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Archive for February, 2012

Bank Reconciliation module in majority of the implementation is used for Matching Receipts and Payments against Bank statement.
This procedure is pretty simple and doesnt require the knowledge on how to originate transactions directly in BR. Well review this scenario, plus well try to come through various miscellaneous payments and receipts, where you would like to do them directly in the Bank Reconciliation. Lets begin with typical FAQ:
1.By whatever reason, when I am trying to reconcile my Statement I see only Payments and do not see receipts from our customers. Imagine what happens in real life with the customer checks mailed to your office. They arrive in mail and then you put them together, drive or walk to the bank branch and fill deposit slip, where each check is listed on a separate line. The same should be done in Bank Reconciliation module. You checks, cash or credit card (when CC is set as Bank Card, otherwise you get Vendor Invoice no need to trace in details) customer payments are posted in Sales Order Processing (as Deposit against SOP Order or Invoice), or Receivable Management modules. These receipts go all the way to or through GL (when through GL they are automatically posted there, otherwise you post them in GL Batches). They posted in BR and now you have to open Financials -> Bank Deposit in Transaction section, select Type as Deposit with Receipts and work with this document, marking receipts (as you would compile Deposit slip in your bank)
2.Deposit without Receipt. This is popular document, when you are implementing Lockbox with your bank. Your payments are arriving to the lockbox and you have all the reasons to update your checkbook balance, as you have report from the bank on the amount collected. However the payments will be posted in AR module later one and update General Ledger Check Book Cash account. And you keep one or multiple deposit without receipt saved until all the receipts are posted and matched against it
3.Deposit Type Clear Unused Receipts. Might sound a bit confusing. What you do here is this you clear receipts, which are legitimate for being deposited from showing up in the future deposits. If the idea is still too abstract, imagine the scenario. You had BR module registered for several years, however you didnt use it and now you decided to switch on Statement reconciliation routine with each monthly bank statement. There is couple of options to do this. First one would be to abandon old check books and create new ones with new IDs, but working with the same cash accounts. If you have not done reconciliation for the checkbook yet, you can change the amount in Bank Statement Ending Balance field. Another elegant option is to use Deposit with the type Clear Unused Receipts, where you clear all the historical receipts on the existing checkbook. Then you create one lump sum receipt to cover current Checkbook balance (please uncheck posting to GL in Posting, where Series is Financial and Origin is Bank Transaction Entry dont forget to switch it back, when you are done with first reconciliation), post it in BR module and match against Deposit with Receipts document
4.Documents in progress. Traditionally in Dynamics GP or former Great Plains you work with transactions, saved into the batch. This method allows you to review and if required modify and even approve the batch and its saved transactions. In BR module, however, batch based logic is not available. Lets think about some exceptions. First of all, when you are implementing Lockbox and using Deposit without receipt it is natural assumption that you should have the option to record as many deposits as required (lockbox report might be seen via online banking and you may decide to record deposits every week or twice per week). Posting payments from AR or SOP module could be done one the monthly basis this scenario requires you to have at least four deposits without receipt saved and ready for future editing at the time (per one checkbook). When we are looking at Deposit with Receipts you can have only one worksheet open at the time and add the matching lines as time goes, when you are done it should be posted to open the way for next saved deposit per checkbook, so only one is allowed to be saved per checkbook. All the other documents (with exception of Bank Statement reconciliation in progress) must be posted as they are entered, or you have to delete them if you are by whatever reason not ready to post
5.Printing checks directly in Bank Reconciliation. This is also possible, but please do not do it for the customers, where you are handling them in AR or SOP modules. Consider check cutting from BR, when it is really something miscellaneous, for example expense report to your employee, where you do not want to have them as vendors and do not have US Payroll module implemented. Do it in Miscellaneous Check form: Financials, in Transaction section find Miscellaneous check links and work from there (interface is pretty nice and you feel like you are writing check directly in your paper checkbook). Here, when you really write check manually in your checkbook, do not do Print Check and Post, click on Post instead
6.Bank Transfer. It is definitely possible to do transfer from one checking account to another. However, the option with BR audit trail code might be preferred. Plus if you do Bank Transfer in GL you may have hard time to reconcile both checkbooks in BR. Instead, we recommend you to do it via Bank Transfer Entry: in Financials open Bank Transfers link in Transactions section
7.Multicurrency. It is supported in all the modules, including Bank Reconciliation. So far we know that if you are transferring from US Dollar to Euro, it is supported in recent versions, including 2010/11.0. However it is impossible to transfer from the check book in Canadian dollar to Euro directly, you have to do it via third party check book with US Dollar default currency
8.Deposit breakdown in Checks, Credit Card, Currency, Coins. Look at the bottom of the deposit form, locate Deposit Amount and click on the expansion button, it should open Deposit Total form. Here you see what is deposited as check, credit card (bank card type) and cash, where cash is split between currency (paper money) and coins. If your currency shows $45.67, and you know that cash portion was deposited as $36 in paper money, just enter this amount in Currency field, and Coins section will be automatically updated to show nine dollars and sixty seven cents
9.Using Integration Manager. If you would like to reconcile your statement automatically from the electronic version of your bank statement, please review sample integration with the name Bank Reconciliation. This is just the starting point for your homework, if you feel that you have reasonable programming and new tools discovery resources in your IT and Accounting departments
10.Customization Options. Bank Rec is Dexterity programmed module, as the rest of the GP thick client (or user workstation). If you would like to modify user interface, review such tools, as Great Plains Dexterity, Modifier with VBA (if you would like cross modules modification, review also Continuum), Extender. Bank Reconciliation is also exposed via eConnect SDK, where you can call eConnect libraries directly via MS Visual Studio, or call them via Web Services for GP from third party platforms, such as Linix/PHP/MySQL, Oracle, Unix, Apple Mac and others. It is also possible to feed in transactions into BR module via SQL Insert statements (typically incorporated into stored procedures) be aware, however, that this method might lead to data corruption, it is only recommended to advanced GP coders. If you are doing your discovery steps with Great Plains, consider to do SQL programming in test company, try to review what transaction created directly via user interface did and try to replicate the logic in your SQL scripts
11.If you feel that your concerns are not addressed or your question is not answered, please feel free to contact our office. Support domestically in the USA, Canada, Mexico and internationally. This option is possible via Web Sessions, Skype or Phone conferences and direct visits onsite (in the case of the large scale project). Our consulting team speaks English, Chinese, Portuguese, Spanish, Russian, Filipino. Feel free to call us 1-866-304-3265, 1-269-605-4904, or email help@efaru.com

Article Tags:
Bank Reconciliation, Credit Card, Without Receipt, Check Book, Bank Statement, Great Plains

Most banking customers care about whether their money is safe in their bank, what their interest rates are, and how much they will get charged for using an ATM. Another aspect of banking all account holders should be worried about but too few are truly concerned with is the safety of the personal information their bank holds. Along with holding this information in hard copy, all banks have a computer system that holds customer information; this system also executes every aspect of a bank’s daily operations, from recording deposits and withdrawals to making ATMs run smoothly. This system is run by software called core system software and is truly the nucleus of a bank. Being aware of what core system software your bank uses will help you decide if your bank is doing enough to keep your personal information safe from hackers, unauthorized eyes, and others who you don’t want seeing your information.So what is core system software, exactly? A bank’s core system software is part of what, literally, a bank is built upon. It is the platform that a bank’s information technology (IT) department uses to keep account balances updated, make sure that interest is compounded properly, run ATMs, passbook maintenance, and banking records, among other functions. In the past, all of these functions were conducted by hand by banking staff; today computer technology allows banks to improve efficiency, reduce costs for customers, increase accuracy, and better overall service. These improvements not only enhance the experience of customers, they increase profits for bank shareholders and promote overall growth which encourages and permits higher pay and more positions for employees as well as strengthening the bank’s financial health and standing.How can one system do all of that? By being a large, complex, and comprehensive system. Core banking software is at the core of all a bank’s operations. When a customer comes in to deposit a check, the teller takes the check and enters the information into a computer. The software program that receives the teller’s input adds the deposit into the customer’s account and updates to the new balance; this entire process is conducted by a branch of the bank’s core software. The same program handles withdrawals, cashed checks, calculating interest on accounts, and records debits and credits of loans. When a customer logs into a bank’s website from home to look at their checking account, another branch of the core system software handles that. Website presence and online banking are also handled through this particular area of the core system. When a customer comes into a bank and applies for a loan, the core system software takes the information and runs it through various parameters to see if the individual meets the bank’s loan requirements and helps the bank decide if the individual is an acceptable credit risk or not. Another sector of the software stores customer information; another runs the bank’s ATMs. Yet another handles the bank’s accounting needs and financial records, while still another focuses on maintaining the bank’s compliance with local, state, and federal laws and regulations. Some systems handle the security of a bank’s vault while yet others include sectors for the bank’s human resource department to handle payroll. Without a secure core financial software platform banks cannot function efficiently and accurately in today’s banking environment.Why is this important to me, as a customer? It is important that you know what system your bank uses because if your personal information is not secure and protected within that core system software, then it is vulnerable to attack. There are several core system platforms on the market today for banks in a variety of choices and configurations, and just like any other product some are better than others. For instance, there are some core system software companies who have been developing platforms for decades, and while they are reliable standbys, they may not update as frequently or utilize the most cutting-edge technology on the market. At the opposite end of the spectrum, some companies utilize the most up-to-date technologies which have not been properly vetted for reliability, security, and functionality. The banks with the best security and overall functionality fall somewhere in the middle and customers need to know where their bank and their information stand. Visit or call your bank and ask them to help you understand the core system software they use and learn about what they are doing to protect you, your money, and your personal information.

Discuss in detail the performance of commercial bank in India.

PERFORMANCE OF COMMERCIAL BANKS IN INDIA*INTRODUCTION:~ Commercial banks play an important role in the economic development of the nation. Hence, the performance of commercial banks can have a marked influence on the development of an economy.~ With this fact in view, various reforms were introduced in the banking sector in India.~ These reforms brought about a remarkable improvement in the performance of commercial banks.*INDICATORS~ The performance of a bank can be judged on various indicators.~ These indicators can be categorised as under:# PROFITABILITY INDICATORS:^ The net profit of a bank is an indicator of its profitability.^ This is influenced by the banks interest income, non-interest income and expenses.^ The following are the profitability indicators of a commercial bank:1) Interest Income Ratio: This is the ratio of a bank’s interest income to its total assets. A high interest income ratio indicates greater profitability.2) Interest Expended Ratio: It is the ratio of interest expenses to total assets. A decline in this ratio brings greater profitability to the bank.3) Net Interest Margin Ratio: Net interest indicates the difference between interest income and interest expense. So, it is the difference between the revenue generated by interest bearing assets and cost of borrowed funds. A net interest margin ratio is the ratio of this net interest to total assets. The higher the ratio, the greater the profitability. A fall in the ratio signals the bank to reorient its policies to earn higher yields through cheaper mix of funds.4) Intermediation Cost to Asset Ratio: Is the ratio of intermediation cost (operating expenses cost) to its total assets. A lower ICAR is an indicator of higher profitability and efficiency.5) Burden Ratio: Is the ratio of non-interest income to non-interest expenses. A higher ratio brings about greater profitability.6) Return on Assets Ratio: Is the ratio of net profit to total assets. It is the most important indicetor of the bank’s performance. A higher ratio is an indicator of high performance and profitability.7) Return on Equity Ratio: Is the ratio of net profit to total equity. A higher ratio indicates greater profitability and better efficiency. This enables a bank to raise more funds from the capital markets. Capital market Indicators: The performance of a bank’s scrip (shares) on the stock market depends on its profitability and it is judged by 2 parameters:^ Earning per share (EPS) ratio: Net ProfitNo of equity shares.^Price Earning Ratio (P/E) : price of sharesEarning per share# PRODUCTIVITY INDICATORS:~ The performance of a bank’s employee (human resource) has an important effect on the bank’s performance in the world of competition.~ The productivity of the banks can be indicated by:1) Profit per Employee: Net profitNo. of employees2) Business per Employee: Net Total IncomeNo. of employees~ Higher ratio indicates a productive and efficient staff.# FINANCIAL STABILITY INDICATORS:~ Apart from profit, financial stability is also of utmost importance to the banks as it gains the trust and confidence of its depositors.~ Financial stability can be judged by the CRAR ratio. It is the ratio of capital to risk-weighted assets.#Quality of Assets:~ The quality of assets in the bank depends on the level of Non-performing Assets (NPAs).~ The NPAs are those assets on which the payment of interest / principal amount receivable is in arrears.~ Higher NPAs indicate the deteriorating quality of assets.~ They are compared to Total Advances / Total Assets.~ The ratios used are: Gross NPAs / Gross Advances: Net NPAs / Net Advances~ If these ratios are higher, they indicate decreasing performance of assets.* PERFORMANCE OF PUBLIC SECTOR BANKS, NEW PRIVATE SECTOR BANKS AND FOREIGN BANKS IN INDIA:~ After the introduction of reforms, there is an overall improvement of performance of all banks.~ There is greater efficiency and better profitability despite the decline in spread.~ Comparative performance:PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS1997-98 88.5 lakhs 785.9 lakhs 529.4 lakhs2005-06 324.1 lakhs 728.9 lakhs 1012.8 lakhsIncreased, but Declined due to higher base Increased considerablyComparatively low Effect # Profits per Employee = Net ProfitsTotal no.of employees. PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS1997-98 0.7 lakhs 11.4 lakhs 4.5 lakhs2005-06 2.9 lakhs 6.3 lakhs 26.5 lakhs Increased Sharply declined due to higher base effect IncreasedEnormously# Business per Branch:PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKSNationalised Banks SBI & Associates 1999-2000 2152 lakhs 2860 lakhs 14989 lakhs 54800 lakhs2004-2005 4242lakhs 7454 lakhs 21656 lakhs 114768 lakhsIncreased, but comparatively lower Increased Increased ~ Thus the productivity of foreign banks was the highest, followed by the new private sector banks and then the public sector banks.~ The use of IT, customer care, liberal RBI policies, dedication of employees etc. play a key role in the increased production of Foreign Banks and New Private Banks.*PROFITABILITY:# Interest – income Ratio=Interest IncomeTotal Assets PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS2000-2001 8.8% 8.2% 9.3%2008-2009 7.26% 8.3% 6.78% Declined Improved marginally Declined# Interest -Expended Ratio = Interest ExpensesTotal Assets PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS2000-2001 6.0% 6.0% 5.6%2008-2009 5.14% 5.55% 2.87% Declined Declined Declined considerably# Intermediation-Cost Ratio = Operating CostsTotal Assets PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS2000-2001 2.7% 1.7% 3.0%2008-2009 1.5% 2.2% 2.8% Declined Increased Declined# Net Profit Ratio = Net profitsTotal Assets PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS2000-2001 0.4% 0.8% 0.9%2008-2009 0.91% 1.06% 1.68% Increased Increased Increased# Spread Ratio = Net InterestTotal Assets PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS2000-2001 2.9% 2.1% 3.6%2008-2009 2.12% 2.79% 3.91% Declined Increased Increased~ Thus, the foreign banks and new private sector banks are efficient and are able to generate greater income.~ However, the profitability of Public Sector banks is also improving.*FINANCIAL STABILITY:~ The capital adequacy ratio (CAR) indicates the financial soundness of a commercial bank.# CAR RATIO OF BANKS PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKSMarch2001 11.2% 11.5% 12.6%March2009 12.3% 15.1% 15.1% ASSET QUALITY:~ Asset Quality can be judged by the level of Non-Performing Assets (NPAs).~ A lower level of NPAs indicates better Asset Quality.~ A better quality of assets indicates greater efficiency.# GROSS AND NET NPAs OF COMMERCIAL BANKS. PUBLIC SECTOR NEW PRIVATE SECTOR FOREIGN BANKS Gross NPAs Net NPAs Gross NPAs Net NPAs Gross NPAs Net NPAs2008 2.2% 1.0% 2.5% 1.2% 1.8% 0.8%2009 2.0% 0.9% 3.1% 1.4% 4.0% 1.8% Declined Increased Increased *CUSTOMER SERVICE:~ These services provide customers easy access to banking facilities, thus improving overall customer service.~ Various financial services are available to customers. These Include:1) Core Banking Solution: These services include ‘anywhere banking’, ‘everywhere access’ and quick transfer of funds.2) ATM Facilities: All banks have introduced ATM facilities. The new private sector banks and foreign banks have greater percent of ATMs as compared to public sector banks.3) Computerization Of Banks: New Private Sector Banks and Foreign Banks have 100% computerization. The proportion of Public Sector Banks branches that achieved full computerization has also increased to 95%.

Discover a Bank Loophole To Buy Foreclosed Homes Dirt Cheap

Weve all heard the saying where theres a will, theres a way; well, how would you like to discover a bank loophole to buy foreclosed home dirt cheap? I can show you how to make money like big investors do. There was a time when banks wouldnt even talk to you if you didnt have A++ credit and a substantial down payment. Well, things have changed drastically, and you can now purchase property with less than perfect credit, with as little as $100 down. No, Im not talking about those infomercials where they promise you the world and deliver information that you can retrieve from your local courthouse. During these tough economic times, nobody has money to throw away and certainly no time to waste, so lets get right to the important part.-Do you want to be a successful real estate investor?-Would you like to purchase property with little or no money down?-Do you want the same opportunities as the real estate gurus who buy and sell hundreds of homes without spending a dime of their own money?-Would you like to tell your boss I quit, and never look back as you walk out the door?-Do you want financial freedom? If youve answered yes to all of the above questions, youre smart. Who wants to work, work, work and never enjoy life? You can get in on the best kept secret in the real estate industry the bank loophole that no one else will reveal. Sign up now, and get your piece of the real estate pie.

One Community Banker Separates Fact from Fiction to Help You Understand the Modern World of BankingIf you listen to the news about banking these days, be it on TV, in the paper or from the radio drive-time talk shows, it’s mostly doom with a heavy sprinkling of gloom just for good measure: “Banks aren’t lending money anymore!” “You’re just a number at those banks anyway!” “Online banking isn’t safe; they’ll steal your identity or sell your personal information!”So many myths about modern banking abound that one bank president has decided to clear the air by debunking the four major myths of banking during lean times. Or, for that matter, anytime at all. According to Robert Sumner, CEO of First National Bank of Pasco (FNB Pasco) near Tampa, Florida, “Banks do have money to lend; in fact, we’re lending every day.”Sumner adds, “All banks aren’t created equal. Maybe some of the big banks are in trouble, but try a small community bank and you’ll realize that we operate under a much less stringent set of rules. In fact, not only do we make our own rules but we get to call the shots as well.”If you’ve been fearful of approaching one of your local community banks for a loan recently, or have doubts about their safety or security, let Mr. Sumner dispel the four following myths for your convenience: Myth # 1 – Banks Aren’t Lending Money Anymore: Some of the bigger chain banks, gridlocked with federal red tape or their own corporate lending policies, have cut back on personal and even professional lending as they “restructure.” However, many small community banks are actively taking loan applications and eager to help those customers seeking reasonable personal or professional loans for a variety of reasons. Myth # 2 – Bankers Don’t Get Personal with Customers: Community banks are famous for personal customer service. Why? Because they are part of the community. While bigger banks deal in quantity over quality, smaller banks have more time, energy and staff to keep their customers happy. Myth # 3 – Banks Have Unlimited Money to Spend: No bank, big or small, has unlimited money to spend. In fact, the bigger the bank, the more systems of checks and balances they have to go through in order to lend you money. A customer requesting a loan from a large chain bank in Florida might have to get approval from a regional or even headquarters office two or three states away. A small community bank can answer you on the spot. Myth # 3 – Online Banking Isn’t Safe: Horror stories have happened to online banking customers, big or small. However, online banking is a big customer draw for banks of any size, and they have taken special pains to make it as safe as possible, with a variety of safeguards. With a community bank, of course, the biggest safeguard is walking through the front door.If you’ve been holding off on either personal or professional banking because of unreasonable fears or mass media hysteria, don’t delay; visit your local community bank today.

Net banking works in a comparable manner to conventional banking, the main distinction being the way 1 is making payments, accessing his account and personal details, and reconciling statements. Rather than visiting the local branch of his bank, the customer uses his computer to complete transactions. Web and conventional banking have their pros and cons to take into consideration. The choice of on the net vs. brick-and-mortar banking is often based on one’s lifestyle and priorities.As a main advantage of world wide web banking, the customer can accomplish multiple tasks inside the comfort of his house. Efficiency is what makes on the net banking attractive to clients: they can pay bills, move dollars between distinctive accounts, check multiple accounts, and a lot much more. Banking is fast and saves clients valuable time. Transactions are completed in seconds and 1 can print out the receipts for his personal records. The customer may possibly access his account at any given component of the day, even during weekends and holidays. Moreover, the on the net account might be accessed from any place around the world, provided that world wide web connection is readily available.On the net bank accounts make banking expedient, convenient, and inexpensive. Lots of banks charge fewer fees for the on line banking services they provide. Furthermore, banks have higher interest rates on savings accounts and certificates of deposit, and supply additional financial services and products. Buyers do not must acquire envelopes and stamps, run to the post office at the last minute, and risk being late on their payments. Monthly bank statements and bills might be accessed electronically. Finally, on-line banking employs sophisticated tools that aid manage one’s dollars and accounts with ease. Despite increased security measures plus the availability of anti-virus and anti-spyware programs, identity theft is still a concern. Other threats associated with on the net banking include phishing and hacking of on the web accounts.Time is among the precious commodities, especially for multi-taskers. On the other hand, some folks prefer to visit their local bank and interact with the teller in individual. Consumers can turn to the bank’s special account representative or even to the bank manager. Clients are physically present when money is handed over to them and when they place valuable items in their safety deposit boxes.When clients hold their cash in banks, they expect to have them accessible when required. The Federal Deposit Insurance Corporation provides coverage of up to $100.000 if banks cannot cover their clients’ accounts. Most banks have increased the level of security by installing much more surveillance cameras and hiring a larger number of security guards. With standard banking, clients are far better protected against identity theft. Even so, security is still a concern with conventional banking. Whilst criminals cannot hold a gun to one’s personal computer, they can rob a bank the conventional way.Inconvenient locations, fixed schedules, and extra limited financial services are a few of the disadvantages associated with conventional banking. In contrast to web banking, buyers opting for conventional banking services have to draw funds just before utilizing it.The FDIC (Federal Deposit Insurance Corporation) pays up to $100,000 of coverage, in case that a bank cannot cover its accounts (both on the internet and conventional). Having said that, protection from identity theft is an aspect of banking that conventional banks take greater care of.

<h1> Online Banking vs. Traditional Banking </h1> With the escalating popularity of the internet, an increasing number of industries are looking for methods to tap into this seamless medium in an attempt to keep up to date with the shifting technological penchant of their customers. At present, just about anything can be done online with the remaining possibilities burgeoning by the day. The potential of the internet is ostensibly infinite and the banking industry decided it was not going to be left in the lurch. Whilst the majority of people are familiar with the presence of online banking it is more than likely a large number of them have yet to have used it. This could very well be due to the fact that more than often we seem to find added comfort in working with real people and actual paper when dealing with matters related to money, as opposed to doing transactions in the seemingly aloof realm of cyberspace. Despite personal preferences, online banking and traditional banking both have their pros and cons. Pros and Prospects First of all, online banking boasts noteworthy expedience and pragmatism. When you use online banking, checking account details, scheduling payments and dealing with deposits, can all be done with a mere few clicks of the mouse.If you have upcoming payments due, scheduling multiple instalments in advance can be easily managed online, in retrospect to the sometimes gruelling task of keeping up to date with paper statements. When banking online, specified amounts and the required dates of payments are automatically processed and sent accordingly by the bank on your behalf.Travelling to the bank to ask for a financial statement is also not necessary; it can be downloaded from your online bank account which allows you see updated figures.A lucrative benefit of internet banking is that it is cost-effective. A myriad of customers can be dealt with immediately. Hence, there is no need to have an unnecessary amount of staff. Subsequently, a considerable amount of administrative work is reduced from internet banking. Overheads on paper slips, forms and even seemingly trivial expenditures such as bank stationery have declined, ultimately helping increase the bank’s profit margin by a startling amount. It is not essential to visit the local bank when applying for a loan as this too can be done online. The same applies to buying or selling stock as well as opening new bank accounts and closing old accounts. All of which being equally achievable as the more traditional procedures but without the tiresome paperwork clients had become accustomed to over time. More than ever this particular technological trend toward loans, insurance and banking is on the rise, mostly due to the acceptance of digital signatures around the globe. Don’t Bank on It Being a Realm With No Shortcomings For the majority of people the key issue is trust, or more correctly said, a lack of trust. Customers find themselves speculating over whether their transactions went through successfully or worrying that they clicked on the wrong button. Printing the transaction receipt as a routine practice is a pre-eminent method for overcoming such unease. By doing so, you can keep the receipt while waiting to receive confirmation that your transaction has been implemented successfully through notification in your bank statement or your online account. Even though online banking provides a simpler means for managing your finances, it may be easier to keep up-to-date with your financial statements for budgeting purposes. The reason for this is online banking is similar in nature to credit cards; with easy access and it being so simple to use, it becomes easier to spend your money without any judgement on the reasons why you are spending in the first place. An option for countering such trends and inclinations is to set up e-mail alerts which inform you when your account dips below a specified margin, however nothing is more effective than seeing it for yourself on paper or keeping your checkbook balanced. In addition, receiving a credit card statement in the post and opening it on a monthly basis is an instant reminder to check if there are any strange or out of the ordinary charges appearing on your account. It is far more likely to forget to keep track of such information online therefore you should strive to have good money management skills. Security Hackers are able to break into virtually any computer system, so you can’t really be too sure that they won’t break into your bank’s system. Nevertheless, any online banking site you consider using should have statements on the type of security they use. It is also advised to email the bank or head down to your nearest branch to enquire and find out exactly what would happen if there were a security breach; if their answer sounds vague stress the point that you want more clarity on the topic or alternatively go to another bank. The advantages and disadvantages of online banking are both equally persuasive – it makes life simpler for some people, forthrightly being a better way to bank. For other people it may be slightly more complex and utterly intimidating. This is why a great deal of people are now using an amalgam of both internet banking and physical banking. While banking online does not seem to be as tangible as physically depositing money at your local bank branch you can still do almost anything with online banking. Arguably, the greatest benefits of online banking are the time and money you save. In the light of these two perceptions, more and more banks are offering internet banking as a feasible option for their customers. At the end of the day, online banking makes life easier for the customers and bank employees alike.

Comparative study of non interest income of the Indian Banking Sector, a study of non interest income

Overview Of Banking Project Title: Comparative study of non interest income of the Indian Banking Sector Submitted by: Gaurav Sharma BBA(Finance, Gold Medal),MBA(Finance) gksindia1@gmail.com Index Introduction 1 Methodology 3 SBI& Associates 5 Nationalized banks(Public sector banks) 10 Private sector banks 15 Foreign banks 20 Findings 25 Conclusion 26 Literature review 26 References 26 Introduction There are two broad sources of bank revenues: Interest income Non-interest income. Interest income is generated from what is known as the spread. The spread is the difference between the interest a bank earns on loans extended to customers, corporate etc and the interest paid to depositors for the use of their money. It is also earned from any securities that the banks own, such as treasury bills or bonds. Non-interest income is earned by providing a variety of services, such as trading of securities, assisting companies to issue new equity financing, securities commissions and wealth management, sale of land, building, profit and loss on revaluation of assets etc. As compared to the developed world, the Indian banking sector, apart from the relying on traditional sources of revenue like loan making are also focusing on the activities that generate fee income, service charges, trading revenue, and other types of noninterest income. While noninterest income plays an important role in banking revenues in the developed world, its contribution to the total income of the Indian banking was 25% as on 31st March 2008. Components of non interest income The major components of non interest income in our banking sector are as follows: Commission/ exchange and brokerage Profit or loss on Sale of investments Profit or loss Sale of land& buildings Profit/loss on revaluation of investments Profit or loss on Exchange transaction etc. Miscellaneous income source which includes advisory, trading etc. Share of various sources of non interest income The share of various sources of non interest income to the total income of banking sector as on 31st march 2008 is shown in the pie chart below: In the above figure we find that the highest contribution to the non interest income has been of the commission followed by sale of investments, miscellaneous income and exchange transactions. Movements of interest and non interest income of the Indian banking sector (1994-2004) Methodology Under this I have done a comparative study of non interest income of the Indian banking sector by classifying banks into four categories: SBI and associates which includes State bank of India, State bank of Bikaner and Jaipur, State bank of Hyderabad, State bank of Mysore, State bank of Patiala, State bank of Saurashtra and State bank of Travancore. Nationalized banks: (Public sector banks) which includes Allahabad bank, Andhra bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara bank, Central Bank of India, Corporation bank, Dena bank, Indian bank, Indian Overseas bank, New bank of India, Oriental bank of Commerce, Punjab &Sind bank, Punjab National Bank, Syndicate bank, UCO bank, Union bank of India, United bank of India, Vijaya bank.( Total 19) Other scheduled banks: (Private sector banks) which includes Development credit bank, Times bank, Axis bank, Indus land Bank, ICICI bank, Bank of Rajasthan, Catholic Syrian bank, Lakshmi Vilas bank, HDFC bank, Centurion bank, Bank of Punjab, Tamilnad Mercantile Bank, Federal bank, Punjab Cooperative bank, Lord Krishna bank, ING Vyasya bank, IDBI bank, Dhanlakshmi bank.(total 18 banks) Foreign banks: which includes Barclays bank, ING bank, ABN Amro bank, Bank of America, BNP Paribas, Standard Chartered bank, DBS bank ,Citibank, HSBC, Deutsche bank, Mashreq bank, Bank of Nova Scotia, Bank of Bahrain & Kuwait, American Express bank (total 14 banks) The banks used under private sector and foreign sector category are reflective of major portion of their respective market/category. Moreover data was not available for other banks within that category. The period of study taken was 11 years i.e. 1994-2004. The period of study was taken as 11 years because, for the above mentioned period the data was available for all the bank and to ensure uniformity. Objectives of the study: To analyze the growth of non interest income as a source of revenue for the Indian banking sector over a period of 11 years (1994-2004). To analyze the contribution of major components of the non interest income over a period of 11 years (1994-2004). To find out statistically that how much of the profits of the banking sector over a period of 11 years is determined by non interest income and interest income. To find out statistically the contribution of various components of Non interest income towards the profits of the bank over a period of 11 years. To find out the contribution of interest and non interest income towards the total income in each of the 11 years (1994-04). To find out the correlation between the non interest income and the total income of the banking sector over a period of 11 years. To find out the reasons for the increase in the non interest income and what are the challenges involved to generate non interest income. Tool used: Data regarding the interest income, non interest income, profits, various components of non interest income, total income of the banking sector has been collected from the RBI website. To find out the influence of interest and non interest income on the profits of the banking sector, I have made use of multiple regression tool in E-views software. The interest and non interest income were independent variable and the profits of the bank was the dependent variable Two Multiple Regression equation was used for the study: Equation 1 Profits=a+b1*interest income+b2*noninterest income Where b1 and b2 were coefficient and a is the intercept term which shows the profits of the bank had been c if interest and non interest income had been 0 Equation 2 Profits: a+b1*commission+b2*profit/loss on sale of land+ profit/loss on sale of investment+ profit/loss on revaluation of investment +profit/loss on exchange transactions+ Miscellaneous income Where profits was the dependent variable and various components of non interest income were independent variable and a is the constant term The equation 2 was used to find out the influence of various components of non interest income on the profits of the bank. SBI and Associates (Rs000) In the above table we see the following: Column1: Average Column 2: Year Column 3: Other income or the non interest income of the bank Column 4: Commission, exchange and brokerage Column 5: Net profit/loss on sale of investment Column6: Net profit/loss on revaluation of investment Column7: Net profit/loss on sale of land, building and other assets Column 8: Net profit/ loss on exchange transactions Column 9: Miscellaneous income Column 10: Total income of the bank Column 11: Profit/loss of the bank Column 12: Interest income of the bank Column 13: Noninterest income as a percentage of total income Column 14: Interest income as a percentage of total income Influence of interest and non interest income on profits of SBI& Associates The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the SBI and its associates are determined by interest and non interest income. We find non -interest income to be a significant variable in explaining the profits of SBI as the prob value is less the .05 (.0095)and the value of t stat is more than 2(3.386)[ Rule: an independent variable is said to be significant is its prob value is less than .05 or the t-stat is more than 2). We find that in our regression model the percentage of variation in the profits of SBI and its associate that is explained by interest and non interest income is 92.81% ( Rule: for a regression model to be efficient the r-square shall be at least .6) From the above output we find that Noninterest income had a significant influence on the profits of SBI and its associates over a period of 11 years. Influence of non interest components on profit of SBI& Associate Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .990(a) .981 .943 4040785.55743 a Predictors: (Constant), misc, plland, plexchange, pllinvest, plreav, comm Coefficients(a) Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) -20565743.526 10099548.868 -2.036 .135 comm 2.109 .603 1.153 3.495 .040 pllinvest .970 .255 .944 3.805 .032 plreav 27.569 76.257 .100 .362 .742 plland 76.158 97.743 .221 .779 .493 plexchange -1.077 .815 -.135 -1.322 .278 misc -4.728 2.151 -1.042 -2.198 .115 a Dependent Variable: profit In the above regression output the independent variable used were various components of non interest income i.e. commission/exchange /brokerage, profit/loss on sale of investment, profit and loss on revaluation of investment, profit/loss on sale of land/building, profit/loss on exchange transaction and miscellaneous income. And the dependent variable used was the profits of the SBI& associates The objective is to find out that which one of the non interest component had a major influence on the profit of SBI & associates over a period of 11 years. We find the following: The percentage of variation in the profits of the SBI& associates explained by the 6 independent variables is 98.1% which is significant(as R square shall be more than .6) We find that commission/exchange/brokerage and profit/loss on sale of investment had a major influence on the profits of the SBI and its associates over a period of 11 years. As they are having a prob values less than .05(level of significance) and is having a t-stat more than 2. This means that SBI and its associates shall focus more on commission exchange and brokerage for its non interest income. Contribution of various components of non-interest income of SBI& Associate(94-04) The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that commission/exchange and brokerage had around 59% (highest) contribution to the non interest income followed by sale of investment (20%). Exchange transaction was having a contribution of 12% and miscellaneous income was having an influence of 9%. The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income. Movements of interest and non interest income of SBI & Associates(94-04) If we look at the movement of interest and non interest income of SBI and associates over a period of 11 years we will find that the non interest income has grown at a CAGR of 18.46% and the interest income has grown at a CAGR of 13.15%.The noninterest income over a period of 11 years has grown by 444.563% whereas interest income has increased by 244.14% which shows how aggressively the bank is working on its non interest income. Contribution of interest and non interest income of SBI & Associate From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 14% to 21% and share of interest income has decreased from 85% to 78%. On an average over a period of 11 years the contribution of non interest income as been 15% and interest income has been 85% to the total income of the SBI and its associates. Correlation between non interest income and total income 0.935642 There is a very positive correlation between non interest income and the total income of SBI and its associates which shows that higher the non interest income higher the total income of the SBI& associate. Nationalized banks: Public sector banks (Rs000) In the above table we see the following: Column1: Average Column 2: Year Column 3: Other income or the non interest income of the bank Column 4: Commission, exchange and brokerage Column 5: Net profit/loss on sale of investment Column6: Net profit/loss on revaluation of investment Column7: Net profit/loss on sale of land, building and other assets Column 8: Net profit/ loss on exchange transactions Column 9: Miscellaneous income Column 10: Total income of the bank Column 11: Profit/loss of the bank Column 12: Interest income of the bank Column 13: Noninterest income as a percentage of total income Column 14: Interest income as a percentage of total income Influence of interest and non interest income on profits of Public sector banks (94-04) The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the public sector banks are determined by interest and non interest income. Non interest and Interest income are independent variables and profit is the dependent variable From the above output we find: We find non -interest income to be a significant variable in explaining the profits of public sector banks as the prob value is less the .05 (.0268) and the value of t stat is more than 2(2.7056) [Rule: an independent variable is said to be significant if its prob value is less than .05(level of significance) or the t-stat is more than 2]. We find that in our regression model the percentage of variation in the profits of public sector banks that is explained by interest and non interest income is 88.86%( Rule for a regression model to be efficient the r-square shall be at least .6) From the above output we find that noninterest income had a significant influence on the profits of public sector banks over a period of 11 years. Influence of non interest components on profit of Public sector banks(94-04) Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .974(a) .948 .870 14640946.95589 a Predictors: (Constant), misc, plland, plreav, pllinvest, plexchange, comm. Coefficients(a) Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) -84595095.339 58218744.505 -1.453 .220 comm .151 5.866 .024 .026 .981 pllinvest .017 .478 .014 .035 .974 plreav -13.928 8.434 -.348 -1.651 .174 plland 48.353 63.394 .105 .763 .488 plexchange 5.954 8.910 .276 .668 .541 misc 3.451 7.536 .470 .458 .671 a Dependent Variable: profit In the above regression output the independent variable used were various components of non interest income i.e. commission/exchange /brokerage, profit/loss on sale of investment, profit and loss on revaluation of investment, profit/loss on sale of land/building, profit/loss on exchange transaction and miscellaneous income. And the dependent variable used was the profits of the public sector banks The objective is to find out which one of the non interest component had a major influence on the profit of public sector banks over a period of 11 years. We find the following: The percentage of variation in the profits of the public sector banks explained by the 6 independent variables is 94.8% which is significant(as r square shall be more than .6) We find that none of the non interest component was individually sufficient in explaining the profits of the public sector banks as we find that none of the non interest component is having a significance value of less than .5 or having a t-stat of more than 2. Contribution of various components of non interest income of Public Sector banks (94-04) The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that commission/exchange and brokerage had around 36% (highest) contribution to the non interest income followed by sale of investment (35%). Miscellaneous income was having a contribution of 16% followed by exchange transaction i.e. 12%. The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income. Movements of interest and non interest income of Public sector banks(94-04) If we look at the movement of interest and non interest income of public sector banks over a period of 11 years we will find that the non interest income has grown at a CAGR of 19.85% and the interest income has grown at a CAGR of 12.68%.The noninterest income over a period of 11 years has grown by 511.87% whereas interest income has increased by 230.03% which shows how aggressively the bank is working on its non interest income. Contribution of interest and non interest income of the Public Sector banks(94-04) From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 11% to 20% and share of interest income has decreased from 88% to 79%. On an average over a period of 11 years the contribution of non interest income as been 13% and interest income has been 87% to the total income of the public sector banks. Correlation between non interest income and total income of Public sector banks 0.940162 There is a very positive correlation between non interest income and the total income of public sector banks which shows that higher the non interest income higher the total income of the public sector banks. Private sector banks (Rs 000) In the above table we see the following: Column1: Average Column 2: Year Column 3: Other income or the non interest income of the bank Column 4: Commission, exchange and brokerage Column 5: Net profit/loss on sale of investment Column6: Net profit/loss on revaluation of investment Column7: Net profit/loss on sale of land, building and other assets Column 8: Net profit/ loss on exchange transactions Column 9: Miscellaneous income Column 10: Total income of the bank Column 11: Profit/loss of the bank Column 12: Interest income of the bank Column 13: Noninterest income as a percentage of total income Column 14: Interest income as a percentage of total income Influence of interest and non interest income on profits of Private sector banks(94-04) The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the private sector banks are determined by interest and non interest income. Non interest and Interest income are independent variables and profit is the dependent variable From the above output we find: We find non -interest income to be a significant variable in explaining the profits of private sector banks as the prob value is less the .05 (.0128) and the value of t stat is more than 2(3.188) [Rule: an independent variable is said to be significant if its prob value is less than .05(level of significance) or the t-stat is more than 2]. We find that in our regression model the percentage of variation in the profits of private sector banks that is explained by interest and non interest income is 95.95 %( Rule for a regression model to be efficient the R-square shall be at least .6) From the above output we find that noninterest income had a significant influence on the profits of private sector banks over a period of 11 years. Influence of non interest components on profit of Private sector banks (94-04) Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .964 .912 .881 309483.83835 a Predictors: (Constant), misc, plreav, plexchange, pllinvest, plland, comm Coefficients(a) Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) -775200.943 177724.748 -4.362 .012 comm .493 .252 .311 1.955 .122 pllinvest .623 .147 .672 4.240 .013 plreav 4.129 2.209 .062 1.869 .135 plland 108.894 14.560 .923 7.479 .002 plexchange -2.522 .513 -.268 -4.915 .008 misc 3.314 .310 1.114 10.680 .000 In the above regression output the independent variable used were various components of non interest income i.e. commission/exchange /brokerage, profit/loss on sale of investment, profit and loss on revaluation of investment, profit/loss on sale of land/building, profit/loss on exchange transaction and miscellaneous income. And the dependent variable used was the profits of the private sector banks The objective to find out which one of the non interest component had a major influence on the profit of private sector banks over a period of 11 years. We find the following: The percentage of variation in the profits of the private sector banks explained by the 6 independent variables is 91.2% which is significant(as r square shall be more than .6) We find that sale of investment , land & building and miscellaneous income and exchange transactions have a major influence on the profits of private sector banks over a period of 11 years as these variable are having a significance level of less than .05 and a t-stat of more than 2. According to the above output miscellaneous income had a major influence o the profits of the as its is having the maximum t-stat i.e. 10.680 so bank shall focus on it for its non interest income. Contribution of various components of non interest income of Private Sector banks (94-04) The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that sale of investment has around 41%(highest) contribution to the non interest income followed by commission/exchange /brokerage 34% followed by miscellaneous income(17%) and exchange transactions 8%. The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income. Movements of interest and non interest income of Private Sector banks(94-04) If we look at the movement of interest and non interest income of private sector banks over a period of 11 years we will find that the non interest income has grown at a CAGR of 43.50% and the interest income has grown at a CAGR of 33.95%. The non interest income over a period of 11 years has grown by 3604.74%% whereas interest income has increased by 1760.84% which shows how aggressively the private sector banks are working on its non interest income. Contribution of interest and non interest income of Private sector banks (94-04) From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 13% to 23% and share of interest income has decreased from 86% to 76%. On an average over a period of 11 years the contribution of non interest income as been 17% and interest income has been 83% to the total income of the private sector banks. Correlation between non interest income and total income of Private sector banks 0.987067 There is a very positive correlation between non interest income and the total income of private sector banks which shows that higher the non interest income higher the total income of the private sector banks. Foreign banks (Rs 000) In the above table we see the following: Column1: Average Column 2: Year Column 3: Other income or the non interest income of the bank Column 4: Commission, exchange and brokerage Column 5: Net profit/loss on sale of investment Column6: Net profit/loss on revaluation of investment Column7: Net profit/loss on sale of land, building and other assets Column 8: Net profit/ loss on exchange transactions Column 9: Miscellaneous income Column 10: Total income of the bank Column 11: Profit/loss of the bank Column 12: Interest income of the bank Column 13: Noninterest income as a percentage of total income Column 14: Interest income as a percentage of total income Influence of interest and non interest income on profits of Foreign banks (94-04) The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the foreign banks are determined by interest and non interest income. Non interest and Interest income are independent variables and profit is the dependent variable From the above output we find: We find non -interest income to be a significant variable in explaining the profits of foreign banks as the prob value is less the .05 (.0006) and the value of t stat is more than 2(5.459) [Rule: an independent variable is said to be significant if its prob value is less than .05(level of significance) or the t-stat is more than 2]. We find that in our regression model the percentage of variation in the profits of foreign banks that is explained by interest and non interest income is 94.64%( Rule for a regression model to be efficient the r-square shall be at least .6) From the above output we find that noninterest income had a major and significant influence on the profits of foreign banks over a period of 11 years Influence of non interest components on profit of Foreign banks (94-04) Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .995(a) .990 .975 891916.79648 a Predictors: (Constant), misc, plland, plreav, pllinvest, comm, plexchange Coefficients(a) Model Unstandardized Coefficients Standardized Coefficients B Std. Error Beta t Sig. 1 (Constant) 2987693.345 1103189.297 2.708 .054 comm -.182 .245 -.131 -.744 .498 pllinvest .371 .298 .158 1.248 .280 plreav -15.101 9.845 -.094 -1.534 .200 plland -9.579 5.393 -.123 -1.776 .150 plexchange .808 .384 .485 2.101 .103 misc 2.657 .952 .580 2.790 .049 a Dependent Variable: profit In the above regression output the independent variable used were various components of non interest income i.e. commission/exchange /brokerage, profit/loss on sale of investment, profit and loss on revaluation of investment, profit/loss on sale of land/building, profit/loss on exchange transaction and miscellaneous income. And the dependent variable used as the profits of the foreign banks The objective is to find out which one of the non interest component had a major influence on the profit of foreign banks over a period of 11 years. We find the following: The percentage of variation in the profits of the foreign banks explained by the 6 independent variables is 99.0% which is significant(as r square shall be more than .6) We find that only miscellaneous income have a major influence on the profits of foreign banks over a period of 11 years as it is having a significance level of less than .05(.049) and a t-stat of more than 2(2.790). Contribution of various components of non interest income of Foreign banks (94-04) The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that commission/exchange /brokerage was having around 48% (highest) contribution to the non interest income followed by exchange transactions 29%. The contribution of sale of investment was 17% followed by miscellaneous income 6% .The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income Movements of interest and non interest income of foreign banks (94-04) If we look at the movement of interest and non interest income of foreign banks over a period of 11 years we will find that the non interest income has grown at a CAGR of 19.57% and the interest income has grown at a CAGR of 13.49%. The non interest income over a period of 11 years has grown by 497.394%% whereas interest income has increased by 254.54% which shows how aggressively the bank is working on its non interest income Contribution of interest and non interest income of foreign banks (94-04) From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 21% to 31% and share of interest income has decreased from 78% to 68%. On an average over a period of 11 years the contribution of non interest income as been 23% and interest income has been 77% to the total income of the foreign banks. Correlation between non interest income and total income of foreign banks 0.972437 There is a very positive correlation between non interest income and the total income of private sector banks which shows that higher the non interest income higher the total income of the private sector banks. Findings We have seen that the contribution of non interest income of our banking sector has increased significantly over a period of 11 years. We have also seen that in each type of banks i.e. SBI, public sector banks, private sector banks and foreign banks the contribution of non interest income towards the total income has increased over a period of time and that of the interest income has decreased over a period of time. If we look at the total banking sector we will find that in our banking system the non interest income is having a significant influence on the profits of the banks. On an average the share of the non interest income towards the total income of the banking sector has increased from 12% in 1994 to 20% in 2004.If we look at the components of non interest income of our banking sector we will find that commission/exchange and brokerage earned by the banks had a major contribution i.e. 44% to the total noninterest income of the bank , after the commission the next big contribution to the non interest income had been of the sale of investments which was 28%, followed by exchange transactions having a share of 15%. Miscellaneous income was having the 13% contribution to the total noninterest income of the banking sector. The contribution of sale of land, revaluation of investments was having a negative or even a negligible influence on the noninterest income of the banking sector. On an average the non interest income of the banking sector has grown at a CAGR of 25% as compared to interest income which has grown at a CAGR of 18%. The percentage increase in the non interest income of the banking sector has increased by 1264.64% and interest income has increased by 622%. The private sector banks had seen a significant contribution in the increase of its non interest income over a period of 11 years as compared to other types of banks. Among the various non interest components that had an influence on the profits of the banking sector we find that commission, sale of investment, miscellaneous income had a significant influence on it. We also find that there was a positive correlation between the non interest income and the total income of the banking sector. We also find that in case of public sector banks none of the non interest component was found to be statistically significant enough to influence the profits over a period of 11 years. Reasons for increase in the non interest income Now if we look at the reason for the increase in the non interest income of the banking sector we will find that it has majorly increased due to following reasons: With economy growing at an unprecedented rate of 9.4 per cent during 2006-07 and acceleration in the growth rate being attributable to the buoyancy in the industrial and service sector, the demand for fee-based services of banks has gone up and as a result of which the non interest income has also risen up. Noninterest income is an effective way used by banks to respond to its squeezing margins At the bank level, greater reliance on noninterest income, particularly trading revenue, is associated with lower risk-adjusted pro?ts attached to it. Challenges involved Not aggressive direct customer interaction of public sector banks. High cost and less expertise involved in launching of innovative products/services as per the customers expectations. Technology requirements. Conclusion After studying the non interest growth pattern of the Indian banking sector over a period of 11 years we can say that it is slowly and gradually becoming one of the important avenues for our Indian banks to generate revenue from. In this respect we see that not only private banks and foreign banks are ahead but also our public sector banks are gradually catching it. We can say that it to be an important source available with our banking sector to respond to the squeezing margins and meeting the shareholders expectations. Literature review 1. Business Efficiency of Public Sector Commercial Banks: A Data Envelopment Approach : Ram Pratap Sinha (2008) The article says that following the nationalization of 20 major commercial banks in 1969 and 1980, the government followed policies of financial repression up to the 1980s. During this period the public sector commercial banks had rapid expansion of branches, especially in the rural and semi urban areas and had reasonable success in the matter of deposit mobilization and disbursement of loans. However, the operating efficiency of public sector commercial banks, declined during the period due to various reasons. In the 1990s, the banking environment was radically transformed by certain bold initiatives taken by RBI including the dismantling of entry barriers, rate deregulation, introduction of prudential accounting norm and the implementation of Basel I capital adequacy norms. The changed competition and accounting environment compelled the commercial banks to provide unprecedented attention to cost cutting and supplementing fund-based income by fee-based income. Product mix and earnings volatility at commercial bank: evidence from a degree of leverage model: Robert De young & Karin P Roland(1999) The article says that the commercial banks lending and deposit taking business has declined in recent years. Deregulation and new technology have eroded banks comparative advantages and made it easier for non bank competitors to enter these markets. In response, banks have shifted their sales mix towards noninterest income-by selling non bank fee based financial services such as mutual funds, by charging fees for services that used to be bundled together with deposit or loan products .It says that the conventional wisdom in the banking industry is that earnings from fee based products are more stable than loan based earnings and that fee based activities reduce bank risk via diversification. References RBI website Icfai Journal of Banking studies Sept 2008 issue pg 22-26 Ideas.repec.org

In the wake of the financial debacle on Wall Street, many Americans want to know where the safest place to deposit their money is.Just a few years ago, bigger was better in the banking industry. Big banks with scores of branches meant safety and stability – just like the Roman Empire. But that empire has been tumbling down. Large banks are on the edge of insolvency and the Federal Deposit Insurance Corporation (FDIC) is cracking down on the banking industry, making their enforcement actions public. But are all banks the same? With the constant reporting of the unethical if not immoral behavior on Wall Street from the media, the banking industry, in general, has been getting a bad rap. But ‘generalties’ have never faired man well. The discerning individual, if he is to navigate the troubled economic waters of our present day must be able to filter out the good from the bad, have access to the rating systems of the banks and determine from his own research which bank will serve him the best – and moreover, who will be there when the deck of cards fall. One has to know how to pervade through the “apparancy.”Marc Gaspard, President of the Washington Financial League, told the Seattle Times that local community banks were just as appalled as the American people. “Very few community banks made subprime-mortgage loans or invested in the subprime-mortgage-backed securities now being referred to as ‘toxic assets.’ ” Just as with any barrel of apples, a few bad apples can mess it up for the rest. Community banks have been lumped in the banking crisis by the criminal and irresponsible actions of Wall Street.The sleeping giant might just be the community banks, knighted by default with the responsibility of carrying the American banking system on their shoulders. It appears today that community roots have more appeal than a decade ago. In the rural region of Pasco County, Florida, one community bank withstood the scrutiny of BauerFinancial, a third-party rating system that reviews bank institutions’ 30-page report filed with government regulators each quarter. No bank can fall off BauerFinancial’s radar, whether they’d like to or not. BauerFinancial performs an independent analysis on the raw data supplemented with historical data in order to assign their ratings. For several consecutive quarters, they rated First National Bank of Pasco as one of the safest banks in the nation. FNB Pasco’s Board of Directors, veterans in the banking industry, apparently dug in their heels in regards to their financial strategies when Wall Street was living large. “Conservative” was the prevailing theme. According to them, sound financial principles are on the same order as natural laws, like gravity or inertia. Bob Sumner, President of Florida Bancshares, Inc., said there’s no escaping these principles, evident in the Wall Street debacle. Has anyone been listening or even paying attention to their community banks? Even back in October of last year Newsweek reported Karen Tyson of the Independent Community Bankers of America stating that the majority of community banks were overall “sound, stable, well-capitalized and trustworthy.”What can Americans do? It is not enough to merely believe the hype. Look past the salted bank promotions containing slogans of trust, safety and security and actually get them to prove it. Even though FDIC.gov is not a super user-friendly site, one can still learn their methods for rating banks if one searches enough. There are helpful sites such as bauerfinancial.com that has a great FAQ page and bankrate.com that gives an easy way to do a cursory check on how one’s bank is doing. Federal regulatory capital requirements vary among institutions and are dependent on many factors. In general, institutions are required to maintain a tangible capital ratio of at least 4%, a tier 1 risk-based capital ratio of at least 4% and a total risk-based capital ratio of at least 8%. (bauerfinancial.com)It is time for Americans to open up about their finances and find banks they can trust. Three basic actions they can initially take are to:1. Ask pointed questions about the safety of their institutions;2. Ask for their institution’s ratings;3. And most of all get them to prove it. Get them to put in writing how they stand up to their federal regulatory requirements on a regular basis. Today is the era of accountability. No one is exempt. As the saying goes, “put up or…”About First National Bank of Pasco:First National Bank of Pasco: “Your Hometown Bank” was started in 1986 by Andy P. Gibbs, of Gibbs & Parnell, P.A., a Florida law firm. The bank has three locations in Pasco County – Dade City, South Zephyrhills and West Zephyrhills. FNB Pasco prides itself on being a “high tech and high touch” bank, using technology and online banking to help their customers connect to “Your Hometown Bank” from anywhere. Florida Bancshares, Inc., the holding company of FNB Pasco was formed in 2008. Its President, Robert Sumner, who also serves on FNB Pasco’s Board of Directors, works closely with Mr. Gibbs and the other Board of Directors to guide and manage First National Bank of Pasco securely into the future for its community. Visit http://www.fnbpasco.com

For small business owners, one of the most perplexing situations is a realization that there are now essentially “good banks” and “bad banks”. To make matters worse, it is rarely easy to distinguish between the good and bad ones. For many commercial borrowers, business finance consulting has emerged as a helpful tool to determine which banks are still effective. But overall, the world of banking has changed dramatically for almost everyone, and many business borrowers are angry and confused by a new commercial banking landscape that does not seem to be working very well.One of the more difficult aspects associated with the “good bank and bad bank” analogy is that there are so many competing explanations as to what constitutes a “good bank”. One popular analysis has focused on how much banks are really worth in view of the toxic assets that are so complicated to evaluate. With this analysis, “bad banks” are typically those with assets worth less than their liabilities and as a result such banks have been referred to as “dead banks walking” or “zombie banks”.Not surprisingly we have not yet experienced a bank which has openly agreed that their liabilities exceed their assets and therefore they should be considered to be a zombie bank. This would be tantamount to describing themselves as a bankrupt bank. If a bank is truly deserving of the bankrupt status (and there are a number which certainly appear to be in this category), the current banking laws do not permit such a bank to go through the kind of bankruptcy process being considered by General Motors and Chrysler.Instead the Federal Deposit Insurance Corporation (FDIC) is supposedly required by law to assume the operation of the bankrupt bank until a new management and ownership arrangement can be established. For a number of smaller banks, this has in fact occurred during the past few months. What has been missing so far from this legal bank takeover approach by the FDIC has been the inclusion of larger banks which appear to have problems that are much more serious than the smaller banks which have already been liquidated and transferred to new owners by the FDIC.The reason that the FDIC has not liquidated larger problematic banks has not been made public. It is certainly possible that the FDIC and key public officials feel that the public failure of a major bank would create a crisis of confidence for all banks regardless of their financial health. An equally strong likelihood is that the FDIC simply does not currently have sufficient assets to cover the failure of a big bank. This viewpoint is supported by the recent announcement that the FDIC is in the process of raising fees paid by banks in order to replenish the FDIC insurance funds.Small business owners need their own evaluation standards to determine what constitutes either a “bad bank” or “good bank” as it relates to the future financial health of their own business. Business owners should include an assessment that focuses on results as to which banks can provide the needed help for their specific business circumstances involving working capital financing and commercial loan needs. The banks themselves are not likely to be helpful in providing the needed data to produce a candid evaluation of their financial status, even though such information would go a long way toward establishing a good bank-bad bank distinction.There are possibly several large bankrupt banks that have not rushed to advise the public that they are in serious trouble and are still functioning normally. While most banks have been publicizing during the past few months that they are making SBA loans and small business loans in a normal fashion, in most cases these banks have actually reduced commercial lending dramatically. In many areas business construction lending and specialized commercial lending have been effectively frozen.In addition to the critical importance of identifying “good banks”, we have published a related report which describes the delicate issue confronting many business owners who might need to fire their banker. Just as there are “good banks” and “bad banks”, there are also “good bankers” and “bad bankers”.Business finance consulting has emerged as an important tool to help small business owners work their way through a complicated commercial banking maze. In the Bernie Madoff fiasco, one of the common questions asked repeatedly is why investment advisors did not evaluate the Madoff internal operations prior to placing investor funds with Madoff and his Ponzi scheme.Our candid final point is that the use of a commercial finance consultant should be at least considered by commercial borrowers in their search for new working capital loans and commercial mortgage financing. Businesses now need to act more aggressively than before in order to protect their own financial interests.