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The IUP Journal of Bank Management

Feb-May '10
Focus

Banks, being financial intermediaries, essentially intermediate between the opposing liquidity needs of depositors and borrowers. In the process, they function with an embedded mismatch between highly liquid liabilities on the one side and less-liquid and long-term assets

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Do Managers of Mutual Institutions Choose Efficiency-Improving Mergers? The Recent Experience of Japanese Credit Associations
Modeling Money Attitudes to Predict Loan Default
Profitability of Foreign Banks Operating in India: A Multi-Discriminant Model
Effect of Size and Age on the Performance of Indian Banks Under Different Ownership Forms
Paradigm Shift in E-Banking: Some Evidence from Indian Banks
An Analysis of the Efficiency of Private Sector Banks in India
Potential for Mortgage Loan in India: A Survey Among the Senior Citizens of Vadodara, Gujarat
Bank Selection Criteria Employed by Customers in Labuan: A Study
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Do Managers of Mutual Institutions Choose Efficiency-Improving Mergers? The Recent Experience of Japanese Credit Associations

--Nobuyoshi Yamori,
--Kozo Harimaya

Because of the unique corporate governance feature of mutual institutions, managers are expected to maximize their own interests at the expense of other stakeholders' interests. However, this study finds that managers of Japanese mutual banks do not behave as suggested.

Modeling Money Attitudes to Predict Loan Default

--Sunil Bhardwaj,
--Kaushik Bhattacharjee

The primary objective of the study is to classify the defaulters and non-defaulters of auto loans based on their specific personality traits, viz., `money attitude' and `income dimensions'. However, the aim is not only to classify, but also to understand the root of the defaulter behavior. Therefore, the study probes deeper into the attitude and perception variables of the consumers who avail loan facilities. The study, based on the customers of an MNC bank1, using a survey in two metropolitan cities in India, suggests that the constructs of personality traits, such as money attitudes, power-prestige and anxiety, actually enhance the intention and actual usage of loan facility, and that the same can be the predictors of default behavior at a significant level. The results and the model developed can be used as the basis for decision making while processing loans.

Profitability of Foreign Banks Operating in India: A Multi-Discriminant Model

--V K Shobana and G Shanthi

Moving from the scenario that was dominated by nationalized banks, Indian commercial banking system has witnessed a rapid spread of Foreign Banks (FBs). The operations of FBs have received a considerable boost during the post-reform era beginning with the year 1993, providing opportunities for players to shape up and prepare for their growth. This paper is an attempt to determine the profitability of FBs operating in India, using the data for the period from 1996-97 to 2004-05. The study uses multi-discriminant function analysis to identify the variables discriminating the high profitability bank groups from the low profitability groups.

Effect of Size and Age on the Performance of Indian Banks Under Different Ownership Forms

--Harsh Arora

A sound and effective banking system helps in the building of a healthy economy of a country. India is not an outlier in this respect. The Indian banking sector has also undergone changes. These changes have given a sound industrial structure in the country. Further, to strengthen the structure, the Indian government liberalized the industry in the year 1991. This liberalization gave entry to many foreign players. It also helped many domestic players to establish themselves in the industry. Today, all public sector and private sector banks (both Indian and foreign) compete with each other. The main thrust of the paper is to find out how age and size of banks affect their growth performance. The paper contributes to the existing literature in the area and encourages future research.

Paradigm Shift in E-Banking: Some Evidence from Indian Banks

--R K Uppal

The present paper examines the productivity and profitability in pre and post e-banking periods and highlights the emerging issues and new strategies to enhance the performance of bank groups in today's liberalized, globalized and IT era. The paper concludes that though there is a paradigm shift in the performance of all bank groups in the post e-banking period, new private sector banks and foreign banks have an edge over Public Sector Banks (PSBs). The fully IT-oriented banks have become both a threat and a motivation for the PSBs. The paper stresses on customer-centricism, proficiency in managing assets, technology, skilled staff, transparency, human resource management policies, customer relationship management, and merger and acquisition policies as vital factors to enhance the performance of banks to face the emerging global competition.

An Analysis of the Efficiency of Private Sector Banks in India

--B S Bodla,
--Richa Verma Bajaj

This paper aims to examine the efficiency, benchmarks and targets for private sector banks operating in India. Keeping in view the limitations of ratio analysis techniques, production approach of Data Envelopment Analysis (DEA) was applied to judge the efficiency of private sector banks. In this model, banks are considered as service providers, and while interest expenses, non-interest expenses and the Non-Performing Asset (NPA) ratio, i.e., net NPAs to net advances, are considered as input variables, deposits, advances and investments are considered as the output variables. The paper analyzes the efficiency of 29 private sector banks with the dataset ranging from the period 1998-99 to 2005-06. The results of the study indicate that there is a lot of scope for the private sector banks to improve their efficiency level, as, at the most, only 31.25% private sector banks were found efficient during the entire study period. The results indicate that a majority of private sector banks in India need to take steps to decrease the NPA level and improve their output parameters, such as deposits, advances and investments, because they have failed to acquire full efficiency score in all the years under study.

Potential for Mortgage Loan in India: A Survey Among the Senior Citizens of Vadodara, Gujarat

--Vipin Desai

Reverse mortgage loan is a home loan product having its deep roots in western countries. As far as India is concerned, the name formally figured in the Budget-2007 speech, in which the Finance Minister proclaimed the government's intention to have this product launched as a social security measure for the senior Indian citizens. The banks and other lending institutions were expected to offer this product. However, the present status of the scheme does not reflect it having reached the expected level. Although some banks have announced the scheme, the volume of sanctions and disbursements is not large enough. The popular discourse suggests that Indians would not accept the said product due to their emotional attachment to the house, and their mindset towards leaving a legacy behind them for their heirs. Do the banks, too, have apprehensions on these lines? Is it due to such apprehensions that much publicity is not given after making formal announcements? This paper makes an attempt to analyze these issues based on the data collected from the senior citizens and ascertain the potentiality of the product by examining the substance and the scale of the said apprehensions, if any. The study is based on a sample survey of senior citizens in Vadodara, Gujarat.

Bank Selection Criteria Employed by Customers in Labuan: A Study

--Nelson Lajuni,
--Bryan Lo Ching Wing,
--Mohd. Fahmi bin Ghazali

Banks, which aim to attract a vibrant segment of competitive market, must identify the criteria based on which potential customers determine their bank selection decision. The study focuses on examining the bank selection criteria preferred by Labuanese. Seven parameters, viz., image, services offered, influences, incentives, security, conveniences, and the advancement of technology, were chosen to investigate the customers' attitude towards selecting banks. A total of 200 questionnaires were distributed; however, only 185 questionnaires were returned (54% male and 46% female) which served as the sample for the study. Respondents were selected randomly; however, care was taken to choose only those who were working or had their own income, as they were believed to possess the purchasing power to be in need of bank transaction. The study shows that Labuanese preferred banks that could offer and promise efficiency, and a wide range of services, including Automated Teller Machines (ATMs). They also gave preference to banks that were strictly regulated by the central bank and financially stable with a strong brand name.

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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.

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