in the sectors of banking, competition, insurance, capital markets, and different services sectors. In finance, the financial system is the system that allows the transfer of money between savers and borrowers. It comprises a set of complex and closely interconnected financial institutions, services, markets, instruments practices, and transactions. In Banking finance, the financial system is the system that allows the transfer of money between savers and borrowers. It comprises a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions. Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow intertemporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely.
---------------------------------------------------------------------------------------------------------------------Associate Professor, Economics & Banking Deptt. Dr. Subhash Mahila College,Junagadh.

The Indian banking sector has been remarkably successful in some respects. Its immense size and enormous penetration in rural areas are exemplary among developing countries, as is its solid reputation for stability among depositors. The penetration in rural areas has been associated with a reduction of poverty and a diversification out of agriculture (Burgess and Pande, 2003). However in recent years it has been widely viewed as being both expensive and inept. In particular it has been argued that most banks are overstaed, that a large fraction of their assets are non-performing (NPA) and that they under-lend, in the sense of not putting enough eort into their primary task of financing industry (Narasimhan committee, Government of India, 1991). A wide range of remedies have been suggested ranging from strengthening the legal system to punish defaulters, to abolishing the targeted lending programs (the so-called priority sector rules), to privatization of the entire banking system
1.      Types of finance found in the current economy--
There are mainly 2 types of finance found in the current economy. They are a personal finance and a corporate finance.
*Personal-finance
In this finance decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement. Personal financial decisions may also involve paying, for a loan or debt obligations.
*Corporate-finance
It is the task of providing the funds for a corporation's activities. Corporate finance can easily categorize in two categories. First one is Short term finance which generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock. Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the company's capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.
2.STRUCTURE OF FINANCIAL SYSTEM IN INDIA Financial structure refers to the mix of financial institutions, instruments and markets that channel savings and other funds to businesses and other borrowers. In a bank-based system, banks play the major role in channeling funds to businesses. In a market-based system, capital market including the stock and bond markets is the more important source of funds.
*
Financial Institution: - Financial Institution can be classified as banking and non banking institutions. Banking Institutions are creators and purveyors of credit while non banking financial institution are purveyors of credit.
*Financial Markets: - Financial Markets can be classified as primary and secondary markets. A Primary Market deals with new issues and secondary markets is meant for trading in existing securities.
*Financial Instruments: - A financial instrument is a claim against an institution or a person for payment at a future date of a sum of money in the form of dividend.
Financial Services: - Financial services are those, which help with borrowing and funding, buying and selling securities, lending and investing, making and enabling payments and settlements and managing risk exposures in financial markets.
3. IN INDIA  THE FUNCTIONS OF FINANCING SYSTEM
 Functions performed by financial system are:
Saving function: Public saving find their way into the hands of those in production through the financial system. Financial claims are issued in the money and capital markets which promise future income flows. The funds with the producers result in production of goods and services thereby increasing society living standards.
Liquidity function: The financial markets provide the investor with the opportunity to liquidate investments like stocks bonds debentures whenever they need the fund.
Payment function: The financial system offers a very convenient mode for payment of goods and services. Cheque system, credit card system etc are the easiest methods of payments.The cost and time of transactions are drastically reduced.
Risk function: The financial markets provide protection against life, health and income risks. These are accomplished through the sale of life and health insurance and property insurance policies. The financial markets provide immense opportunities for the investor to hedge himself against or reduce the possible risks involved in various investments.
Policy function: The government intervenes in the financial system to influence macroeconomic variables like interest rates or inflation so if country needs more money government would cut rate of interest through various financial instruments and if inflation is high and too much money is there in the system then government would increase rate of interest.
4. METHODS OF FINANCE
           Financial controls and monitoring methods have a dual role in supporting internal needs &   external requirements. There are five key aspects to financial controls and monitoring. These include:
*Accounting Records (or Accounts Receivable and Payable):Establish a process that records every financial transaction by maintaining paper files, an electronic database, and copying all records in a virtual library. Accounting records should be consistent. Choose a method and regular schedule for tracking income and expenses that works for your organization. . Your organization needs to be able to demonstrate what funds were received and how funds were spent. Accounting records should be consistent. Choose a method and regular schedule for tracking income and expenses that works for your organization. This is important in case the organization is audited or if a funder requests information for a specific item or transaction. A system should also be developed to track donations from individuals to keep donors updated of the organization’s progress or to solicit annual and repeat contributions. A separate accounting system should be developed for funding from foundations with the original proposal and budget, dates of receipt of funds, notes on allowable expenditures, and reporting requirements so that you can respond to funders’ requests for financial records or in case of audits
*Financial Planning: Financial planning converts an organization’s objectives into a budget. Financial planning allows you to review your organization, examining successes and challenges in the past. Planning also enables you to make projections and set targets, informing strategies for future success. .
*Asset-based lending - A secured business loan in which the borrower pledges as collateral any assets used in the conduct of his/her business.
 *Business finance companies - Firms that lend money primarily to businesses.
*Capital budget - A plan to finance long-term outlays, such as for fixed assets like facilities and equipment
5. DATA OF A BETTER PERFORMING INDIAN PUBLIC SECTOR BANK-
 We use data from loan portfolios of a better-performing Indian public sector bank.The loan folders include information on profit, sales, credit sanctions, and interest rates, as well as figures loan ocers are required to calculate (e.g. his projection of the bank’s future turnover, his calculation of the bank’s credit needs, etc.) to determine the amount to be lent. Our sample includes 253 firms (including 93 newly eligible firms), from 1997 to 1999.Through much of this section we will estimate an equation of the form
yit − yit−1 = αyBI Gi + βyP OS Tt + γyBI Gi P OS Tt + ²yit
with y taking the role of the various outcomes of interest (credit, revenue, profits, etc.) and the dummy P OS T representing the post January  period. We are in eect comparing how the outcomes change for the big firms after January, with how they change for the small firms. Since y is always a growth rate, this is, in eect, a triple dierence–we can allow small firms and big firms have dierent rates of growth, and the rate of growth to dier from year to year, but we assume that there would have been no dierential changes in the rate of growth of small and large firms in the year., absent the change in the priority sector regulation. Using, respectively, the log of the credit limit and the log of next year’s sales (or profit) in place of y in equation 1, we obtain the first stage and the reduced form of a regression of sales on credit, using the interaction BI G P OS T as an instrument for credit.
RESULTS
1. Estimation of equation 1 using bank credit as the outcome shows that the change in the regulation greatly aected who got priority sector credit. The sample of firms where there was a change in credit limit,
the coecient of the interaction BI G P OS T is 0.24, with a standard error of 0.09.
2.This increase in credit was not accompanied by a change in the     rate of interest It did not lead to reduction in the rate of utilization of the limits by the big firms the ratio of total turnover (the sum of all debts incurred during the year) to credit limit is not associated with the interaction BI G P OS T. The additional credit limit thus resulted in an increase in bank credit utilization by the firms. This additional credit in turn led to an increase in sales.
The coecient of the interaction BI G P OS T in the sales equation, in the sample where the limit was increased, is 0.21, with a standard error of 0.09
3 .By contrast, in the sample where there was no increase in limit,    the interaction BI G P OS T is close to zero (0.05) and insignificant which suggests that the result is not driven by a failure of the identification assumption.
The coecient of the interaction BI G P OS T is 0.24 in the credit regression, and 0.21 in the sales regression:
 Thus, sales increased almost as fast as loans in response to the reform. This is an indication that there was no substitution of bank credit for non-bank credit as a result of the reform, and that firms are credit constrained.we present the eect of the reform on profit. The eect is even bigger than that of sales: 0.75, with a standard error of 0.38. Note that the eect of the reform on profit is due to the gap between the marginal product of capital and the bank interest rate: in other words, it combines the subsidy eect  and the credit constraint eect. Even if firms were not credit constrained, their profit would increase after the reform if more subsidized credit is made available to them, because they substitute cheaper capital for expensive capital. Here again, we see no eect of the interaction BI G P OS T in the sample without a change in limit .
6  FINANCING MONITORING AND REPORTING-
Drawing from the information in the accounting records, an organization can create internal reports that help monitor progress by comparing budgets to actual expenses. Frequent reviews and monitoring allows the governing board and staff to measure your organization’s progress and helps inform decision-making about the organization’s or a project’s future. Internal reports, sometimes called management reports allow you to be forward thinking as you assess the financial status of the organization and what will be needed to realize your goals. Accounting records are also the source for creating external financial reports that demonstrate to funders and other stakeholders how funds have been spent. Funders may require financial reports at the completion of the project or periodically during the project’s implementation.
6. GOVERNING BODY-
A governing board, whether comprised by a board of directors or leadership from the community, serves as stewards of an organization’s resources. Governing boards should participate in approving budgets, financial monitoring and reviews, and agree upon and ensure that internal controls are implemented. The board treasurer who has skills in accounting should be the lead person in working with the staff in ensuring financial accountability
7. INTERNAL CONTROLs
 Controls are organizational practices that help safeguard an assets and ensure that money is being handled properly. Controls help detect errors in accounting, prevent fraud or theft, and help support the people responsible for handling an organization’s finances.Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States. People used to always use cash envelopes to control their monthly spending, but very few do in today's card swiping culture. The envelope system is a key component of the Total Money Makeover plan because it works.
8.POLICY RESPONCES-
Credit in India does not necessarily seem to flow to the people who have the greatest use for it. It seems that making lending rules more responsive to current profits and projections of future profits may be a way to both target better and guard against potential NPAs, largely because 13poor profitability seems to be a good predictor of future default. But choosing the right way to include profits in the lending decision will not be easy. If a firm is and will continue to be unprofitable, it makes sense to for the bank to seek to wind up the firm. On the other hand, cutting o credit to a profitable firm suering a temporary shock may push it into default. The diculty lies in distinguishing the two. One solution may be to categorize firms into three groups: (1) Profitable to highly profitable firms. Here, lending should respond to profitability, with more profitable firms getting more credit. (2) Marginally profitable to loss-making firms that were recently highly profitable, but have been hit by a temporary shock. For these firms the existing rules for lending might work well. (3) Firms with a long track record of losses, or which have been hit by a negative permanent shock (e.g., removal of taris for a good in which For these firms, lending should be discontinued, though in a way that oers enough to the firm that it prefers to cooperate rather than default. Of course it is not always going to be easy to distinguish permanent shocks from the temporary, but loan ocers should use information from previous performance, as well as the experience of the industry as a whole. If loan ocers are corrupt, or afraid to act for fear of appearing corrupt, it may not be advisable to give them this additional responsibility, without changing the incentive structure they face. A number of small steps that may go some distance towards this goal. First, to
avoid a climate of fear, there should be a clear separation between investigation of loans and investigations of loan ocers. The loan should be investigated first (could the original sanction amount have made sense at the time it was given, were there obvious warning signs, etc.). Only if a prima facie case that the failure of the loan could have been predicted can be made should the loan ocer know of the investigation. The authorization to investigate a loan ocer should be based on the most objective available measures of the life-time performance of the loan ocer across all the loans where he made decisions and weight should be given both to successes and failures. A loan ocer with a good track record should be allowed a number of mistakes (andeven suspicious looking mistakes) before he is open to investigation. Banks should also create a division staed by bankers with high reputations with a mandate to make some high risk loans. Ocers posted to this division should be explicitly protected from investigation for loans made while in this division. Giving banks a stronger incentive to lend by cutting the interest rate on government borrowing will also help. The evidence reported above is only suggestive, but it does indicate that lower government interest rates can have a strong eect on the willingness of bankers to make loans to the private sector. The one reasonably eective incentive system now in place is the rule that banks have to lend to the priority sector–most public banks do lend the legally stipulated 40% to the priority sector. While it is argued that priority sector loans are an inecient allocation of capital , our evidence suggests the contrary: priority-sector in our sample have very high marginal products of capital, and while they are slightly more likely to default, the amount of the default is smaller. There is therefore no reason to believe that abolishing the priority sector will improve bank
performance substantially, and it may end up reinforcing the tendency of the banks make only conservative loans.  We do think the eligibility criteria for priority sector loans could be rationalized. For example, based on the evidence above, we favor a higher limit for value of plant and machinery. However, the increase of the limit could be combined with a time limit for eligibility: after a certain number of years, firms should establish a reputation as reliable borrowers, and begin borrowing from the market. A priority sector client that has borrowed from a bank for some time without convincing the bank of its creditworthiness is perhaps not worth saving. Second, the size of the gap between the marginal product of capital and the interest rate suggests the possibility of letting banks charge substantially higher interest rates to the priority sector than they are currently permitted, making it more attractive to lend to the priority sector. This increase could be gradual, making it easier for the firm to endure early growing pains. There is however a basic incentive problem in bank lending: to diversify risks, banks should be large, but in large banks it is dicult for a loan ocer to have any significant stake in the profitability of the bank. Therefore bank privatization, and in particular sale to large multinationals, is unlikely to solve the problem of under-lending, though it will probably help This is not to defend the other concessions to the priority sector–in particular the reservation of specific goods for the priority sector. remove some of the most egregious examples of inaction and surely reduce the degree of overstang. It is probably also true that the public sector banks are more responsive to the directives to carry out social banking than private banks will be: most of the new private banks do not lend to the priority sector, instead placing an equivalent amount of money in low-return government bonds. This simply transfers the responsibility to identify and nurture new talent back to the government. Privatization without stricter enforcement of the requirement to lend to the priority sector will probably end up hurting the smaller firms. This is not to say that privatization is not a reasonable option, but rather that it should be accompanied by some eorts to reach out more eectively to the smaller and less well-established firms, not just on equity grounds, but also because these firms may have the highest returns on capital. A possible step in this direction would be to encourage established reputable firms in the corporate sector as well as multinationals to set up small specialized companies whose only job is to lend to smaller firms in a particular sector (and possibly in particular locations).
CONCLUSION-
Just as organizations create a plan, it may wish to Document its financial systems, its  methods for financial Management and its plans for sustainability. A written Document can serve as an important reference point for an Organization and assist in the periodic reviews and Planning sessions. It also helps build confidence among Stakeholders that one  have a long-term vision and plan for an organization’s operations.  Employing financial systems that help build checks and balances, support a program planning ability, and increase a success with budgeting and assessing progress in programming, can significantly advance an organization’s capacity to begin thinking about long-term plans and financial sustainability. In other words these would be the equivalents of the many finance companies that do extensive lending all over India, but with links to a much bigger corporate entity and therefore creditworthiness. The banks would then lend to these entities at some rate that would be somewhat below the cost of capital (instead of doing priority sector lending) and these finance companies would then make loans to the firms in their domain, at a rate that is at most x per cent higher than their borrowing rates. By being small and connected to a particular industry, these finance companies would have the ability to acquire detailed knowledge of the firms in the industry and would have incentives to make loans that would appear adventurous to outsiders
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REFERENCES-
***Banerjee, Abhijit (2003) “Contracting Constraints, Credit Markets, and Economic Development,’ Econometric Society, Volume III. Cambridge University Press, pp. 1-46.
***Government of India (1991) “Report of the Committee on the Financial Sector,” chairman M. Narsimhan, Ministry of Finance, Delhi.

RURAL BANKING IN GUJARAT


                                       
Rural banking started since the establishment of banking sector in India. Rural Banks in those days mainly focused upon the agro sector. Regional rural banks penetrated every corner of the country and extended a helping hand in the growth process of the country. Today, branches are the primary delivery channel in rural areas. Though there are 32,000 commercial bank branches in India, they cover less than 7% of total villages. Opening more branches is not necessarily profitable as many pockets of rural areas do not have business enough to justify an expensive branch channel. Rural banking having committed 75% of their branches network to serving rural and semi-urban population, public sector banks have to adopt a financial emerging approach to rural banking.
Improve access in rural areas

To improve access in rural areas, banks need to modify existing channels, introduce new channels and identify innovative ways to integrate  there are two ways---

                   1) Modify Existing Channels
Fortunately there are a variety of options available for banks looking to modify their existing channels. To reduce the costs imposed by branches, banks should consider the option of sharing their branch
Infrastructure. This would not be too dissimilar to the example of the
Telecom industry sharing network infrastructure or the fast food industry sharing food courts in urban areas.

                      2) Introduce New Channels
The RBI allows banks to appoint business correspondents and facilitators to be used as intermediaries in providing banking services. NGOs, MFIs, Societies, Section 25 companies, registered NBFCs not accepting public deposits, and Post Offices can be appointed as Business Correspondents. Business Correspondents can provide several services which are not currently offered by SHGs and MFIs, including:

(i)            identification of borrowers and fitment of activities;
(ii)           collection and preliminary processing of loan applications including verification of primary information/data;
(iii)           creating awareness about savings and other products and education and advice on managing money and debt counseling;
(iv)          processing and submission of applications to banks;
(v)           promotion and nurturing Self Help Groups/Joint Liability Groups;
(vi)         post-sanction monitoring;
(vii)        monitoring and handholding of Self Help Groups/Joint Liability

SOME CHALLENGES BEFORE RURAL BANKING-
 Challenges facing rural banking --The main challenges facing by banking are the role of financial instrumentation in different phases of the business cycle, the emerging compulsions of the new prudential norms and benchmarking the financial system against international standards and best practices. The need for introduction of new technology in the banking and the importance of skill building and intellectual capital formation in the banking industry are also equal important.
1) Financial intermediation Till recently the role of banks in the economy was perceived to be 'catalysts' of mobilizing resource requirement for growth. This view has undergone a change and banks are no longer viewed as passive mobilizer of funds, Efficiency in the financial intermediation is the ability of the financial institution to intermediate between savers and investors, to set economic prices for capital and allocate resources among completing demands is now emphasized. In the wake of the recent emphasized in the economy the intermediation role assumes even greater relevance. By virtue of their experience and superior credit assessment of the investment proposals banks should play a significant role in identifying nurturing growth impulse in the commodity and service producing sector in the economy.
2) Market discipline Transparency and disclosure norms are assuming greater importance in the emerging their notes to balance sheet. Efforts are on to set up a credit information bureau to collect and share information on borrowers and improve the credit appraisal of banks and financial institutions.
3) Adopting International Standards The fallout of Asian crisis and the impetus given to the strengthening of domestic financial systems has resulted in a more by the regulators to set up universally acceptable standards and codes for benchmarking financial systems. RBI has also set-up an advisory group to draw a road map for implementation of appropriate standards and codes in light of existing levels of compliance, cross country experience and the existing legal and institutional infrastructure. In view of the vast diversity in the size, an asset liability profiles of the banks it becomes very difficult for a few of them to meet the new benchmark of global standards. Each bank has to draw it own strategy to move towards this direction. 4)Technology Banking Innovation in technology and world-wide revolution in information and communication technology are perceived to be the catalyst of productivity growth. The relationship between IT and Banking is fundamentally symbiotic. It is expected to reduce costs, increase volumes and facilitate customized products. Technology adoption is a dire necessity for the public sector banks to complete with new generation private sector and foreign banks. It is a `compulsion' rather than a `choice'. Retention of existing customer is the primary concern of majority of the banks today.
The major challenge for banks is to fall in line with the emerging scenario and adopting the require technology to provide stake-of-the-art services to the customers. Introduction of on-line, inter-connected automatic teller machines (ATM), telephone banking, on-line bill payment and Internet banking are some of the high tech facilities. Banks have to provide in order to survive in the competitive scenario. Technology should ultimate results in better customer service, low cost and quick delivery.
The introduction of Business Correspondents may face some challenges from
* labor unions. However, Diamond believes that there may be some options to address the concerns of the current workforce while using Business Correspondents to capture more value from rural customers.
*. The lottery network and distributes government benefits. To increase the access of its services opened about 2.8 million new accounts and estimates that 40% of its banking transactions are handled through the banking correspondent channel.
* Satellite offices are a cost-effective alternative to branches. These
Offices can be established at fixed premises in villages and are controlled and operated from a base branch located at a block headquarters. All types of banking transactions may be conducted at these offices.
* Banks have, however, not used this channel actively, despite the argument that this channel is relatively less expensive, as it can draw personnel from the main branch and can remain open for just two days a week. This channel, therefore, is appropriate in blocks and districts which are densely populated. In the urban areas, most I banks opt for an extension counter where the business does not justify a full-fl edged branch.
* Similarly, satellite branches can cater to rural areas which do not justify a large branch. Where banks do not find it economical to open full-fl edged branches of satellite offices, mobile offices may be more appropriate. Mobile offices extend banking facilities through a well-protected truck or van. The mobile unit visits villages on specified days/ hours. The mobile office would be affiliated with a branch of the bank, and serve areas which have a large concentration of villages. This will not be dissimilar to the mobile ATMs implemented by some of the banks in the urban areas.
Determine the Combination of Channels
There is no one right channel or solution to improve access in rural
areas. Banks have to evaluate the trade-offs between those channels
 Branches and Satellite Branches— In addition to providing regular
banking operations, providing backend support to manage and audit
the operations of business correspondents.
A low-cost, custom-made ATM— Managed by a business
correspondent to bring down the operating cost and scale the channel.
An e-kiosk—Managed by a business correspondent with internet
banking, ATM and POS terminal in relatively large rural areas.
A business correspondent—Using manual ledgers or POS/Palmtop to act as deposit collector and remitting agent in smaller rural areas
Financial System is the most important institutional and functional vehicle for economic transformation of any country. Banking sector is reckoned as a hub and barometer of the financial system. As a pillar of the economy, this sector plays a predominant role in the economic development of the country. The geographical pervasiveness of the bank coupled with the range and depth of their services make the system an indispensable medium in every day transactions. The virtual monopoly of banks in `Payment Mechanism' touches the lives of millions of people every day and every where. Thus the banking sector has been playing a significant role as growth facilitator.
The changing paradigm of Banking Change is the only constant factor in this dynamic world and banking is not an exception. The changes staring in the face of bankers relates to the fundamental way of banking-which is undergoing rapid transformation in the world of today, in response to the forces of completion productivity and efficiency of operations, reduced operating margins better asset/liability management, risk management, any time and any where banking. The major challenge faced by banks today is to protect the falling margins due to the impact of competition. Another significant impact of banks today is the technology issue. There is an imperative need for not mere technology up gradation but also its integration with the general way of functioning of banks to give them an edge in respect of services provided to optimizing the use of funds and building up MIS for decision making and better management of assets and liabilities and risk assumed which in turns have a direct impact on the balance sheet of banks as a whole. Word over, technology has demonstrated potential to change methods of selling marketing, advertising, designing, pricing and distributing financial products of an electronic, self-service product delivery channel. All these changes call for a new, more dynamic, aggressive and challenging work culture to meet the demands of customer relationships, product differentiation, brand values, reputation, corporate governance and regulatory prescriptions
Human resource development in banks --The core function of HRD in the banking industry is to facilitate performance improvement, measured not only in terms of certain financial indicators of operational efficiency but also in terms of quality of financial services provided. The skill level, attitude and knowledge of the personnel play an important role in determining the competitiveness of a bank. Banks have to understand that the capital and technology-considered to be the most important pillars of banking -are replicable, but not human capital, which needs to be viewed as a valuable resource for the achievement of competitive advantage. The primary concern of the bank should be to bring in proper integration of human resource management strategies with the business strategies. It should faster cohesive team work and create commitment to improve the efficiency of its human capital. More than operational skills today's banking call for these `soft skills' to attend the needs and requirement of the customers at the counter. The need to adopt global best practices to financial sector regulation and supervision and adopt them to the domestic environment, places a premium skills and expertise of the bank human resources.
Conclusions
The Indian banking industry is facing newer challenges in terms of narrowing spreads, new banking products and players and mergers and acquisitions. Adoption of risk management tools and new information technology is now no more a choice but a business compulsion. Technology product innovation, sophisticated risk management systems, generation of new income streams, Building business volumes and cost efficiency will be the key to success of the banks in the new era.