“BANKING INDUSTRY IN INDIA”

Mini Project II Report

Submitted In Partial
Fulfillment of the Requirements for the Degree
Of

MASTERS IN BUSINESS ADMINISTRATION

SUNDERDEEP ENGINEERING COLLEGE,
GHAZIABAD (240)
(Affiliated to ABDUL KALAM TECHNICAL UNIVERSITY, LUCKNOW
Approved by AICTE, Govt. of India)

SUBMITTED BY:
HARSH KUMAR

Roll. No:202400700013

UNDER THE SUPERVISION OF

Project Supervisor FACULTY GUIDE

MR. RACHIT AGGARWAL GUIDE NAME : DR DEEPA KANWAR
ASSISTANT PROFESSSOR DESIGNATION : HOD MBA

2020-2021
SUNDER DEEP ENGINEERING COLLEGE, GHAZIABAD
 CERTIFICATE BY THE FACULTY

This is to certify that Mr. /Ms. HARSH KUMAR S/o MR. SATISH
KUMAR Roll No. 202400700013 is a Bonafide student of MBA 1st
Year of the college. HE has completed the project on BANKING
INDUSTRY IN INDIA The project report has been completed under
my guidance.

Mr. Rachit Agarwal

(Assistant Professor)
 DECLARATION

This is to declare that this mini project report entitled BANKING

INDUSTRY IN INDIA is a record of genuine work done by me under

the supervision of Mr. Rachit Agarwal, Assistant Professor and Mini

Project II faculty guide DR.DEEPA KANWAR in the partial

fulfillment of the requirement for Masters in Business Administrations

of Abdul Kalam Technical University, Lucknow. I declare that this

project is original and not submitted to any university before.

HARSH KUMAR

Roll No. 202400700013

MBA IInd SEMESTER

 ACKNOWLEDGEMENT

I would like to take this opportunity to extend my heartfelt gratitude and thanks to
MR. RACHIT AGARWAL for his invaluable guidance, immense patience and
encouragement provided to me during the course of the Mini Project II. My
increased spectrum of knowledge in this field is the result of his constant
supervision and direction that has helped me to absorb relevant and high-quality
information

I am also grateful to my Dr. Deepa Kanwar, HOD MBA at SUNDERDEEP

ENGINEERING COLLEGE, Ghaziabad for her constant support and foresight.
Her invaluable experiences provide to be one of the key success factors in my
project taking its present mould.

I would like to thank all the respondents without whose cooperation my project
would not have been completed. This report is the culmination of the synchronized
effort of all the above mentioned that had faith and confidence in me. For their
belief, I shall forever be grateful.

HARSH KUMAR

ROLL NO: 202400700013

MBA IInd Semester

 INDEX
SR.NO TOPIC EXPLAINED
1 INTRODUCTION
2 OBJECTIVE OF STUDY
3 SIGNIFICANCE OF
STUDY
4 LIMITATION OF STUDY
5 SCOPE OF BANKING
SECTOR
6 BANKING IN INDIA
7 INDIAN BANKING
INDUSTRY
8 INDIAN BANKING
SECTOR
9 TYPES OF BANKING
10 STRUCTURE OF
ORGANISATION INDIAN
BANKING
11 3 PHASES OF BANKING
12 SERVICES PROVIDED BY
BANK
13 MERCHANT BANKING
14 RESERVE BANK OF INDIA
15 GUIDLINE ON FAIR
PRACTICE
16 MICRO FACTOR
AFFECTING INDUSTRY
17 ORGANIZATION PROFILE
18 IMPACT OF COVID 19
19 70 % BANK DEBT
20 COVID 19 SECOND WAVE
 EXECUTIVE SUMMARY

The pace of development for the Indian banking industry

has been tremendous over the past decade. As the world
reels from the global financial meltdown, India’s banking
sector has been one of the very few to actually maintain
resilience while continuing to provide growth
opportunities, a feat unlikely to be matched by other
developed markets around the world. FICCI conducted a
survey on the Indian Banking Industry to assess the
competitive advantage offered by the banking sector, as
well as the policies and structures required to further
stimulate the pace of growth.
 1.
INTRODUCTION
Recent time has witnessed the world economy develop
serious difficulties in terms of lapse of banking &
financial institutions and plunging demand. Prospects
became very uncertain causing recession in major
economies. However, amidst all this chaos India’s
banking sector has been amongst the few to maintain
resilience. A progressively growing balance sheet,
higher pace of credit expansion, expanding profitability
and productivity akin to banks in developed markets,
lower incidence of nonperforming assets and focus on
financial inclusion have contributed to making Indian
banking vibrant and strong. Indian banks have begun to
revise their growth approach and re-evaluate the prospects
on hand to keep the economy rolling. The way forward
for the Indian banks are to innovate to take advantage of
the new business opportunities and at the same time
ensure continuous assessment of risks. A rigorous
evaluation of the health of commercial banks, recently
undertaken by the Committee on Financial Sector
Assessment (CFSA) also shows that the commercial
banks are robust and versatile. The single-factor stress
tests undertaken by the CFSA divulge that the banking
system can endure considerable shocks arising from large
possible changes in credit 1 quality, interest rate and
 liquidity conditions. These stress tests for credit, market
and liquidity risk show that Indian banks are by and large
resilient. Thus, it has become far more imperative to
contemplate the role of the Banking Industry in fostering
the long term growth of the economy. With the purview
of economic stability and growth, greater attention is
required on both political and regulatory commitment to
long term development programed . FICCI conducted a
survey on the Indian Banking Industry to assess the
competitive advantage offered by the banking sector, as
well as the policies and structures that are required to
further the pace of growth.

2.

OBJECTIVES OF STUDY
 To study broad outline of management of credit, market
and operational risks associated with banking sector.
 To understand the importance of banking sector.
 To study the Indian banking scenario and its problem.
 Long term and short term finances.

 To study the role of Bank in Indian market.

 Different types of services provided by the Banks.

 To study various bank, corporate and commercial.

 To study aims at learning the techniques involved to

manage the various types of Banks, various
methodologies undertaken.

 To offer suggestions based upon various technologies

used in Banking sector.
 3.
SIGNIFICANCE OF THE STUDY
 To make a detailed study of various financial services
provide by the different banks
.  To analyze customers view point regarding their banks
.  To study effective and most popular bank among the
customers regarding its services.
 To find out the rate of interest of banks and reaction of
customers on it.
 To make analysis on the economic benefits provided by
various banks.
 Suggest the investors whether to invest in shares of
Banking Companies.
 4.
Limitation of study
Every work has its own limitation. Limitations one extent
to which the process should not exceed. Limitations of
this projects are: -
 The project was constrained by the time limit of two
months.
 The major limitations of this study is data availability
as the data is propriety and not readily for dissemination.
 Due to ongoing process of globalization and increasing
competition, no one model or method will suffice over a
long period of time and constant up graduation will be
required. As such the project can be considered as an
overview of the various banks prevailing in Punjab
National Bank and in the Banking Industry.
 The project study is restricted to banking sector used in
India only.
 The conclusion made is based on sample study and
does not apply to all the individuals.
 In India the banks are being segregated in different
groups has their own benefits and limitations in operating
in India.
  All banks are not included. PROBLEMS: - The
corporate sector has stopped up its demand for credit to
fund its expansion plans, there has also been a growth in
retail banking. However, even as the opportunities
increase, there are some issues and challenges that Indian
banks will have to control with if they are to emerge
successful in the medium to long term.

5.
SCOPE OF BANKING SECTOR
Banking business has history of over 200 years. From the
times of the Bank of Bengal (1806) the sector has been
witnessing qualitative and quantitative changes. Main
players during the pre-independence period were credit
Lyonnais, Allahabad Bank, Punjab National Bank and
Bank of India was proclaimed the central Bank of India
and was vested with controlling powers over the
commercial banks.
The drastic development taken places during the first 25
years since independence was Nationalization of many
private banks. With this, central government become
major policy maker for these nationalized banks With
economic liberalization measures many private and
foreign banking companies were allowed to operate in the
country. Favorable economic climate and a variety of
other factors such as demand for wide range of financial
products from various sections of the society led to
mutually beneficial growth to the banking sector and
economic growth process. This was coincided by
technology development in the banking operations. Today
most of the Indian cities have networked banking facility
as well as Internet banking facility. A customer is
empowering to operate his account from any part of the
country. UTI bank, ICICI Bank and Bank of Punjab are
the main winners of the race
 6.
BANKING IN INDIA
Banking in India originated in the first decade of 18th
century with The General Bank of India coming into
existence in 1786. This was followed by Bank of
Hindustan. Both these banks are now defunct. The oldest
bank in the existence in India is the State Bank of India
being established as “The Bank Bengal” in Calcutta in
June 1806. A couple of decades later, foreign banks like
Credit Lyonnais started their Calcutta operations in the
1850s. At that point of time, Calcutta was the most active
trading port, mainly due to the trade of the British
Empire, and due to which banking activity took roots
there and prospered. The first fully Indian owned bank
was the Allahabad Bank, which was established in 1865.
By the 1900s, the market expanded with the establishment
of banks such as Punjab National Bank, in 1895 in Lahore
and Bank of India, in 1906, in Mumbai – both of which
were founded under private ownership. The Reserve Bank
of India formally took on the responsibility of regulating
the Indian banking sector from 1935. After India’s
independence in 1947, The Reserve Bank was
nationalizing and given broader powers.
Definition of the Bank: - Financial institution whose
primary activity is to act as a payment agent for
customers and to borrow and lend money. Banks are
 important players of the market and offer services as
loans and funds.  Banking was originated in 18th
century.  First bank were General Bank of India and
Bank of Hindustan, now defunct.  Punjab National Bank
and Bank of India was the only private bank in 1906. 
Allahabad bank first fully India owned bank in 1865.

7.
INDIAN BANKING INDUSTRY
In India, given the relatively underdeveloped capital
market and with little internal resources, firms and
economic entities depend, largely, on financial
intermediaries to meet their fund requirements. In terms
of supply of credit, financial intermediaries can broadly
be categorized as institutional and non-institutional. The
major institutional suppliers of credit in India are banks
and non-bank financial institutions (that is, development
financial institutions or DFIs), other financial institutions
(FIs), and non-banking finance companies (NBFCs). The
non-institutional or unorganized sources of credit
include indigenous bankers and money-lenders.
Information about the unorganized sector is limited and
not readily available. Bank of Bombay Imperial Bank of
India State bank of India Bank of Madras An important
feature of the credit market is its term structure: (a) Short-
term credit (b) Medium-term credit (c) Long-term credit.
While banks and NBFCs predominantly cater for short-
term needs, FIs provide mostly medium and long-term
funds.

8.
Indian Banking Sector Experience
India inherited a weak financial system after
Independence in 1947. At end1947, there were
625commercial banks in India, with an asset base of Rs .
11.51 billion. Commercial banks mobilized household
savings through demand and term deposits, and disbursed
credit primarily to large corporations. Following
Independence, the development of rural India was given
the highest priority. The commercial banks of the country
including the IBI had till then confined their operations to
the urban sector and were not equipped to respond to the
emergent needs of economic regeneration of the rural
areas. In order to serve the economy in general and the
rural sector in particular, the All India Rural Credit
Survey Committee recommended the creation of a state-
partnered and state-sponsored bank by taking over the
IBI, and integrating with it, the former state-owned or
state-associate banks.
 Accordingly, an act was passed in Parliament in May
1955, and the State Bank of India (SBI) was constituted
on July 1, 1955. More than quarter of the resources of the
Indian banking system thus passed under the direct
control of the State. Subsequently in 1959, the State Bank
of India (Subsidiary Bank) Act was passed (SBI Act),
enabling the SBI to take over 8 former State-associate
banks as its subsidiaries (later named Associates). The
GOI also felt the need to bring about wider diffusion of
banking facilities and to change the uneven distribution of
bank lending. The proportion of credit going to industry
and trade increased from a high 83% in 1951 to 90% in
1968. This increase was at the expense of some crucial
segment of the economy like agriculture and the small-
scale industrial sector. Bank failures and mergers resulted
in a decline in number of banks from 648 (including 97
scheduled commercial banks or SCBs and 551
non-SCBs) in 1947 to 89 in 1969 (comprising 73 SCBs
and16 non-SCBs). The lop-sided pattern of credit
disbursal, and perhaps the spate of bank failures during
the sixties, forced the government to resort to
nationalization of banks. In July 1969, the GOI
nationalized 14 scheduled commercial banks (SCBs),
each having minimum aggregate deposits of Rs. 500
million. State-control was considered as a necessary
catalyst for economic growth and ensuring an even
distribution of banking facilities. Subsequently, in 1980,
 the GOI nationalized another 6 banks2, each having
deposits of Rs. 2,000 million and above. The
nationalization of banks was the culmination of pressures
to use the banks as public instruments of development.
The GOI imposed `social control’ on banks. However, by
the 1980s, it was generally perceived that the operational
efficiency of banks was declining. Banks were
characterized by low profitability, high and growing non-
performing assets (NPAs), and low capital base. Average
returns on assets were only around 0.15% in the second
half of the 1980s, and capital aggregated an estimated
1.5% of assets. Poor internal controls and the lack of
proper disclosure norms led to many problems being kept
under cover. The quality of customer service did not keep
pace with the increasing expectations. In 1991, a fresh era
in Indian banking began, with the introduction of banking
sector reforms as part of the overall economic
liberalization in India.

9.
Types of Banking
Commercial bank has two meanings: o Commercial bank
is the term used for a normal bank to distinguish it from
an investment bank. (After the great depression, the U.S.
Congress required that banks only engage in banking
activities, whereas investment banks were limited to
 capital markets activities. This separation is no longer
mandatory.) o Commercial bank can also refer to bank or
a division of a bank that mostly deals with deposits and
loans from corporations or large businesses, as opposed to
normal individual members of the public (retail banking).
It is the most successful department of banking.
 Community development bank are regulated banks that
provide financial services and credit to underserved
market or populations.

 Offshore banks are banks located in jurisdiction with

low taxation and regulation. Many offshore banks are
essentially private banks
.  Saving banks accept saving deposits.
 Postal saving banks are saving banks associated with
national postal system.
There is some example of banks in India: - 
Private sector bank
 HDFC, ICICI, Axis bank, Yes bank, Kotak Mahindra
bank, Bank of Rajasthan
 Rural Bank
 United bank of India, Syndicate bank, National bank
for agriculture and rural development (NABARD)
 Commercial bank
 State Bank, Central Bank, Punjab National Bank,
HSBC, ICICI, HDFC etc.
 Retail bank
 BOB, PNB 
Universal Bank
 Deutsche bank 1

10.
Structure of Organized Indian Banking
System:
The organized banking system in India can be
classified as given below:
Reserve Bank of India (RBI):
The country had no central bank prior to the
establishment of the RBI. The RBI is the supreme
monetary and banking authority in the country and
controls the banking system in India. It is called the
Reserve Bank’ as it keeps the reserves of all commercial
banks.
Commercial Banks:
Commercial banks mobilize savings of general public and
make them available to large and small industrial and
trading units mainly for working capital requirements.
Commercial banks in India are largely Indian-public
sector and private sector with a few foreign banks. The
public sector banks account for more than 92 percent of
the entire banking business in India—occupying a
dominant position in the commercial banking. The State
Bank of India and its 7 associate banks along with another
19 banks are the public sector banks.

: Scheduled and Non-Scheduled Banks

The scheduled banks are those which are enshrined in the

second schedule of the RBI Act, 1934. These banks have
a paid-up capital and reserves of an aggregate value of not
less than Rs. 5 lakhs, hey have to satisfy the RBI that their
affairs are carried out in the interest of their depositors.
Regional Rural Banks:

The Regional Rural Banks (RRBs) the newest form of

banks, came into existence in the middle of 1970s
(sponsored by individual nationalized commercial banks)
with the objective of developing rural economy by
providing credit and deposit facilities for agriculture and
other productive activities of all kinds in rural areas.
Other special features of these banks are:

(i) their area of operation is limited to a specified region,

comprising one or more districts in any state; (ii) their
lending rates cannot be higher than the prevailing lending
rates of cooperative credit societies in any particular state;
(iii) the paid-up capital of each rural bank is Rs. 25 lakhs,
50 percent of which has been contributed by the Central
Government, 15 percent by State Government and 35
percent by sponsoring public sector commercial banks
which are also responsible for actual setting up of the
RRBs.
Cooperative Banks:
Cooperative banks are so-called because they are
organized under the provisions of the Cooperative Credit
Societies Act of the states. The major beneficiary of the
Cooperative Banking is the agricultural sector in
particular and the rural sector in general.

11
3 Phases of Indian Banking System
Phases of Indian Banking System are
summarized below:
Without a sound and effective banking system in India it
cannot have a healthy economy. The banking system of
India should not only be hassle free but it should be able
to meet new challenges posed by the technology and any
other external and internal factors For the past three
decades India’s banking system has several outstanding
achievements to its credit. The most striking is its
extensive reach; it is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian
banking system has reached even the remote comers of
the country. This is one of the main reasons of India’s
growth process. The government’s regular policy for
Indian bank since 1969 has paid rich dividends with the
nationalization of 14 major private banks of India. Not
long ago, an account holder had to wait for hours at the
bank counters for getting a draft or for withdrawing his
own money. Today, he has a choice, gone are days when
the most efficient bank transferred money from one
branch to other in two days. Now it is simple as instant
messaging or dial a pizza. Money have become the order
of the day. The first bank in India, though conservative,
was established in 1786. From 1786 till today, the journey
of Indian Banking System can be segregated into three
distinct phases. 1
They are as mentioned below
i. Early phase from 1786 to 1969 of Indian banks. ii.
Nationalization of Indian Banks and up to 1991 prior to
Indian banking sector Reforms. iii. New phase of Indian
Banking System with the advent of Indian Financial and
Banking Sector Reforms after 1991. To make this write-
up more explanatory, I prefix the scenario as Phase I,
Phase II and Phase III.

Phase I
The Genera; Bank of India was set up in the year
1786. Next came Bank of Hindustan and Bengal Bank.
The East India Company established Bank of Bengal
(1806), Bank of Bombay (1840) and Bank of Madras
(1843) as independent units and called them Presidency
Banks. These three banks were amalgamated m 1921 and
imperial Bank of India was established which started as
private shareholder’s banks, mostly Europeans
shareholders. In 1865 Allahabad Bank was established
and first time exclusively by Indians, Punjab National
Bank Ltd. was set up in 1894 with headquarters at
Lahore. Between 1885 and 1913, Bank of India Central
Bank of India, Bank of Baroda, Canara Bank, Indian
Bank, and Bank of Mysore were set up Reserve Bank of
India came in 1935. During the first phase the growth was
very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100
banks, mostly small. To streamline the functioning and
activities of commercial banks, the Government of India
came up with the Banking Companies Act, 1949 which
was later changed to Banking Regulation Act, 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve
Bank of India was vested with extensive power for the
supervision of banking in India as the Central Banking
Authority. During those day’s public has lesser
confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank
facility provided by the Postal department was
comparatively safer. Moreover, funds were largely given
to traders.
Phase II:
Government took major steps in the Indian Banking
Sector Reform after independence. In 1955, it
nationalized Imperial Bank of India with extensive
banking facilities on a large scale especially in rural and
semi urban areas. It formed State Bank of India to act as
the principal agent of RBI and to handle banking
transactions of the Union and State Governments all over
the country. Seven banks forming subsidiary of State
Bank of India were nationalized on 19th July 1959. In
1969, major process of nationalization was carried out. It
was the effort of the then Prime Minister of India, Mrs.
Indira Gandhi 14 major commercial banks in the country
was nationalized. Second phase of nationalization in
Indian Banking Sector Reform was carried out in 1980
with six more banks. This step brought 80% of the
banking segment in India under Government ownership.
The following are the steps taken by the Government of
India to Regulate Banking Institutions in the country.
i. 1949: Enactment of Banking Regulation
Act.
 ii. 1955: Nationalization of State Bank of
India.
iii. 1959: Nationalization of SBI
subsidiaries.
iv. 1961: Insurance cover extended to
deposits.
v. 1969: Nationalization of 14 major banks.
vi. 1971: Creation of credit guarantee
corporation.
vii. 1975: Creation of regional rural banks.
viii. 1980: Nationalization of 6 banks with deposits
over 200 crore.

Phase III:
This phase has introduced many more products and
facilities in the banking sector in its reforms measure.
In 1991, under the chairmanship of M Narasimham , a
committee was setup by his name which worked for
the liberalization of banking practices. The country is
flooded with foreign banks and their ATM stations.
Efforts are being made to give a satisfactory service to
customers. Phone banking and net banking is
introduced. The entire system became more
convenient and swift. Time is given more importance
than money. The financial system of India has shown
a great deal of resilience. It is sheltered from any
crisis triggered by any external macro-economic
shock as other East Asian Countries suffered. This is
all due to a flexible exchange rate regime, the foreign
reserves are high, the capital account is not yet fully
convertible, and banks and their customers have
limited foreign exchange exposure.
 12.
Services Provided by the Bank
Banks provide two types of services: -
1. Fund based
2. Non-fund Based

FUND BASED AND NON-FUND BASED FUNCTIONS

The difference between fund-based and non-fund based
credit assistance lies mainly in the cash outflow. While
the former involves all immediate cash outflow, the latter
may or not involve cash outflow a banker. In other words,
a fund based credit facility to a borrower would result in
depletion of actual liquidity of a banker immediately
whereas grant of non-fund based credit facilities to a
borrower may or may not affect the banker’s liquidity.
FUND BASED FACILITY
Fund based functions of bank are those in which banks
make development of their funds either by granting
advances or by making investments for meeting gaps in
funds requirements of their customers / borrowers. Fund-
based functions of a bank may be classified into two
 parts: -  Granting of Loans and Advances  Making
Investments in shares / debentures / bonds.

I. LOANS AND ADVANCES

1. Commercial Loans segment
a. Working capital
: -Working capital is current assets minus current
liabilities. Working capital measures how much in liquid
assets a company has available to build its business. The
number can be positive or negative, depending on how
much debt the company is carrying. In general,
companies that have a lot of working capital will be more
successful since they can expand and improve their
operations. Companies with negative capital may lack the
funds necessary for growth, also called net current or
current capital. A loan whose purpose is to finance
everyday operation of a company. A working capital loan
is not used to buy long term assets or investments. Instead
it used to clear accounts payable, wages, etc. b
. Cash Credit: -this facility is given by the banker to the
customer by way of a certain amount of credit facility. Its
limit is fixed on the basis of security of the company’s
current assets.
 c. Overdraft: -Banks allow selected customers to write
cheque in excess of the balances in their current account,
ie, to overdrafts are arranged up to limits which depend
on the customer’s credit standing and the bank manager’s
humour. The arrangements allow flexibility in the amount
spent and, equally, allow flexibility in repayments
(although technically a bank can demand repayment of an
overdraft within 24 hours). In that respect overdrafts are
unlike personal loans, which are structured with regular
repayments. Interest on overdraft is changed on the
fluctuating daily balance
 d. Bills Discounting: -
This is the most important form in which a bank lends
without any collateral security. The seller draws bills of
exchange on the buyer of goods on credit. Such a bill may
either be a clean bill or documentary bill which is
accompanied by documents of title to goods, viz railway
receipts. The bank purchase bills payable on demand and
credit the customer’s account with the amount of bills less
the discount. On maturity of the bills, the bank present
them to its acceptor for payment. In case the discounted
bill is dishonoured by the non-payment, the bank can
recover the full amount from the customer along with the
expense in that connection.
II. Term Loan: -
A bank loan to a company, with a fixed maturity and
often featuring amortization of principal. If this loan is in
the form of a line of credit, the funds are drawn down
shortly after the agreement is signed. Otherwise, the
borrower usually uses the funds from the loan soon after
they become available. Bank term loans are very a
common kind of lending.
Capital Expenditure: -
Money spent to acquire or upgrade physical assets such
as building and machinery also called capital spending or
capital expenses.
 Project
finance: -
Financing arrangements where the funds are made
available for a specific purpose (the project), with the
loan repayment geared to the project’s cash flow.
Project finance is used in connection with raising large
amount of money for big - ticket, energy-related
facilities. The term has come to be loosely applied to
various forms of financing. ‘A financing of a particular
economic unit in which a lender is satisfied to look
initially to the cash flows and earnings of that
economic unit as the source of funds from which a loan
will be required and to the assets of the economic unit
as collateral for the loan’.

13.
Merchant Banking

In India merchant banking services were started only in

1967 by National Grind lays Bank followed by City
Bank in 1970. The State Bank of India was the first
Indian Commercial Bank having set up separate
Merchant Banking Division in 1972. In India merchant
banks have been primarily operating as issue houses
than full- fledged merchant banks as in other countries.
A merchant bank may be defined as an institution or an
organization which provides a number of services
including management of securities issues, portfolio
services, underwriting of capital issues, insurance,
credit syndication, financial advices, project counseling
etc. There is a distinction between a commercial bank
and a merchant bank. The merchant banks mainly offer
financial services for a fee. while commercial banks
accept deposits and grant loans. The merchant banks do
not act as repositories for savings of the individuals.

Functions of Merchant Banks:

The basic function of a merchant banker is marketing
corporate and other securities. Now they are required to
take up some allied functions also.
1 .Issue management: -
In the past, the function of a merchant banker had been
mainly confined to the management of new public
issues of corporate securities by the newly formed
companies, existing companies (further issues) and the
foreign companies in dilution of equity as required
under FERA in this capacity the merchant banks
usually act as sponsor of issues. They obtain consent of
the Controller of Capital Issues (now, the Securities
and Exchange Board of India) and provide a number of
other services to ensure success in the marketing of
securities. The services provided by them include, the
preparation of the prospectus, underwriting
arrangements, appointment of registrars, brokers and
bankers to the issue, advertising and arranging
publicity and compliance of listing requirements of the
stock-exchanges, etc. They act as experts of the type,
timing and terms of issues of corporate securities and
make them acceptable for the investors on the one hand
and also provide flexibility and freedom to the issuing
companies.

2 Loan syndication: -

Merchant banks provide specialized services in

preparation of project, loan applications for raising
short-term as well as long- term credit from various
bank and financial institutions, etc. They also manage
Euro-issues and help in raising funds abroad.

3. Leasing and Finance: -

Many merchant bankers provide leasing and finance

facilities to their customers. Some of them even
maintain venture capital funds to assist the
entrepreneurs. They also help companies in raising
finance by way of public deposits.
 14.

Reserve Bank of India

Establishment

The Reserve Bank of India was established on April 1,

1935 in accordance with the provision of the Reserve
bank of India Act, 1934. The Central Office of the
Reserve Bank was initially established in Calcutta but
was permanently moved to Mumbai in 1937. The
Central Office is where the Governor sits and where
policies are formulated. Though originally privately
owned, since nationalization in 1949, the Reserve Bank
is fully owned by the Government of India.

RBI Guidelines for Licensing of

New Banks in the Private Sector
The Guidelines for Licensing of New Banks in Private
Sector Key features of the guidelines are:
(i) Eligible Promoters:
Entities / groups in the private sector, entities in public
sector and Non-Banking Financial Companies (NBFCs)
shall be eligible to set up a bank through a wholly-owned
Non-Operative Financial Holding Company (NOFHC).
(ii) ‘Fit and Proper’ criteria:

Entities / groups should have a past record of sound

credentials and integrity, be financially sound with a
successful track record of 10 years. For this purpose,
RBI may seek feedback from other regulators and
enforcement and investigative agencies.
(iii) Corporate structure of the NOFHC:

The NOFHC shall be wholly owned by the

Promoter / Promoter Group. The NOFHC shall hold
the bank as well as all the other financial services
entities of the group.

(iv) Minimum voting equity capital requirements for

banks and shareholding by NOFHC:
 The initial minimum paid-up voting equity capital for a
bank shall be `5 billion. The NOFHC shall initially hold a
minimum of 40 per cent of the paid-up voting equity
capital of the bank which shall be locked in for a period
of five years and which shall be brought down to 15 per
cent within 12 years. The bank shall get its shares listed
on the stock exchanges within three years of the
commencement of business by the bank.
(v) Regulatory framework:
The bank will be governed by the provisions of the
relevant Acts, relevant Statutes and the Directives,
Prudential regulations and other
Guidelines/Instructions issued by RBI and other
regulators. The NOFHC shall be registered as a non-
banking finance company (NBFC) with the RBI and
will be governed by a separate set of directions
issued by RBI.

(vi) Foreign shareholding in the bank:

The aggregate non-resident shareholding in the new bank
shall not exceed 49% for the first 5 years after which it
will be as per the extant policy.
(vii)Corporate governance of NOFHC: At least 50% of
the Directors of the NOFHC should be independent
directors. The corporate structure should not impede
 effective supervision of the bank and the NOFHC on
a consolidated basis by RBI.

(viii) Prudential norms for the NOFHC: The prudential

norms will be applied to NOFHC both on stand-
alone as well as on a consolidated basis and the
norms would be on similar lines as that of the bank.

(ix) Exposure norms: The NOFHC and the bank

shall not have any exposure to the Promoter Group.
The bank shall not invest in the equity / debt capital
instruments of any financial entities held by the
NOFHC.

(ix) Business Plan for the bank: The business plan should
be realistic and viable and should address how the
bank proposes to achieve financial inclusion
(x) Other conditions for the bank:
 The Board of the bank should have a majority of
independent Directors.  The bank shall open at least
25 per cent of its branches in unbanked rural centers
(population up to 9,999 as per the latest census). 
The bank shall comply with the priority sector
lending targets and sub-targets as applicable to the
existing domestic banks.  Banks promoted by
groups having 40 per cent or more assets/income
from non-financial business will require RBI’s prior
approval for raising paid-up voting equity capital
beyond `10 billion for every block of `5 billion. 
Any non-compliance of terms and conditions will
attract penal measures including cancellation of
license of the bank.

(xii) Additional conditions for NBFCs promoting /

converting into a bank: Existing NBFCs, if
considered eligible, may be permitted to promote a
new bank or convert themselves into banks.
Procedure for application: In terms of Rule 11 of the
Banking Regulation (Companies) Rules, 1949,
applications shall be submitted in the prescribed
form (Form III). The eligible promoters can send
their applications for setting up of new banks along
with other details mentioned in Annex II to the
Guidelines to the Chief General Manger-in-Charge,
Department of Banking Operations and
Development, Reserve Bank of India, Central Office,
12th Floor, Central Office Building, Mumbai – 400
001
Procedure for RBI decisions:

At the first stage, the applications will be screened by

the Reserve Bank. Thereafter, the applications will be
referred to a High Level Advisory Committee, the
constitution of which will be announced shortly.
The Committee will submit its recommendations to
the Reserve Bank. The decision to issue an in-principle
approval for setting up of a bank will be taken by the
Reserve Bank.
The validity of the in-principle approval issued by the
Reserve Bank will be one year.
In order to ensure transparency, the names of the
applicants will be placed on the Reserve Bank website
after the last date of receipt of applications.
Guidelines on Ownership and Governance in Private
Sector Banks Banks are

“special” as they not only accept and deploy large

amount of uncollateralized public funds in fiduciary
capacity, but they also leverage such funds through credit
creation. The Banks are also important for smooth
functioning of the payment system. In view of the above,
legal prescriptions for ownership and governance of
banks laid down in Banking Regulation Act, 1949 have
been supplement by regulatory prescription issued by RBI
from time to time. The existing legal framework and
significant current practice in particular cover the
following aspects:

i. The composition of Board of Directors comprising

members with demonstrable professional and other
experience in specific sector like agriculture, rural
economy, co-operation, SSI, law, etc., approval of
Reserve Bank of India for appointment of CEO as
well as terms and conditions thereof, and powers
for removal of managerial personnel, CEO and
directors, etc. in the interest of depositors are
governed by various sections of the Banking
Regulation Act, 1949.

ii. Guidelines on corporate governance covering

criteria for appointment of directors, role and
responsibilities of directors and the Board, signing
of declaration and undertaking by directors, etc.,
were issued by RBI on June 20, 2002 and June 25,
 2004, based on the recommendations of Ganguly
Committee and review by the BFS.

iii. Guidelines for acknowledgement of

transfer/allotment of shares in private sector banks
were issued in the interest of transparency by RBI
on February 3, 2004.

iv. Foreign investment in the banking sector is

governed by Press Note dated March 5, 2004
issued by the Government of India, Ministry of
Commerce and Industries.

v.
vi. The earlier practice of RBI nominating directors on
the board of all private sector banks has yielded
place to such nomination in select private sector
banks. vi. Against this background, it is considered
necessary to lay down a comprehensive framework
of policy in transparent manner relating to
ownership and governance in the Indian private
sector banks as described below.
 The broad principles underlying the framework
of policy relating to ownership and governance of
private sector banks would have to ensure that
  The ultimate ownership and control of private
sector banks is well diversifying. While diversified
ownership minimizes the risk of misuse or
imprudent use of leveraged funds, it is no
substitute for effective regulation. Further, the fit
and proper criterion, on a continuing basis, has to
be the over-riding consideration in the path of
ensuring adequate investments, appropriate
restructuring and consolidation in the banking
sector. The pursuit of the goal of diversified
ownership will take account of these basis
objectives, in a systematic manner and the process
will be spread over time as appropriate.

Minimum Capital:
The capital requirement of existing private sector
should be on par with the entry capital requirement
for new private sector banks prescribed in RBI
guidelines of January 3, 2001, which is initially
Rs.200crore, with a commitment to increase to
Rs.30 crores within three years. In order to meet
this requirement, all banks in private sector should
have a net worth will have to submit a time-bound
programmed for capital augmentation to RBI.
Where the net worth declines to a level below
Rs.300 crores, it should be restored to Rs.300
crores within a reasonable time.

Foreign investment in private sector banks

In terms of the Government of India press note the

aggregate foreign investment in private banks from
all sources (FDI, FII, NRI) cannot exceed 74 per
cent. At all times, at least 26 per cent of the private
sector banks will have to be held by resident
Indians.

Foreign Direct Investment (FDI) (other than by

foreign banks or foreign bank group)
i. The policy already articulated in guidelines for
determining ‘fit and proper’ status of
shareholding of 5 per cent and above will be
equally applicable for FDI. Hence any FDI in
private banks where shareholding reaches and
exceeds 5 per cent either individually or as a
group will have to comply with the criteria
indicated in the aforesaid guidelines and get
RBI acknowledgment for transfer of shares.
 ii. To enable assessment of ‘fit and proper’ the
information on ownership/beneficial
ownership as well as other relevant aspects
will be extensive.

Foreign Institutional Investors (FIIs)

i. Currently there is a limit of 10 per cent for individual
FII investment with the aggregate limit for all FIIs
restricted to 24 per cent which can be raised to 49 per
cent with the approval of Board/General Body. This
dispensation will continue.
ii.
iii. The present policy requires RBI’s acknowledgment
for acquisition/transfer of shares of 5 per cent and
more of a private sector bank by FIIs based upon the
policy guidelines on acknowledgment of
acquisition/transfer of shares issued. For this
purpose, RBI may seek certification from the
concerned FII of all beneficial interest.
 Non-Resident
Indian (NRIs)

Currently there is limit of 5 per cent for individual NRI

portfolio investment with the aggregate limit for all NRIs
restricted to 10 per cent which can be raised to 24 per cent
with the approval of Board/General Body. Further, the
policy guidelines on acknowledgment for
acquisition/transfer will be applied.
 15.
Guidelines on Fair practices code

 Loan application forms shall be comprehensive to

include information about rate of interest
(fixed/floating) and manner of charging
(monthly/quarterly/half yearly/rest), process fees and
other charges, penal interest rates, pre-payment
option and any other matter which affects the interest
of the borrower, so that a meaningful comparison
with that of other banks can be made and informed
decision can be taken by the borrower.
 Banks and Financial Institution should devise a
system of giving acknowledgment for receipt of all
loans application. Banks/Financial Institutions should
verify the loan application within a reasonable period
of time. If additional details /documents are required,
they should intimate the borrowers immediately. If
all the requirements are complied with the borrowers,
banks/financial institution should acknowledge for
the same and state the specific time period from the
date of acknowledgement within which a decision on
the specific loan request will be conveyed to the
borrowers.
  Acknowledgment should also state the amount of
process fees paid or to be paid and the extent to
which such fees shall be refunded in the event of
rejection of any application for loan.

 In the case of rejection of any loan application,

lenders, should convey in writing the specific reason
thereof.
 Terms and conditions and other caveats governing
credit facilities given by banks/Financial Institution
arrived at after negotiation by the lending institution
and the borrower should be reduced in writing duly
witnessed and certified by the authorized sanctioning
authority; in respect of advances sanctioned by the
Board of Directors or its committee the documents of
understanding should be certified by the authorized
signatory preferably at company secretary level. A
copy of such agreement should be made available to
the borrowers for their record.
  Lenders should ensure timely disbursement of
loans sanctioned.
  Stipulation of margin and security should be based
on due diligence and credit worthiness of borrowers.
  Lenders should keep the borrowers apprised of the
state of their accounts from time to time and shall
give notice of any changes in the terms and
conditions including interest rates and charges are
effected only prospectively. To ensure the above,
Banks/Financial institution should create appropriate
information dissemination mechanism.
  The loan agreement should clearly specify the
liability of lenders to borrowers in regard to allowing
drawings beyond the sanctioned limits, honoring the
cheques issued for the purpose other than agreed,
disallowing large cash withdrawals and obligation to
meet further requirements of the borrowers on
account of growth in business etc. without proper
vision and sanction in credit limit, and disallowing
drawings on a borrower account on its classification
as a non-performing assets or on account of non-
compliance with the terms of sanction.

16.

MICRO FACTORS
AFFECTING INDIAN BANKING INDUSTRY
 Loan Demand:

Over the past three years, Indian Banking Industry

has seen sustained strength in credit growth, which is
not just a function of economic buoyancy but also the
broad-basing of loan demand. This has recently been
articulated by the central bank too: “A contextual
analysis of the co-movement between
macroeconomic performance and bank credit in the
current phase of the business cycle suggests that
factors other than demand may also be at work:
financial deepening from a low base; structural shifts
in supply elasticity’s; rising efficiency of credit
markets; and competitive pressures augmenting the
overall supply of credit.” (Reserve Bank of India,
Monetary Policy Review, October 2006). Loan
growth sustained for very long
 The
slowdown of the mid-1990s hit the banks very hard
because corporate, which accounted for a lion’s share
of bank credit, went into a less profitable and hence a
financial restructuring mode. There was no retail
credit then, banks did not focus on Small and
Medium Enterprises and farm lending was done
grudgingly, under compulsion. Along with the
diversification of the pie that keeps the tempo of
demand intact, after a long time industry has also
started demanding higher levels of credit. In the five
years prior to FY05, growth in industrial credit was
almost wholly driven by infrastructure. There is a
perceptibly wider participation from other segments
during FY05 and FY06. If a substantial portion of
loan growth gets driven by the banking system taking
away market shares from informal sectors – this is
clearly happening to farm credit, SMEs and to a
limited extent non-mortgage retail – interest rate
considerations influencing demand will be relatively
low. SMEs and the rural folk have accessed credit
from other sources at exorbitant interest rates, and
hence banks’ rates going by 200-300bps is not so
meaningful. That explains the
Apparent lack of correlation between rates that have been
rising and loan demand.
 Rising funding costs with soft lending rates
irrational:
Plenty of historical evidence of return of pricing
power to banks:

Concerns are often expressed about banks’ ability to

increase lending rates in the face of competition and
government pressure. The reality is that banks, which led
the mortgage price war, have increased mortgage rate by
200-300bps from the bottom, and is yet to see significant
resistance. That PSU banks raised prime lending rates
twice in. Competition from overseas borrowings is a
serious factor only with AAA companies, and banks have
reduced exposure to them considerably during the last 3-4
years.
Government stand is understandably against higher
interest rates. However, it is unlikely that the government
will be able to influence the course of interest rates
single-handedly.

Inflexibility of deposit growth a myth:

 With 100-200bps increase in the card rates of deposits,
banks have managed to move the deposit growth rate
from 15-16% to 19- 20%, on a larger base. In the last five
years, household financial savings have moved out of
equities and long-term products to bank deposits in
percentage terms. The point to note here is that
component of cash (currency) has marginally risen –
that’s the real, incremental opportunity as more cash from
chests moves into bank deposits first before potentially
going to other avenues.

The Q4FY07 is expected to be a period of margin

pressure. This is because as the last interest-rate cycle
showed, deposit costs increase first, and followed by
lending rates. Q4 is also usually a period of tight liquidity,
and the RBI could be increasing CRR or SLR
requirements to further tighten the liquidity. Also, banks
will be cautious about the actual implementation of the
lending rate increases and may do it in a graduated
fashion so as not to invite outright resistance or overt
attention from the government. HDFC Bank, PNB, SBI
and a few others have nevertheless already made a
beginning by increasing their prime lending rates after the
cash reserve ratio hike by the RBI. However, the fight for
deposits has intensified and it is possible that in Q4FY07
banks could be increasing their exposure to high-cost
wholesale deposits, taken at higher than card rates.
 Banks’ increased risk appetite good for loan yields:

The banks’ lending risk appetite has increased

significantly over the last five years – banks veering more
towards lending at increasing spreads rather than
investing in risk-free bonds. Accordingly, banks are
willing to take higher risks, which is good for overall
asset yields.

Investment spreads may increase in future:

As long-duration bonds at high interest rates have been

coming up for maturity and getting re-priced at lower
interest rates, yields on investments have been
continuously falling over the last few years.

17.
ORGANIZATION PROFILE
 FORMATION OF THE COMPANY
The Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an ‘in principle’
approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI’s
liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of
‘HDFC Bank Limited’,
With its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Bank in January
1995.

 PROMOTER
HDFC is India’s premier housing finance company and
enjoys an impeccable track record in India as well as in
international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy
growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over
a million dwelling units. HDFC has developed significant
expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its
housing related credit facilities. With its experience in the
financial markets, a strong market reputation, large
shareholder base and unique consumer franchise, HDFC
was ideally positioned to promote a bank in the Indian
environment.
 BUSINESS FOCUS
HDFC Bank’s mission is to be a world-class Indian Bank.
The objective is to build sound customer franchises across
distinct business so as to be the preferred provider of
banking services for target retail and wholesale customer
segment, and to achieve healthy growth in profitability,
consistent with the bank’s risk appetite. The bank is
committed to maintain the highest level of ethical
standards, professional integrity, corporate governance
and regulatory compliance. HDFC Bank’s business
philosophy is based on four core values – Operational
Excellence, Customer Focus, Product Leadership and
People.
 CAPITAL STRUCTURE
The authorized capital of HDFC Bank is Rs.550 crores
(RS.5.5 billion). The paid-up capital is Rs.424.6crore
(Rs.4.2 billion). The HDFC group holds 19.4% of the
bank’s equity and about 17.6% of the equity is held by the
ADS Depository (in respect of the bank’s American
Depository Shares (ADS) Issue). Roughly 28% of the
equity is held by the Foreign
Institutional Investors (FIIs) and the bank has about
570,000 shareholders. The shares are listed on the Stock
Exchange, Mumbai and the National Stock Exchange.
The bank’s American Depository Shares are listed on the
New York Stock Exchange (NYSE) under the symbol
‘HDB’.

 TIMES BANK AMALGAMATION

In a milestone transaction in the Indian banking industry,
Times Bank Limited (another new private sector bank
promoted by Bennett, Coleman & Co) was merged with
HDFC Bank Ltd., effective February 26, 2000. As per the
scheme of amalgamation approved by the shareholders of
both banks and the Reserve Bank of India, shareholders
of Times Bank received 1 share of HDFC Bank for every
5.75 shares of Times Bank. The acquisition added
significant value to HDFC Bank in terms of increased
branch network, expanded geographic reach, enhanced
customer base, skilled manpower and the opportunity to
cross-sell and leverage alternative delivery channels.

 DISRTUBUTION NETWORK
HDFC Bank is headquartered in Mumbai. The Bank at
present has an enviable network of over 1229 branches
spread over 444 cities across India. All branches are
linked on an online real-time basis. Customers in over
120 locations are also serviced through Telephone
Banking. The Bank’s expansion plans take into account
the need to have a presence in all major industrial and
commercial centers where its corporate customers are
located as well as the need to build a strong retail
customer base for both deposits and loan products. Being
a clearing/settlement bank to various leading stock
exchange, the bank has branches in the centers where the
NSC/BSC has a strong and active member base. The bank
also has a network of about over 2526 networked ATMs
across these cities. Moreover, HDFC Bank’s ATM
network can be accessed by al domestic and international
Visa/MasterCard, Visa Electron/Maestro, Plus/Circus and
American Express Credit/Charge cardholders.

 TECHNOLOGY
HDFC Bank operates in a highly automated environment
in terms of information technology and communication
systems. All the bank’s branches have online
connectivity, which enables the bank to offer speedy
funds transfer facilities to its customers. Multi-branches
access is also provided to retail customers through the
branch network and Automated Teller Machines (ATMs).
The bank has made substantial efforts and investments in
acquiring the best technology available internationally, to
build the infrastructure for a world class bank. The bank’s
business is supported by scalable and robust systems
which ensure that our clients always get the finest
services we offer. The bank has prioritized its engagement
in technology and the internet as one of its key goals and
has already made significant progress in web-enabling in
core business in each of its businesses, the bank has
succeeded in leveraging its market position, expertise and
technology to create a competitive advantage and build
market share.

 BUSINESSFOCUS
HDFC Banks mission is to be a World Class Indian Bank.
The objective is to build sound customer franchises across
distinct businesses so as to be the preferred provider of
banking services to target retail and wholesale customer
segments, and to achieve healthy growth in profitability,
consistent with the banks risk appetite. The bank I
committed to maintain highest level of ethical standards,
professional integrity, corporate governance and
regulatory compliance. HDFC Banks business philosophy
is based on four core values – Operational Excellence,
Customer Focus, Product Leadership and People.
 PRODUCT SCOPE
HDFC Bank offer a bunch of products and services to
meet every need of the people. The company cares for
both, individuals as well as corporate and a small and
medium enterprises. For individuals, the company has a
range accounts, investment, and pension scheme, different
types of loans and cards that assist the customers. The
customers can choose the suitable one for range of
products which will suit their life stage and needs. For
organizations the company has the host of customized
solutions that range from Funded services, Non funded
services, Value addition services, Mutual Fund etc. These
affordable plans apart from providing long term value to
the employees help in enhancing goodwill of the
company. The product of the company is categorized into
various sections which are as follow: o Accounts and
Deposits o Loans o Investments and Insurance o Forex
and Payment Services o Cards o Customer center
 18
Impact of Covid-19 Outbreak on Performance of
Indian Banking Sector
Abstract The COVID-19 pandemic adversely impacted
various industrial sectors of India as well as other
countries across globe. In India, impact is resulting to a
negative growth rate in economy. Many sectors were
performing good before the pandemic but now they have
been pulled down by this pandemic. So, it is very much
required to analyze and cater the data about those sectors
which are badly impacted by pandemic, these sectors play
vital role in Indian economy. One of the most important
sector of Indian economy is banking sector which is
responsible for all the financial activities going on in the
country and working as a supporting hand to all of the
industries in term of financing, credit, transactions,
collection and payment and so on. There are so many
reports containing numerous data are in public domain
stating the effects of this virus pandemic. The data is not
only in physical form but also it is scattered in various
format over the internet. Though the data amount is
enormous, the major problem is to get the appropriate
data according to the user needs. The databases available
online are being regularly updated but these databases are
not able to provide inference over the knowledge already
stored. By using inference capability, we can fetch latent
and indirect information out of the knowledge base.
 Various ontologies for Covid-19 are available online but
they do not focus on the performance of banking sector of
India during Covid19. So, many times users do not get
appropriate information according to the imposed query.
This article attempts to highlight the repercussions of the
Covid-19 in the performance of the Indian banking sector
by creating and evaluating the largest comprehensive
knowledge base called ontology (Covid19-IBO) in order
to get semantic information, in continuation of the same
we address few important research questions with respect
to Indian economy
1. Introduction
Indian economy basically depends on the three sectors
namely primary sector, secondary sector and tertiary
sector and all the three sectors are being majorly
supported by banking sector. Banking sector is providing
the financial support to all these sectors by disbursing
loans, advances, short term credits, issuing letter of credit,
bank guarantees etc as its traditional work. Apart from it
the new phase of Indian Banking resembles in work like
providing forex support, digital banking, e-commerce,
telebanking, e-kiosk and many more. You cannot imagine
rapid growing economy without banking support. If
banking sector get impacted by any obstacle its
consequences will definetly be borne by all these three
sectors which are pillar of the Indian economy. This
pandemic appeared as “black swan event” that needs
immediate action from government to help resume
economic stability through banking channel [1]. Based on
approximation about recovery time from this global
pandemic various economic tools are pointing out
towards global economic depression of different
dimensions. Covid-19 has affected the economy of India
at that time when the growth rate of the country was at
lowest in last 10 year. In the recent past, Indian Abstract
The COVID-19 pandemic adversely impacted various
industrial sectors of India as well as other countries across
globe. In India, impact is resulting to a negative growth
 rate in economy. Many sectors were performing good
before the pandemic but now they have been pulled down
by this pandemic. So, it is very much required to analyze
and cater the data about those sectors which are badly
impacted by pandemic, these sectors play vital role in
Indian economy. One of the most important sector of
Indian economy is banking sector which is responsible for
all the financial activities going on in the country and
working as a supporting hand to all of the industries in
term of financing, credit, transactions, collection and
payment and so on. There are so many reports containing
numerous data are in public domain stating the effects of
this virus pandemic. The data is not only in physical form
but also it is scattered in various format over the internet.
Though the data amount is enormous, the major problem
is to get the appropriate data according to the user needs.
The databases available online are being regularly
updated but these databases are not able to provide
inference over the knowledge already stored. By using
inference capability, we can fetch latent and indirect
information out of the knowledge base. Various
ontologies for Covid-19 are available online but they do
not focus on the performance of banking sector of India
during Covid19. So, many times users do not get
appropriate information according to the imposed query.
This article attempts to highlight the repercussions of the
Covid-19 in the performance of the Indian banking sector
by creating and evaluating the largest comprehensive
 knowledge base called ontology (Covid19-IBO) in order
to get semantic information, in continuation of the same
we address few important research questions with respect
to Indian economy. Keywords Large data, Ontology,
Indian Banking, Covid-19, Sectors, Evaluation ISIC’21:
International Semantic Intelligence Conference, February
25-27, 2021, New Delhi, India
[email protected] (A. K. Mishra);
[email protected] (A. Patel);
[email protected] (S.Jain) ©️2021 Copyright for this
paper by its authors. Use permitted under Creative
Commons License Attribution 4.0 International (CC BY
4.0). CEUR Workshop Proceedings (CEUR-WS.org)
economy was trying to get on the track by recovering
with a slow rate. However, due to this pandemic the
recovery process is severely impacted. As in last two
quarters India has facing negative growth in GDP. The
Indian economy was already suffering even before the
Covid-19 outbreak, but Covid-19 outbreak resulting it
worsen more. In a recent report published by the RBI
(India’s central bank) states that this virus has impacted
better companies, organizations and businesses that were
performing well before this pandemic. (a) (b) Figure 1:
(a) % share in banking sector debt (b) debt in Rs lakh
crore (Source: data taken from [2]) Now, Banks have to
minimize the risk and use the high risk-averse strategy to
restructure loans, provisioning bad debts due to less risk
appetite, Indian banks have already suffered severe losses
 in past restructuring attempts. The same report indicates
that 19 sectors are been adversely impacted by this
pandemic resulting the stress of dept having value Rs 15.5
lakh crore which were not under the stress before this
virus outbreak [2]. Fig 1 (a) and (b) shows the adverse
impact on % share in banking sector debt and debt in Rs
lakh crore respectively. Therefore, investigation of the
impact of Covid19 from the large amount of distributed
data is very vital to prevent the downfall of the economy
and the minimize the pandemic effect. It is also essential
because this study will be used as a touch bearer in future
if any of the pandemic impacts like Covid-19. This paper
offers the Covid19 impact on Banking ontology
(Covid19-IBO) that provides semantic information about
the impact of the Covid-19 on the banking sector of India.
The major contributions of the paper are listed below: •
Development of Covid19 Impact on Banking ontology
(Covid19-IBO) • Evaluation of the Covid19-IBO by
different evaluation approaches The rest of the paper is
divided into six sections. Section 2 describes existing
work. Section 3 discusses some research questions that is
handled by developed ontology. Section 4 shows the
development and evaluation of the Covid19-IBO. Section
5 emphases the result and discussion of the proposed
work. Section 6 shows the results of subjective testing
and last section concludes the paper.
2. LITERATURE
Covid-19 pandemic adverse impact the Indian economy.
To control the flow of the virus, GoI announced a
nationwide lock down and various policies to help the
people. Dev and Sengupta [3] have analyzed the
economic condition of the India before the Covid-19
along with policies that has been declared so far and
potential effect of the shock on several part of the Indian
economy. Rakshit and Basistha [4] have wrote an article
about economic effect of the outbreak in India by
considering outbreak as a man-made disaster i.e. human
tragedy. They addressed three important research
questions: the effect of Covid-19 on the Indian economy
along with the detailed analysis of the different sectors
that suffered from Covid-19, the effect of Covid-19 on the
bilateral trade relationship between China and India, the
performance of health system during this pandemic.
Kanitkar [5] demonstrated the economic loss of India
during Covid-19 by using a linear I/O model and results
shows that the loss is about 10-30% of its GDP. The
author has also focused on the emission of CO2 from the
power sector and electricity supply, demand. Demirguc-
Kunt et al. [6] have analyzed the effect of the Covid-19
outbreak on the banking sector by discussing the bank
stock prices all over the world along with examine the
role of financial policy by using global databases for the
performance of bank stocks. The Covid-19 data is
available on the internet in various format. WHO provides
multilingual Covid-19 database that updates regularly and
contains all the information about Covid-19 [7-8]. Kousha
and Thelwall [9] provided the access of the coverage of
scholarly databases and impact indicators from the period
of 21.03.2020 to 18.04.2020 so that people can identify
the important new studies quickly from Covid-19
publications like news, tweets, citations, facebook,
databases and many more places. To respond effectively
to emergencies like public health, we need to share the
information across various disciplines and IT systems
[10]. This is the place where ontologies offer excellent
services and overcome the problem of interoperability.
Along with the databases, various ontologies also have
been developed in order to exact the hidden and semantic
information. Dutta and DeBellis [11] have published the
ontology as a data model namely COviD-19 ontology for
case and patient information (called CODO) on the web
as a knowledge graph that provides the information about
the Covid-19 pandemic. The primary focus of the CODO
ontology is to describe the Covid-19 cases and Covid-19
patient data. Infectious Disease Ontology (called IDO) is
an interoperable ontology that contains the domain
information about infectious disease where entities are
related to the clinical and biomedical aspects of the
disease [12]. The extension of the IDO and Virus
Infectious Disease ontology (VIDO) is called COVID-19
Infectious Disease Ontology (known as IDO-COVID-19)
and contains the information about the Covid19 disease
and SARS-CoV-2 virus [13]. The available different
format of data (text documents, video, audio, databases
and ontologies) contains the detailed information about
the Covid-19 disease. After studying the literature, we
claim that the available databases and ontologies that
provide information according to the user queries do not
have the complete information about the impact of Covid-
19 on Indian banking sector that play vigorous role in the
growth of Indian economy.

3. Research Questions
By the current article, three important research question
are addressed that are listed below: RQ1. What are the
necessary steps to minimize the loss to banking sector by
Covid-19 pandemic?

In current situation by the cause of outbreak of this virus

pandemic, Indian banks need to review the portfolio in
asset and liability side, for all the discussed cases to easily
grasping the negative effect. This present economic
situation warns more stress evaluation that might show
straight implications for settlement that are make by
Indian Banks for current time. Finding the high-risk
sectors/areas/corporates/individuals and reevaluating the
credit risk provisions related with loan for various
economical cases is inevitable

RQ2. What are the major challenges for Indian banking

sector during Covid-19?
 During the virus pandemic, major production units were
closed or partially working. Entertainment, Aviation,
Tourism industries are badly impacted. Due to the same
liquidity in market needs to increase with keeping an eye
to lowering down the NPA. This is major challenge for
banking industry. For the same, RBI has infused liquidity
of about 3.2 % of GDP in the system. Now banks can
lend to reconstruct / support badly impacted industries but
taking a lighter risk. Right now, many SMEs and MSMEs
are bound to shut down their operations, surely it is
indicating towards increasing of loan default cases.
Though as a cushion RBI has allowed moratorium period,
it is not enough to meet the requirement of industries.
Hence RBI has to make all efforts to meet the challenges
and take the banking industry in right direction.

19
70% of banking sector debt affected by
Covid-19 impact

A report by the Reserve Bank of India notes that the

pandemic “has affected the best of companies” and
businesses that were otherwise viable before the outbreak.
The Indian economy wasn’t in great shape even before
the Covid-19 outbreak, which has only made matters
worse. The report by the Reserve Bank of India’s (RBI)
expert committee on a resolution framework, headed by
former ICICI Bank chief K V Kamath, brings this out
clearly. The report notes that the pandemic “has affected
the best of companies” and businesses that were
otherwise viable before the outbreak. Experts believe that
banks may be more risk-averse to restructuring loans this
time around, having already suffered big losses in
previous restructuring efforts. Nineteen sectors, which
were not under stress before the pandemic but have been
hit it, account for Rs 15.5 lakh crore of debt. Retail and
wholesale trade are the worst affected with outstanding
debt of Rs 5.4 lakh crore. The pandemic has also affected
11 sectors which were already under stress. These sectors
have a debt of Rs 22.2 lakh crore. Non-banking financial
companies (NBFCs) have the highest , Rs 7.98 lakh crore,
among these sectors. Agriculture and allied products
make up the biggest silver lining in India’s debt
landscape. This sector has debt of Rs 9.8 lakh crore. It
was stress-free before the pandemic and continues to be
so.
The Kamath committee has specified sector-specific
ratios on five major parameters – total outstanding
liability to adjusted net worth, total debt to earnings
before interest, tax, depreciation and amortisation
(EBITDA), current ratio (current assets divided by current
liabilities), debt service coverage ratio and average debt
service coverage ratio to decide whether or not companies
will be eligible for loan restructuring. A Nomura analysis
of 5,179 companies across 25 sectors shows that 30-50%
of them do not meet the necessary criteria on backward
looking data.  
Huge write-offs in previous restructuring
might make banks more risk-averse
The Nomura report expects risk-aversion among banks to
rise given their bad experience in previous restructuring
cycles. “We think banks will be a lot more prudent
towards restructuring in this cycle vs past restructuring
cycles where ultimate slippages/write offs were as high as
70-75% in the corporate segment”, the report said. That’s
bad news for industry.  
 20

COVID-19 Second Wave: Banks brace for impact as

vaccination pace slows
The slow pace of vaccination and the fears of a COVID-
19 third wave are threatening to hamper signs of early
recovery in the banking sector. Banks are already reeling
under stress due to a gloomy economic environment, said
bankers and analysts Moneycontrol spoke to.
The only hope is that the ongoing vaccination drive will
contain the spread of the COVID second wave. But, the
rather disappointing pace of vaccination so far poses a big
risk to the industry’s optimism, bankers said.
On May 24, analysts at Kotak Institutional Equities wrote
that the pace of vaccination has faltered and the daily
average vaccination stood at 1.8 million doses per day.
“India has administered at least one dose to only 11.5
percent of its total population and some of the most
populous states are well behind even this level of
coverage,” the Kotak report said.
India recorded 1.96 lakh new COVID cases in the last 24
hours and the number of active cases stood at 25.8 lakh
on May 25.
In the post-result press conferences, leading lenders, State
Bank of India (SBI), HDFC Bank and ICICI Bank cited
successful vaccination drive as a key factor for growth
recovery in the banking sector in fiscal year 2022.
“The sharp rise in COVID cases in recent times and the
lockdowns in many places have slightly decelerated the
pick-up in the economy that we witnessed in the previous
two quarters,” said SBI Chairman, Dinesh Khara on
Friday.

“Having said that, with the improvement in vaccination

coverage, we expect recovery in the activity level in the
next two to three months,” Khara said. The country’s
largest lender by assets has guided for a 10 per cent year-
on-year credit growth in the current fiscal year.
In the media interactions post the announcement of the
Q4 results, HDFC Bank management too said vaccination
progress will be key for banking sector recovery going
ahead. “That's where the growth is coming from,” said
HDFC Bank's Chief Financial Officer
Srinivasan Vaidyanathan.
On May 24, HDFC Bank CEO Sashidhar Jagdishan said
on a conference call with analysts that the second wave
has not impacted the bank as much as the first wave.
However, Jagdishan does expect higher delinquencies in
the retail segment, particularly in the restructured book
and the portfolio that took the moratorium last year.
Similarly, ICICI Bank said that it would wait and watch
the trajectory of the vaccination drive for a month or two
before it offers a precise outlook on its business.
Vaccination pace slows
So far, the progress of vaccination has not picked up to
the desired extent. A senior executive with a mid-sized
private bank said it will be “utopian” to believe the whole
population will be vaccinated by the end of the current
year or even the next year. “The only thing we are hoping
for is that there is no third wave, and we get a
springboard-like growth in the second half of the year,
like last year,” the official said, He requested anonymity.
Lockdowns have been imposed by many state
governments in the wake of the second wave of COVID.
Although there is no nationwide lockdown this time
unlike last year, the state lockdowns have begun to hurt
the businesses. Banks are worried that if these lockdowns
prolong, the resultant economic stress could impact the
repayment ability of the borrowers.
Last year, the central government announced a
nationwide lockdown in March last week to curb the
spread of the Covid pandemic. The banking sector didn’t
feel the heat because of the timely interventions of the
Reserve Bank of India (RBI) and the government.
While the RBI announced six months of loan moratorium
on all term loans and liquidity measures totalling close to
Rs 13 lakh crore, the central government launched a Rs
20 lakh crore stimulus package to support the economy.
The RBI also announced a one-time loan recast.
These measures indeed helped to avoid a big spurt in
NPAs. A loan becomes NPA if there is no repayment in
90 days. Banks need to set aside additional funds to cover
such losses. This impacts profitability.
This year too, the RBI has announced a slew of measures
including recast facility for smaller borrowers and certain
additional liquidity measures.

Second wave impact

This year too, banking operations have been hit because
of local restrictions. Banks are operating only limited
hours due to the COVID restrictions across states. There
has been a rapid spread of COVID cases among bank
employees, forcing banks to cut branch operations. At
least 1.5 lakh bank employees have contracted COVID
and around 1,500 employees have died so far, according
to data from All India Bank Employees Association.
For instance, Kerala has allowed branches to remain open
only three days a week.  In April, Raipur in Chhattisgarh
went into a 10-day lockdown during which banks were
directed to remain shut. Property registration offices and
technical valuers’ establishments are also closed in many
parts of the country. As a result, banks are unable to
disburse loans in the normal course of business.
The COVID restrictions have already begun to impact
banks. Retail loan disbursements in April have fallen.
“Even what is getting disbursed is mostly already
sanctioned loans. First quarter is basically a complete
washout,” the banker quoted above said.
Business outlook
Banks are not too hopeful about a significant recovery in
the second half of the year. A senior executive at a non-
banking financial company (NBFC) said that the
extensive spread of the virus in rural areas poses a threat
to recovery.
“We may not get the benefit of pent-up demand this year
because a lot of people who needed to buy their own
vehicles or two-wheelers already bought them last year.
Only in some sectors like travel, theatres and hospitality,
which have been almost entirely shut down, could we see
some vengeance consumption,” the official said. He too
declined to be named.
Analysts expect that the impact of the second wave will
be contained in the June quarter. In a report dated May
18, brokerage Nomura said it expects lockdown
restrictions and the economic hit to be spread out over
April and June, although the worst of the impact will
likely be in May.
“Overall, in our baseline, we assume that the worst of the
economic hit from the second wave will likely take place
in Q2 (April-June),” the Nomura report said.