INTRODUCTION

INTRODUCTION
Banking regulation Act, 1949, defines banking as accepting for the purpose
of lending or investment, of deposits of money from the public, repayable
on demands or otherwise and with drawable on demand by cheques, draft
or order otherwise.
Functions of Commercial Banks :
To change cash for bank deposits and bank deposits for cash.
To transfer bank deposits between individuals and or companies.
To exchange deposits for bills of exchange, govt. bonds, the secured
and unsecured promises of trade and industrial units.
To underwrite capital issues. They are also allowed to invest 5% of
their incremental deposit liabilities in shares and debentures in the
primary and secondary markets.
The lending or advancing of money either upon securities or without
securities.
The borrowing, raising or taking of money.
The collecting and transmitting of money and securities.
The buying and selling of foreign exchange including foreign bank
notes.
Banking scene in India
The banking sector in India is passing through a period of structural
change under the combined impact of financial sector reforms, internal
competition, changes in regulations, new technology, global competitive
pressure and fast evolving strategic objectives of banks and their existing
2

and potential competitors. Until the last decade, banks were regarded
largely as institutions rather akin to public utilities. The market for banking
services were oligopolies and Centralized while the market place was
regulated and banks were expected to receive assured spreads over their
cost of funds. This phenomenon, which was caricatured as 3-6-3 banking
in the united states, meaning that banks accepted deposits at 3%, lent at
6%, and went home at 3 p.m. to play golf, was the result of the sheltered
markets and administrated prices for banking products. Existence of entry
barriers for new banks meant that competition was restricted to existing
players, who often operated as a cartel, even in areas where the freedom to
price their products existed.
The market place began to change for banks in India as a result of reforms
of the financial sectors initiated in the current decade. On account of policy
measures introduce to infuse greater competitive vitality in the system, the
banking has entered in to a competitive phase. Competition has emerged
not only from within the banking system but also from non-banking
institutions. Lowering of entry barriers, deregulation of interest rates and
growing sophistication of customers have made banking far less
oligopolistic today. Introduction of capital adequacy and other prudential
norms, freedom granted to enter into new turfs and greater overlap of
functions between banks and non-banks have forced banks to get out of
their cozy little world and think of the future of the banking.
Emerging environment in India
Full convertibility of rupee leading to free mobility of capital, which will
mean virtual collapse of the national borders for trade and capital
flows.Greater coordination between monetary, fiscal and exchanged rate
policies for achieving the goals of faster and sustainable economic growth,
macro-economic stability and export promotion.Close integration of
3

various financial markets such as money market, capital market and forex
market.Removal of lowering of existing barriers of competitiveness, which
are present today in the form of quantitative instructions on certain imports
protective custom duties, reservation of certain utilities for the public
sector.
Growing privatization and commercialization infrastructure sector.
Today, Banks customers are better informed, more sophisticated and
discerning. They also have a wide choice to choose from various banks and
non-bank intermediaries. Their expectations are soaring. This is
particularly true for banks corporate clientele but also applies to customers
from personal segment.
This is changing profile of customers call for a shift from product-based
approach to customers-based approach. A bank aiming at maximizing
customer value must, of necessity, plan for customized products. A
combination of marketing skills and state-of-the-art technology should
enable to bank in maximizing its profits through customer satisfaction.
In the next millenium banks will have to be more and more cautions about
customer service, profitability, increased productivity, to keep face with
changing banking scenario. As banks in India prepare themselves for the
millenium these are the shifts in the paradigm they are likely to experience.
The 21st century may see the dawn of DARWINIAN BANKING. Only
the banks could fulfill the demands of markets and changing items would
survive and prosper.

A word about SBI card

SBI Segment :
Small business credit card (SBI credit card)
Preamble :
Small business units, retail traders, artisans, village industries, small-scale
industrial units and tiny units, professionals and self employed persons
etc., contribute significantly to the growth of our economy. The
entrepreneur himself manages many of the units. Very often, these
entrepreneurs complain of procedural delay in sanctions and renewal of
limits. They also find it difficult to cope with the demands for audited
balance sheet and other statements sought by the bank from time to time
for availing credit facilities. With a view to providing hassle free financial
supports to the above categories of entrepreneurs who have shown
commitment to run the unit successfully and who are dealing with the
banks for last two years satisfactorily, new and friendly credit product
namely small business credit card scheme is designed. Under the scheme,
cumbersome procedural aspects relating to reviews and renewals,
submission of balance sheet, stock statements and other statements are
done with credit delivery made simple and easy.
Purpose :
To meet the credit requirements of small business units, industrial unit,
retail trader, artisan, Small Scale Industry (SSI) and tiny units.

Eligibility :
A.

Customers of the following segments with a satisfactory track

record for the last two years enjoying credit facilities.

Small industrial units (SSI and tiny units including

artisans)

B.

Small retail traders (Under SBF)

Professional and self employed persons

Small business enterprise

Units who do not enjoy credit limit with us/other banks at present
with excellent performance and credential may be considered.

Quantum of loan :
Loan up to Rs. 5 Lakh can be sanctioned to eligible persons.
Assessment :
The small business credit card limit can be fixed as follows :

For small business, retail trader etc. 20% of the annual turnover
declared for tax purpose or last twelve months turnover in the
operative accounts, whichever is higher.
In respect of parties with good track record, where sales tax returns
are not available, the credit limits may be decided taking into
consideration the actual turnover in the accounts during the last two
years.

For professionals and self employed persons, 50% of their gross

annual income as per IT return shall be considered as the limit for
issuing the SBI credit card.

For small scale industrial units, tiny sector units the assessment
norms in vogue as per the Nayak Committee recommendations
would continue.

Validity :

Credit card limit will be valid for a period of three years, subject to
satisfactory conduct of the accounts.

Annual review will be done based on conduct/operations of the A/cs.

A major portion of the sales turnover should have been routed
through the accounts as revealed by the credit summations.

Repayment :

The working capital advance may be continued subject to that

review every year provided the credit summations in the account is
not less than 50% of the projected sales turnover. If the credit
summations is less than 50% of projected sales turnover. The
outstanding as on the due date of review should be made repayable
in suitable monthly installments.

The term loan is repayable in suitable installments with in a

maximum period of five years.

In case of composite loans, only the term loan is repayable in

installments up to a maximum period of five years.

Interest rate :
As per extent instructions issued from time to time relating the market
segment.

Refinance :
No refinance is to be claim from SIDBI
Security :
Primary :

Hypothecation of the stock in trade receivables, machinery,

office equipment.
Collateral :
Under SSI-No collateral security as per existing guidelines of RBI.
User SBF :
Up to Rs. 25000/- No collateral security.
Over Rs. 25000/- charge over movable/immovable property or third party
granted.
However, in case of the excellent track record, sanctioning authority may
waive collateral requirement.
Margins :
Up to Rs. 25000/-

NIL

Rs. 25001/- to Rs. 5,00,000/-

20%

Documentation :
Documents as per extant instructions.
Methodology :
The credit card is a hassle free convenient banking product aimed at
simplifying the credit delivery mechanism. Cumbersome procedural
aspects relating to reviews and renewals, submission of stock statement,
balance sheet and other statements are done away with. The credit limit
will be worked as detail above.
8

Small business credit card

Card No.
Name
Account No.
Tel. No.
Limit Rs.
Date of issue
Valid upto
.. (Branch Code)
Signature of the Brach Manager
Card holders Photograph with signature
The borrower would be issued a photo card indicating sanctioned limit and
validity of the limit (sample card)
Insurance :

Fixed assets/stock pledged/hypothecated to the bank be fully insured at least to

the extent of the bank interests.

Bank may waive insurance of assets for equipment against the fire
and other risk up to Rs.25000/-

Cover under credit guarantee scheme :

All eligible laon accounts sanctioned for small scale industries (other than
services) would qualify for cover under CGTFSI scheme (presently the
scheme has been introduce in five circles on pilot basis viz. New Delhi,
Chandigarh, Lucknow, Patna & Hydrabad).

Operation :

Small business credit card accounts should be maintained in a

separate ledger.

Cheque book should be issued and marked as small business credit

card account.

Pass book should be issued for mall business credit card holders.

Stock statement waived.

Submission of audited balance sheet waived.

Borrower would be issued a small business credit card with

photograph thereon. Cost of photograph to be borne by banks.

IRAC norms would be applicable.

Brief opinion report should be recorded. Marked inquiries should be

made and recorded in the opinion report and singed by the field
officer/cash officer or officers not below that rank.

Units within a radius of 5 kilometers may be covered intensively for

the issue of credit card. This condition may be waived for such of
those units already in the book of the branch as on 31-2-2002.

Inspections :
Half-yearly inspection/monitoring to ensure the end user funds.
Sanction :
Required loan may be sanctioned with in a week after receipt of detailed
information.
Control return after sanction may be sent to next higher authority for
approval .

10

Scoring Model :
Loan would be sanctioned up to Rs. 5,00,000/- based on the simplified
scoring model as given in annexure- II. Those who are scoring less than
60% would not qualify for the loan.
Rationale :
New schemes for hassle free credit facilities to small borrower.
Automatic Teller Machine (ATM)
An ATM (Automatic Teller Machine) card is useful to a card holder
as it helps him to withdraw cash from banks even when they are
closed. This can be done by inserting the card in the ATM installed
at various banks locations.
State Bank Cash Plus CARD
o

Signature Panel.
Magnetic Stripe

Features of State Bank Cash Plus Card

State Bank Cash Plus Card having the 19 digit.

Name of the card holders mention there on it.

In case of State Bank Cash Plus Card, there is no expiry period but
for the old card, the date after which your card needs to be renewed
is the last day of the month indicated on your card.

Signature panel on which you must sign as soon as youre your card.
It identifies the card as your State Bank Card Plus Card.

The magnetic stripe, which contains encoded information.

ATM card possess pincode which having the 4 digit.

Use of State Bank Cash Plus Card

11

We uses our State Bank Cash Plus Card for cash withdrawal from
ATMs.
We uses it for making the payments for purchase made at the
merchant establishments.

Significance of the Study

This study entitled comparative study of various credit schemes of SBI
V/s other banks will be helpful for bankers to maintain customers service
policy, for customers while deciding their financing needs and also helpful
for other researchers for further research in the future.
SBI card provides customers with an option, in addition to the existing
banking credit facilities available. With an SBI card customers can enjoy
hassle-free credit facilities.
This study would help us to know about the problems that are faced by the
consumers during transactions. It would also reveal the problems that are
being faced by the bank employees while dealing with customers and
would also highlight the future prospect of SBI card.
Review of existing literature
It is very essential to know whether the study has already been conducted
before. If so, how and to what extent ? And because of this scholar has to
go through all the existing literature related to the study. SBI Card is a new
concept introduced in Bhiwani by State Bank of India only a few months
back, very limited studies have been conducted on the subject. Due to the
time restrictions scholar could seek advice from only the limited literature,
which is available with the bank.
As the concept is completely under the control of various banks and RBI.
So the information is directly taken from these sources.

12

Conceptualization
As the concept includes two terms i.e. cash credit or working capital loans
and terms loans. Therefore both the terms are taken into consideration in
the proposed study. Due to the privatization of banking sector many big
private players entered in this sector giving a tough competition to the
existing players. So, to face this stiff competition all the public sector
banks have to review their functioning. These aspects will be given
importance in this study.
The concept of SBI card is quite new to the people of Bhiwani. Question
crops in mind what is a SBI card, What is its shape and size, what is its
function. A SBI card is nothing but a identity card containing card holders
photographs with signature, card no. Name, A/c No. limit, validity period,
branch code with signature of Branch Manager.

13

COMPANY PROFILE
State Bank of India

BACKGROUND
The SBI was formed through an Act of Parliament in 1955 by taking
over the Imperial Bank. The SBI group consisted of seven associate
banks:
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
State Bank of Bikaner & Jaipur
The State Bank of India, the countrys oldest Bank and a premier in
terms of balance sheet size, number of branches, market capitalization
and profits is today going through a momentous phase of Change and
Transformation the two hundred year old Public sector behemoth is
today stirring out of its Public Sector legacy and moving with an
agility to give the Private and Foreign Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups
Pension Funds, General Insurance, Custodial Services, Private Equity,
Mobile Banking, Point of Sale Merchant Acquisition, Advisory
14

Services, structured products etc each one of these initiatives having

a huge potential for growth.
The Bank is forging ahead with cutting edge technology and
innovative new banking models, to expand its Rural Banking base,
looking at the vast untapped potential in the hinterland and proposes
to cover 100,000 villages in the next two years.
It is also focusing at the top end of the market, on whole sale banking
capabilities to provide Indias growing mid / large Corporate with a
complete array of products and services. It is consolidating its global
treasury operations and entering into structured products and
derivative instruments. Today, the Bank is the largest provider of
infrastructure debt and the largest arranger of external commercial
borrowings in the country. It is the only Indian bank to feature in the
Fortune 500 list.
The Bank is changing outdated front and back end processes to
modern customer friendly processes to help improve the total
customer experience. With about 8500 of its own 10000 branches and
another 5100 branches of its Associate Banks already networked,
today it offers the largest banking network to the Indian customer. The
Bank is also in the process of providing complete payment solution to
its clientele with its over 8500 ATMs, and other electronic channels
such as Internet banking, debit cards, mobile banking, etc.

15

With four national level Apex Training Colleges and 54 learning

Centers spread all over the country the Bank is continuously engaged
in skill enhancement of its employees. Some of the training programs
are attended by bankers from banks in other countries.
The bank is also looking at opportunities to grow in size in India as
well as Internationally. It presently has 82 foreign offices in 32
countries across the globe. It has also 7 Subsidiaries in India SBI
Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI
Life and SBI Cards - forming a formidable group in the Indian
Banking scenario. It is in the process of raising capital for its growth
and also consolidating its various holdings.
Throughout all this change, the Bank is also attempting to change old
mindsets, attitudes and take all employees together on this exciting
road to Transformation. In a recently concluded mass internal
communication Programme termed Parivartan the Bank rolled out
over 3300 two day workshops across the country and covered over
130,000 employees in a period of 100 days using about 400 Trainers,
to drive home the message of Change and inclusiveness. The
workshops fired the imagination of the employees with some other
banks in India as well as other Public Sector Organizations seeking to
emulate the Programme.
The

CNN

IBN,

Network

18

recognized

this

momentous

transformation journey, the State Bank of India is undertaking, and

16

has awarded the prestigious Indian of the Year Business, to its

Chairman, Mr. O. P. Bhatt in January 2008.
The SBI was the largest bank in India in terms of network of
branches, revenues and workforce. It offered a wide range of services
for both personal and corporate banking. The personal banking
services included credit cards, housing loans, consumer loans, and
insurance. For corporate banking, SBI offered infrastructure finance,
cash management and loan syndication.
Over the years; the bank became saddled with a large workforce and
huge NPAs. According to reports, staff costs in 1999-2000 amounted
to Rs 4.5 billion as against Rs 4.1 billion in 1998-99. Increased
competition from the new private sector banks (NPBs) further added
to SBI's problems. The NPBs had effectively leveraged technology to
make up for their size.
Though SBI had 9,000 branches, a mere 22% of those (1935
branches) were connected through Internet. In contrast all of
HDFC[5] Bank's 61 branches were connected. By 2000, SBI's net
profit per employee was Rs 0.43 million while HDFC's was Rs 0.96
million, and SBI's NPA level was around 7.18% as against HDFC's
0.73% (Refer Table I).
A COMPARISON BETWEEN SBI & SOME NPBs
BANK

NPAs/NET PROFIT
ADVANCES PER
17

EMPLOYEE
(Rs in
Million)
SBI

7.18%

0.43

HDFC 0.77%

0.96

UTI
BANK
ICICI
BANK
GTB

4.71%

0.69

1.53%

0.78

0.87%

1.2

IDBI

1.95%
1.15
BANK
Source: www.bankersindia.com
SBI - reach, customer base and experience - had become its problems.
Technological tools like ATMs and the Internet had changed banking
dynamics. A large portion of the back-office staff had become
redundant after the computerization of banks. To protect its business
and remain profitable, SBI realized that it would have to reduce its
cost of operations and increase its revenues from fee-based services.
The VRS implementation was a part of an over all cost cutting
initiative.
The VRS package offered 60 days salary for every year of service or
the salary to be drawn by the employee for the remaining period of
service, whichever was less. While 50% of the payment was to be
18

paid immediately, the rest could be paid in cash or bonds. An

employee could avail the pension or provident fund as per the option
exercised by the employee. The package was offered to the permanent
staff who had put in 15 years of service or were 40 years old as of
March 31, 2000.
Activities:
State Bank of India offers its products and services in domains like

Personal Banking.

NRI Services.

Agriculture.

International.

Corporate.

SME.

Domestic Treasury.

State Bank of India Services offers the following products through its
well-managed, efficient and deep-rooted network:

Domestic Treasury.

SBI Vishwa Yatra Foreign Travel Card.

Broking Services

Revised Service Charge.

ATM Services.

Internet Banking.

E-Pay.

E-Rail.

RBIEFT.

Safe Deposit Lockers.

19

Gift Cheques.

MICR Codes.

Foreign Inward Remittances.

Products and Services

Listed on the left are Services, SBI offers to its customers.

DOMESTIC TREASURY

SBI VISHWA YATRA FOREIGN TRAVEL CARD

BROKING SERVICES

REVISED SERVICE CHARGES

ATM SERVICES

INTERNET BANKING

E-PAY

E-RAIL

RBIEFT

SAFE DEPOSIT LOCKER

GIFT CHEQUES

MICR CODES
FOREIGN INWARD REMITTANCES

20

MOBILE BANKING SERVICES

SBI FreedoM Your Mobile Your Bank
Away from home, bills can be paid or money sent to the loved ones or
balance enquiries done anytime 24x7 !!!That is what SBI FreedoM
offers -convenience, simple, secure, anytime and anywhere banking.
The service is presently available on java enabled mobile phones over
SMS/ GPRS/ WAP as also non java phones with GPRS connection.
The service can be availed over the free GPRS facilities offered by
various mobile service providers. The services for other non-Java
mobile phones are under development and will be offered using
Unstructured Supplementary Services Data (USSD).
The following functionalities will be provided in the Phase I :
-Funds transfer (within and outside the bank using NEFT)
-Enquiry services (Balance enquiry/ Mini statement)
-Request services (cheque book request)
-Bill Payment (Utility bills, credit cards)
Business Rules Governing Mobile Banking Services:

The Mobile Banking Service will be available to all the

customers having a satisfactory running account (Current/
Savings). The customers will have to register for the services.

Daily transaction limits for fund transfer and bill/ merchant

payment will be Rs.5000.00and Rs.10,000.00 respectively per
customer with an overall calendar month limit of Rs.30,000.00

The service will be carrier-agnostic i.e. all customers can avail

the mobile banking service with the Bank irrespective of the
service provider for their mobiles.
21

Credit Guarantee Fund Scheme for MICRO AND SMALL

ENTERPRISES

There are an estimated 26 million micro and small enterprises (MSEs) in the
country providing employment to an estimated 60 million persons. The MSE
sector contributes about 45% of the manufacturing sector output and 40 % of the
nation's exports. Of all the problems faced by the MSEs, non-availability of
timely and adequate credit at reasonable interest rate is one of the most
important. One of the major causes for low availability of bank finance to this
sector is the high risk perception of the banks in lending to MSEs and
consequent insistence on collaterals which are not easily available with these
enterprises. The problem is more serious for micro enterprises requiring small
loans and the first generation entrepreneurs.
2. The Credit Guarantee Fund Scheme for Micro and Small Enterprises
(CGMSE) was launched by the Government of India to make available
collateral-free credit to the micro and small enterprise sector. Both the existing
and the new enterprises are eligible to be covered under the scheme. The
Ministry of Micro, Small and Medium Enterprises and Small Industries
Development Bank of India (SIDBI), established a Trust named Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement
the Credit Guarantee Fund Scheme for Micro and Small Enterprises. The scheme
was formally launched on August 30, 2000 and is operational with effect from
1st January 2000. The corpus of CGTMSE is being contributed by the
Government and SIDBI in the ratio of 4:1 respectively and has contributed
Rs.1906.55 crore to the corpus of the Trust up to March 31,2010. As announced
in the Package for MSEs, the corpus is to be raised to Rs.2500 crore by the end
of 11th Plan.

22

Eligible Lending Institutions

3. The institutions, which are eligible under the scheme, are scheduled
commercial banks (Public Sector Banks/Private Sector Banks/Foreign Banks)
and select Regional Rural Banks (which have been classified under 'Sustainable
Viable' category by NABARD). National Small Industries Corporation Ltd.
(NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi) and
SIDBI have also been made eligible institutions. As on March 31, 2010, there
were 112 eligible Lending Institutions registered as (MLIs) of the Trust,
comprising of 27 Public Sector Banks, 16 Private Sector Banks, 61 Regional
Rural Banks, 2 Foreign Bank and 6 other Institutions viz., NSIC, NEDFI, SIDBI
and The Tamil Nadu Industrial Investment Corporation(TNIIC).
Eligible Credit Facility
4. The credit facilities which are eligible to be covered under the scheme are
both term loans and working capital facility up to Rs.100 lakh per borrowing
unit, extended without any collateral security or third party guarantee, to a new
or existing micro and small enterprise. For those units covered under the
guarantee scheme, which may become sick owing to factors beyond the control
of management, rehabilitation assistance extended by the lender could also be
covered under the guarantee scheme. It is noteworthy that if the credit facility
exceeds Rs.50 lakh, it may still be covered under the scheme but the guarantee
cover will be extended for credit assistance of Rs.50 lakh only. Another
important requirement under the scheme is that the credit facility should be
availed by the borrowing unit from a single lending institution. However, the
unit already assisted by the State Level Institution/NSIC/NEDFi can be covered
under the scheme for the credit facility availed from member bank, subject to
fulfillment of other eligibility criteria. Any credit facility in respect of which
risks are additionally covered under a scheme, operated by Government or other
agencies, will not be eligible for coverage under the scheme.

23

Guarantee Cover
5. The guarantee cover available under the scheme is to the extent of 75 per cent
of the sanctioned amount of the credit facility. The extent of guarantee cover is
80 per cent for (i) micro enterprises for loans up to Rs.5 lakh; (ii) MSEs operated
and/or owned by women; and (iii) all loans in the North-East Region. In case of
default, Trust settles the claim up to 75% (or 80% wherever applicable) of the
amount in default of the credit facility extended by the lending institution. For
this purpose the amount in default is reckoned as the principal amount
outstanding in the account of the borrower, in respect of term loan, and amount
of outstanding working capital facilities, including interest, as on the date of the
account turning Non-Performing Asset (NPA).
Tenure of Guarantee
6. The Guarantee cover under the scheme is for the agreed tenure of the term
loan/composite credit. In case of working capital, the guarantee cover is of 5
years or block of 5 years.
Fee for Guarantee
7. The fee payable to the Trust under the scheme is one-time guarantee fee of
1.5% and annual service fee of 0.75% on the credit facilities sanctioned. For
loans up to Rs.5 lakh, the one-time guarantee fee and annual service fee is 1%
and 0.5% respectively. Further, for loans in the North-East Region, the one-time
guarantee fee is only 0.75%.
Website
8. Operations of CGTMSE are conducted through Internet. The website of
CGTMSE has been hosted at www.cgtsi.org.in.

24

Scheme Awareness Programmes

9. CGTMSE has adopted multi-channel approach for creating awareness about
its guarantee scheme amongst banks, MSE associations, entrepreneurs, etc.
through print and electronic media, by conducting workshops/seminars,
attending meetings convened at various district/state/national fora, etc. As on
March 31,2010, 1080 workshops and seminars were conducted on Credit
Guarantee Scheme. Also, CGTMSE participated in 19 exhibitions and attended
304 SLBC/meetings convened by RBI/other Government offices. Posters and
mailers have been circulated to banks, industry associations, and other
stakeholders for promoting the scheme and creating its greater awareness. With a
view to imparting training to MLIs through their training colleges, multimedia
CD-ROM containing operational modalities of the scheme, was distributed to
the staff training centers/colleges of the MLIs. The Trust has recently launched
an advertisement campaign in 194 newspapers across the country through DAVP,
which has created considerable awareness about the scheme among the target
audience.
Operational Highlights of CGTMSE
Operational Highlights of CGTMSE 10. As on March 31, 2010, 3,00,105
proposals from micro and small enterprises have been approved for guarantee
cover for aggregate credit of Rs.11550.61 crore, extended by 85 MLIs in 35
States/UTs. A year-wise growth position is indicated in the table below:

Period

Active
MLIs

Number

of Credit

Amount

Proposals

Approved (Rs. in

Approved

Lakh)

FY 2000-01

951

606

FY 2001-02

16

2296

2952

FY 2002-03

22

4955

5867

25

FY 2003-04

29

6603

11760

FY 2004-05

32

9516

32677

FY 2005-06

36

16284

46191

FY 2006-07

40

27457

70453

FY 2007-08*

47

30825

105584

FY 2008-09*

57

53708

219940

FY 2009-10*

85

151387

687511

Scheme of Micro Finance Programme

The Government has launched a Scheme of Micro Finance Programme in 200304.The Scheme has been tied up with the existing programme of SIDBI by way
of contributing towards security deposits required from the MFIs/NGOs to get
loan from SIDBI.The scheme is being operated in underserved States and
underserved pockets/districts of other states.
The Government of India provide funds for Micro-Finnance Programme to
SIDBI, which is called 'Portfolio Risk Fund'(PRF).At present SIDBI takes fixed
deposit equal to 10% of the loan amount.The share of MFIs/NGOs is 2.5% of the
loan amount (i.e. 25% of security deposit) and balance 7.5%(i.e. 7.5% of
security deposite) is adjusted from the funds provided by the Government of
India.

Community-based saving and credit schemes

26

Coopration Internationale pour le Dveloppement et la Solidarit (CIDSE)

CIDSE is a working group of 16 Catholic development agencies. In 1998,
CIDSE celebrated the twentieth anniversary of its work in Viet Nam. Initially
CIDSE provided emergency aid and supported national reconstruction
programmes. However, political and economic changes in the country have
allowed CIDSE to increasingly focus on community-based development.
CIDSE has been supporting projects focusing on community-based primary
health care, agricultural extension, integrated pest management (IPM), farmermanaged irrigation, credit and savings and emergency assistance. CIDSEs main
target groups are poor ethnic minorities, farmers and the unemployed with a
special focus on women.
In the area of micro-credit, CIDSE has supported projects adapting the Grameen
Bank methodology to Viet Nam since 1992 starting in Ho Chi Minh City.
Twenty-one credit and savings projects have been supported by CIDSE in nine
provinces.
Loans issued by CIDSE range from VND 500,000 (US$ 36) to VND 2,000,000
(US$ 143), with the first loan to be granted not exceeding VND 500,000. Interest
rates are kept low at 1,5 per cent per month for sustainability purposes. Groups
of 5 persons are formed as basic units of a savings and credit scheme. The
members of the group hold regular weekly/monthly meetings to develop and
improve their solidarity, mutual understanding and undertake credit and savings
as well as social activities. CIDSE does not target loans; it is up to the people to
decide on how use the money for the purpose of income generating activities.
Besides, CIDSE encourages a "small loan small repayment" policy. Loans need
to be repaid through weekly installments that are collected by the group leaders
and consist of three components: principal, interest and savings.
CIDSE has been focusing on income generation and self-employment in urban
District 1, 3, 8 and 11 in Ho Chi Minh City, as well as, in suburban districts in
27

Binh Chanh, Cu Chi, Hoc Mon and Nha Be. Savings and credit projects are
implemented through the Peoples Committees of the Subdistricts, i.e. Wards,
and other partners. Among them are the City Womens Union, the Gardeners
Association, the Institute for Economic Research and the C.E.P. Fund of the Ho
Chi Minh City Labour Union. More in general, CIDSEs programmes are aimed
at promoting job creation and productivity through savings and credit schemes
and supporting the urban and rural poor in determining and managing their own
development process.
An important component of CIDSEs activities is strengthening the ability of
local partners to become self-sufficient in development work by providing them
with training and exposure trips. Besides, for group members, CIDSE provides
training in small business, simple accounting to improve their income activities
and finance management skills.
Environmental Development Action in the Third World (ENDA)
ENDA is an international NGO working in the area of sustainable community
development. Its activities are funded by the European Community, the French
Government and European NGOs. ENDA has been implementing programmes
on slum improvement and urban community development in HCMC and Hue
City and recently started to develop projects in Hanoi and Danang in the
perspective of creating a network of urban community development at the
national level. Besides, ENDA supports ethnic minority communities in the
central highland provinces Gialai and Daklak and the coastal provinces Quang
Nai and Phu Yen. In the urban context ENDA works at ward level, while with
respect to the ethnic minorities ENDA works at village/commune level. The
target group of ENDAs urban programmes consists of poor, marginalized,
threatened and disadvantaged communities in bigger cities. Most participants of
ENDAs projects or programmes - that are all developed as a lead-up to
environmental improvement (e.g. through promoting the use of handcarts,
community-based waste collection, latrine building, road and sewage system
28

repairing etc.) - are women living in slum settlements likely to be reallocated by

Central Government policies. All programmes include and encourage awareness
raising activities on health, environment, nutrition and family planning, amongst
others through television and video applications. Meanwhile, the target group of
ENDAs rural programmes are local indigenous people under threat of the
vicious circle of poverty as they are becoming landless due to rapid population
growth and land use competition of the migrants.
ENDA adheres to an integrated community development approach and regards
savings and credit schemes as a tool to strengthen the communities capacities to
eventually take the lead in the community development process. In order to
achieve this, ENDA supports social workers (trained as facilitators cum
motivators to assist community leaders) and local mass organizations (e.g.
Financial Institutions, the Labour Union, the Youth Union and the Women
Union) as partners in savings and credit programmes. ENDAs regular
collaboration with social workers of the Youth Union and Women Union proves
to be very dynamic. At ward level, when dealing with community problems such
as income generation and small-scale environmental improvement, ENDA more
than often experiences good cooperation of the Ward Peoples Committees, even
though they are new to the community development approach. However, when
addressing sensitive issues such as land and housing planning, larger and newly
constructed or improved infrastructure etc., the ward authority should follow and
implement policies and regulations imposed by the district and city level.
Unfortunately, at these levels the interpretation of national legislation documents
and policies is not always transparent, nor applicable to the needs of the poor
people, as is the case with providing housing for the evicted people. As a result,
a partnership with district and city level authorities is essential but not always
easy or efficient.
Credit funds to beneficiaries funded by ENDA are refundable with a monthly
interest rate of 2 per cent to foster the communitys involvement. Besides, these
funds can be used in a flexible way: either on a short-term basis (contributing to
29

direct economic improvement) or a long-term basis (benefiting community

infrastructure and housing schemes). The registration and accounting system is
kept as simple as possible. ENDAs most recent programme is called the Local
Initiative Support Programme, a revolving fund of US$ 2,500/each to be used for
supporting any sustainable development purpose suggested by the community.
This program has been put into operation since early 1999. Moreover, ENDA
and the Peoples Committee of District 2 have developed a Housing Credit
System that is supposed to benefit 200 low-income families on a long-term basis
(approximately 10 years) through voluntary relocation of their houses financed
with maintained capital stemming from interest earnings on loans allocated.
However, long-term loans appear to scare poor people off because of the higher
amounts of money and interest rates involved. As they mostly prefer small shortterm loans ENDA decided to adapt the approach and turn it into a step-by-step
saving system and get people used to the positive effects of longer term loans. In
the meantime, ENDA has circulated the project proposal for funding to different
donors.
Tiet Kiem Mua Xuan - Spring Saving Group
Tiet Kiem Mua Xuan saving group is located in the Triangle Community (Ward
3, District 11) of My Tho City, a suburb of HCMC. The Triangle Community
was formed in the early 1990s when district 11 authorities demolished
community houses on a cemetery and transformed it into a new real estate site.
The poor families living on the cemetery grounds were relocated to a small
triangular plot of land behind the new housing estate. However, many families
did not have the financial means to build new houses and quickly sold their new
plots of land to better-off families, causing fragmentation within the community.
The Tiet Kiem Mua Xuan savings and credit programme started in February
1994 after a small group of women from the Triangle Community participated in
a training visit (organized by the Youth Association of HCMC with financial
support of ENDA) to successful credit and saving schemes in neighbouring slum
communities.
30

The Spring Saving Group is composed of 3 different groups, mostly consisting

of women, some older men and even children, each chaired by an elected
committee of three group leaders: a money-keeper, an accountant and a manager.
The groups hold monthly public meetings to review the groups financial
activities as well as applications for loans. The latter are granted based on the
availability of funds and the financial need of the applicants, taking into account
that daily saving should amount to at least 500 Dong. Loan rates are determined
by the group members (totaling 228 at present) according to a calculation of
repayment days converting the interest rate (3 per cent per month) into the
number of days in which the loan should be repaid and specifying the daily
amount of the loan. Loans issued range from VND 100,000 (US$ 8) to VND
5,000,000 (US$ 400) and saving amounts depend on peoples capacity and
whatever they can contribute. The main characteristic that distinguishes the
Spring Saving Programme from other credit programmes in HCMC is its
autonomy. Group management is extremely flexible and varies across the group
according to the needs and capabilities of each group member. Repayment
schedules (daily, weekly or monthly) are chosen by borrowers and depend on
their individual financial circumstances.
In 5 years time, the Spring Saving Group has been quite successful in sustaining
its programme turning the Triangle Community into a fairly rich community
31

consisting of two main roads and offering group members lots of possibilities
to do business. The main activities that have evolved over the years as a result of
the saving and credit scheme are related to small businesses and trade, including
amongst others breakfast and fruit selling stalls and a construction material and
stone furniture factory. Besides an increased average family income of group
members, their living circumstances have improved as well, due to constructive
cooperation with local authorities willing to provide community services (water,
electricity etc.) the Triangle Community can afford to pay for. Amongst the
group members there is also increased solidarity, trust and confidence to share
good and bad experiences. Currently, the Spring Saving Group is trying to
combine its efforts with family health care and environment programmes
organized by local mass organizations. Another challenge expressed by the
saving group is to start saving on a more long-term basis, e.g. for the
construction of houses. The saving group would welcome any advise in this
matter on how to go about it and how to convince their members to participate in
longer term loans and saving schemes. In this respect, the Spring Saving Group
is eager to welcome other saving groups and exchange experiences in order to
learn from each other.

32

CREDIT SCHEMES

33

A credit card is a payment card issued to users as a system of payment. It allows

the cardholder to pay for goods and services based on the holder's promise to pay
for them.[1] The issuer of the card creates a revolving account and grants a line of
credit to the consumer (or the user) from which the user can borrow money for
payment to a merchant or as a cash advance to the user.
A credit card is different from a charge card: a charge card requires the balance
to be paid in full each month.[2] In contrast, credit cards allow the consumers a
continuing balance of debt, subject to interest being charged. A credit card also
differs from a cash card, which can be used like currency by the owner of the
card. A credit card differs from a charge card also in that a credit card typically
involves a third-party entity that pays the seller and is reimbursed by the buyer,
whereas a charge card simply defers payment by the buyer until a later date.
The size of most credit cards is 3 2 in (85.60 53.98 mm),[3] conforming
to the ISO/IEC 7810 ID-1 standard. Credit cards have an embossed bank card
number complying with the ISO/IEC 7812 numbering standard.
The concept of using a card for purchases was described in 1887 by Edward
Bellamy in his utopian novel Looking Backward. Bellamy used the term credit
card eleven times in this novel, although this referred to a card for spending a
citizen's dividend rather than borrowing.[4]
The modern credit card was the successor of a variety of merchant credit
schemes. It was first used in the 1940s, in the United States, specifically to sell
fuel to a growing number of automobile owners. In 1938 several companies
started to accept each other's cards. Western Union had begun issuing charge
cards to its frequent customers in 1921. Some charge cards were printed on
paper card stock, but were easily counterfeited.
The Charga-Plate, developed in 1928, was an early predecessor to the credit card
and used in the U.S. from the 1930s to the late 1950s. It was a 2 in 1 in
34

rectangle of sheet metal related to Addressograph and military dog tag systems.
It was embossed with the customer's name, city and state. It held a small paper
card for a signature. In recording a purchase, the plate was laid into a recess in
the imprinter, with a paper "charge slip" positioned on top of it. The record of the
transaction included an impression of the embossed information, made by the
imprinter pressing an inked ribbon against the charge slip.[5] Charga-Plate was a
trademark of Farrington Manufacturing Co. Charga-Plates were issued by largescale merchants to their regular customers, much like department store credit
cards of today. In some cases, the plates were kept in the issuing store rather than
held by customers. When an authorized user made a purchase, a clerk retrieved
the plate from the store's files and then processed the purchase. Charga-Plates
speeded back-office bookkeeping that was done manually in paper ledgers in
each store, before computers.
In 1934, American Airlines and the Air Transport Association simplified the
process even more with the advent of the Air Travel Card.[6] They created a
numbering scheme that identified the issuer of card as well as the customer
account. This is the reason the modern UATP cards still start with the number 1.
With an Air Travel Card, passengers could "buy now, and pay later" for a ticket
against their credit and receive a fifteen percent discount at any of the accepting
airlines. By the 1940s, all of the major domestic airlines offered Air Travel Cards
that could be used on 17 different airlines. By 1941 about half of the airlines'
revenues came through the Air Travel Card agreement. The airlines had also
started offering installment plans to lure new travelers into the air. In October
1948, the Air Travel Card became the first inter-nationally valid charge card
within all members of the International Air Transport Association.[7]
The concept of customers paying different merchants using the same card was
expanded in 1950 by Ralph Schneider and Frank McNamara, founders of Diners
Club, to consolidate multiple cards. The Diners Club, which was created
partially through a merger with Dine and Sign, produced the first "general
purpose" charge card, and required the entire bill to be paid with each statement.
35

That was followed by Carte Blanche and in 1958 by American Express which
created a worldwide credit card network (although these were initially charge
cards that acquired credit card features after BankAmericard demonstrated the
feasibility of the concept).
However, until 1958, no one had been able to create a working revolving credit
financial instrument issued by a third-party bank that was generally accepted by
a large number of merchants (as opposed to merchant-issued revolving cards
accepted by only a few merchants). A dozen experiments by small American
banks had been attempted (and had failed). In September 1958, Bank of America
launched the BankAmericard in Fresno, California. BankAmericard became the
first successful recognizably modern credit card (although it underwent a
troubled gestation during which its creator resigned), and with its overseas
affiliates, eventually evolved into the Visa system. In 1966, the ancestor of
MasterCard was born when a group of banks established Master Charge to
compete with BankAmericard; it received a significant boost when Citibank
merged its proprietary Everything Card (launched in 1967) into Master Charge
in 1969.
Early credit cards in the U.S., of which BankAmericard was the most prominent
example, were mass produced and mass mailed unsolicited to bank customers
who were thought to be good credit risks. But, "They have been mailed off to
unemployables, drunks, narcotics addicts and to compulsive debtors, a process
President Johnson's Special Assistant Betty Furness found very like 'giving sugar
to diabetics'." These mass mailings were known as "drops" in banking
terminology, and were outlawed in 1970 due to the financial chaos they caused,
but not before 100 million credit cards had been dropped into the U.S.
population. After 1970, only credit card applications could be sent unsolicited in
mass mailings.
The fractured nature of the U.S. banking system under the GlassSteagall Act
meant that credit cards became an effective way for those who were traveling
36

around the country to move their credit to places where they could not directly
use their banking facilities. In 1966 Barclaycard in the UK launched the first
credit card outside of the U.S.
There are now countless variations on the basic concept of revolving credit for
individuals (as issued by banks and honored by a network of financial
institutions), including organization-branded credit cards, corporate-user credit
cards, store cards and so on.
Although credit cards reached very high adoption levels in the US, Canada and
the UK in the mid twentieth century, many cultures were more cash-oriented, or
developed alternative forms of cash-less payments, such as Carte bleue or the
Eurocard (Germany, France, Switzerland, and others). In these places, adoption
of credit cards was initially much slower. It took until the 1990s to reach
anything like the percentage market-penetration levels achieved in the US,
Canada, or UK. In some countries, acceptance still remains poor as the use of a
credit card system depends on the banking system being perceived as reliable.
Japan remains a very cash oriented society, with credit card adoption being
limited to only the largest of merchants, although an alternative system based on
RFIDs inside cellphones has seen some acceptance. Because of strict regulations
regarding banking system overdrafts, some countries, France in particular, were
much faster to develop and adopt chip-based credit cards which are now seen as
major anti-fraud credit devices. Debit cards and online banking are used more
widely than credit cards in some countries.
The design of the credit card itself has become a major selling point in recent
years. The value of the card to the issuer is often related to the customer's usage
of the card, or to the customer's financial worth. This has led to the rise of CoBrand and Affinity cards, where the card design is related to the "affinity" (a
university or professional society, for example) leading to higher card usage. In
most cases a percentage of the value of the card is returned to the affinity group.

37

Collectible credit cards

A growing field of numismatics (study of money), or more specifically
exonumia (study of money-like objects), credit card collectors seek to collect
various embodiments of credit from the now familiar plastic cards to older paper
merchant cards, and even metal tokens that were accepted as merchant credit
cards. Early credit cards were made of celluloid plastic, then metal and fiber,
then paper, and are now mostly polyvinyl chloride (PVC) plastic.
How credit cards work
Credit cards are issued by a credit card issuer, such as a bank or credit union,
after an account has been approved by the credit provider, after which
cardholders can use it to make purchases at merchants accepting that card.
Merchants often advertise which cards they accept by displaying acceptance
marks generally derived from logos or may communicate this orally, as in
"We take (brands X, Y, and Z)" or "We don't take credit cards".
When a purchase is made, the credit card user agrees to pay the card issuer. The
cardholder indicates consent to pay by signing a receipt with a record of the card
details and indicating the amount to be paid or by entering a personal
identification number (PIN). Also, many merchants now accept verbal
authorizations via telephone and electronic authorization using the Internet,
known as a card not present transaction (CNP).
Electronic verification systems allow merchants to verify in a few seconds that
the card is valid and the credit card customer has sufficient credit to cover the
purchase, allowing the verification to happen at time of purchase. The
verification is performed using a credit card payment terminal or point-of-sale
(POS) system with a communications link to the merchant's acquiring bank.
Data from the card is obtained from a magnetic stripe or chip on the card; the
latter system is called Chip and PIN in the United Kingdom and Ireland, and is
implemented as an EMV card.
38

For card not present transactions where the card is not shown (e.g., e-commerce,
mail order, and telephone sales), merchants additionally verify that the customer
is in physical possession of the card and is the authorized user by asking for
additional information such as the security code printed on the back of the card,
date of expiry, and billing address.
Each month, the credit card user is sent a statement indicating the purchases
undertaken with the card, any outstanding fees, and the total amount owed. In
the US, after receiving the statement, the cardholder may dispute any charges
that he or she thinks are incorrect (see 15 U.S.C. 1643, which limits cardholder
liability for unauthorized use of a credit card to $50. The Fair Credit Billing Act
gives details of the US regulations. The cardholder must pay a defined minimum
portion of the amount owed by a due date, or may choose to pay a higher amount
up to the entire amount owed which may be greater than the amount billed. The
credit issuer charges interest on the unpaid balance if the billed amount is not
paid in full (typically at a much higher rate than most other forms of debt). In
addition, if the credit card user fails to make at least the minimum payment by
the due date, the issuer may impose a "late fee" and/or other penalties on the
user. To help mitigate this, some financial institutions can arrange for automatic
payments to be deducted from the user's bank accounts, thus avoiding such
penalties altogether as long as the cardholder has sufficient funds.
Many banks now also offer the option of electronic statements, either in lieu of
or in addition to physical statements, which can be viewed at any time by the
cardholder via the issuer's online banking website. Notification of the
availability of a new statement is generally sent to the cardholder's email
address. If the card issuer has chosen to allow it, the cardholder may have other
options for payment besides a physical check, such as an electronic transfer of
funds from a checking account. Depending on the issuer, the cardholder may
also be able to make multiple payments during a single statement period,
possibly enabling him or her to utilize the credit limit on the card several times
over.
39

Advertising, solicitation, application and approval

Credit card advertising regulations in the US include the Schumer box disclosure
requirements. A large fraction of junk mail consists of credit card offers created
from lists provided by the major credit reporting agencies. In the United States,
the three major US credit bureaus (Equifax, TransUnion and Experian) allow
consumers to opt out from related credit card solicitation offers via its Opt Out
Pre Screen program.
Interest charges
Credit card issuers usually waive interest charges if the balance is paid in full
each month, but typically will charge full interest on the entire outstanding
balance from the date of each purchase if the total balance is not paid.
For example, if a user had a $1,000 transaction and repaid it in full within this
grace period, there would be no interest charged. If, however, even $1.00 of the
total amount remained unpaid, interest would be charged on the $1,000 from the
date of purchase until the payment is received. The precise manner in which
interest is charged is usually detailed in a cardholder agreement which may be
summarized on the back of the monthly statement. The general calculation
formula most financial institutions use to determine the amount of interest to be
charged is APR/100 x ADB/365 x number of days revolved. Take the annual
percentage rate (APR) and divide by 100 then multiply to the amount of the
average daily balance (ADB) divided by 365 and then take this total and
multiply by the total number of days the amount revolved before payment was
made on the account. Financial institutions refer to interest charged back to the
original time of the transaction and up to the time a payment was made, if not in
full, as RRFC or residual retail finance charge. Thus after an amount has
revolved and a payment has been made, the user of the card will still receive
interest charges on their statement after paying the next statement in full (in fact

40

the statement may only have a charge for interest that collected up until the date
the full balance was paid, i.e. when the balance stopped revolving).
The credit card may simply serve as a form of revolving credit, or it may become
a complicated financial instrument with multiple balance segments each at a
different interest rate, possibly with a single umbrella credit limit, or with
separate credit limits applicable to the various balance segments. Usually this
compartmentalization is the result of special incentive offers from the issuing
bank, to encourage balance transfers from cards of other issuers. In the event that
several interest rates apply to various balance segments, payment allocation is
generally at the discretion of the issuing bank, and payments will therefore
usually be allocated towards the lowest rate balances until paid in full before any
money is paid towards higher rate balances. Interest rates can vary considerably
from card to card, and the interest rate on a particular card may jump
dramatically if the card user is late with a payment on that card or any other
credit instrument, or even if the issuing bank decides to raise its revenue.
Benefits to customers
The main benefit to each customer is convenience. Compared to debit cards and
checks, a credit card allows small short-term loans to be quickly made to a
customer who need not calculate a balance remaining before every transaction,
provided the total charges do not exceed the maximum credit line for the card.
Different countries offer different levels of protection. In the UK, for example,
the bank is jointly liable with the merchant for purchases of defective products
over 100.
Many credit cards offer rewards and benefits packages, such as enhanced
product warranties at no cost, free loss/damage coverage on new purchases,
various insurance protections, for example, rental car insurance, common carrier
accident protection, and travel medical insurance. Credit cards can also offer
reward points which may be redeemed for cash, products, or airline tickets.
41

Research has examined whether competition among card networks may

potentially make payment rewards too generous, causing higher prices among
merchants, thus actually deteriorating social welfare and its distribution, a
situation potentially warranting public policy interventions.
Detriments to customers
High interest and bankruptcy
Low introductory credit card rates are limited to a fixed term, usually between 6
and 12 months, after which a higher rate is charged. As all credit cards charge
fees and interest, some customers become so indebted to their credit card
provider that they are driven to bankruptcy. Some credit cards often levy a rate
of 20 to 30 percent after a payment is missed. In other cases a fixed charge is
levied without change to the interest rate. In some cases universal default may
apply: the high default rate is applied to a card in good standing by missing a
payment on an unrelated account from the same provider. This can lead to a
snowball effect in which the consumer is drowned by unexpectedly high interest
rates. Further, most card holder agreements enable the issuer to arbitrarily raise
the interest rate for any reason they see fit. First Premier Bank at one point
offered a credit card with a 79.9% interest rate, however they discontinued this
card February 2011 because of persistent defaults.
Complex fee structures in the credit card industry limit customers' ability to
comparison shop, help ensure that the industry is not price-competitive and help
maximize industry profits.
Inflated pricing for all consumers
Merchants that accept credit cards must pay interchange fees and discount fees
on all credit-card transactions. In some cases merchants are barred by their credit
agreements from passing these fees directly to credit card customers, or from
setting a minimum transaction amount (no longer prohibited in the United
42

States). The result is that merchants may charge all customers (including those
who do not use credit cards) higher prices to cover the fees on credit card
transactions. In the United States in 2008 credit card companies collected a total
of $48 billion in interchange fees, or an average of $427 per family, with an
average fee rate of about 2% per transaction. Research shows that a substantial
fraction of consumers (about 40 percent) choose a sub-optimal credit card
agreement, with some incurring hundreds of dollars of avoidable interest costs.
Weakens self regulation
Several studies have shown that consumers are likely to spend more money
when they pay by credit card. Researchers suggest that when people pay using
credit cards, they do not experience the abstract pain of payment. Furthermore,
researchers have found that using credit cards can increase consumption of
unhealthy food.
Grace period
A credit card's grace period is the time the customer has to pay the balance
before interest is assessed on the outstanding balance. Grace periods may vary,
but usually range from 20 to 55 days depending on the type of credit card and
the issuing bank. Some policies allow for reinstatement after certain conditions
are met.
Usually, if a customer is late paying the balance, finance charges will be
calculated and the grace period does not apply. Finance charges incurred depend
on the grace period and balance; with most credit cards there is no grace period
if there is any outstanding balance from the previous billing cycle or statement
(i.e. interest is applied on both the previous balance and new transactions).
However, there are some credit cards that will only apply finance charge on the
previous or old balance, excluding new transactions.

43

Benefits to merchants

An example of street markets accepting credit cards. Most simply display the
acceptance marks (stylized logos, shown in the upper-left corner of the sign) of
all the cards they accept.
For merchants, a credit card transaction is often more secure than other forms of
payment, such as cheques, because the issuing bank commits to pay the
merchant the moment the transaction is authorized, regardless of whether the
consumer defaults on the credit card payment (except for legitimate disputes,
which are discussed below, and can result in charges back to the merchant). In
most cases, cards are even more secure than cash, because they discourage theft
by the merchant's employees and reduce the amount of cash on the premises.
Finally, credit cards reduce the back office expense of processing checks/cash
and transporting them to the bank.
Prior to credit cards, each merchant had to evaluate each customer's credit
history before extending credit. That task is now performed by the banks which
assume the credit risk. Credit cards can also aid in securing a sale, especially if
the customer does not have enough cash on his or her person or checking
account. Extra turnover is generated by the fact that the customer can purchase
goods and/or services immediately and is less inhibited by the amount of cash in
his or her pocket and the immediate state of his or her bank balance. Much of
merchants' marketing is based on this immediacy.
For each purchase, the bank charges the merchant a commission (discount fee)
for this service and there may be a certain delay before the agreed payment is
44

received by the merchant. The commission is often a percentage of the

transaction amount, plus a fixed fee (interchange rate). In addition, a merchant
may be penalized or have their ability to receive payment using that credit card
restricted if there are too many cancellations or reversals of charges as a result of
disputes. Some small merchants require credit purchases to have a minimum
amount to compensate for the transaction costs.
Costs to merchants
Merchants are charged several fees for accepting credit cards. The merchant is
usually charged a commission of around 1 to 4 percent of the value of each
transaction paid for by credit card. The merchant may also pay a variable charge,
called an interchange rate, for each transaction. In some instances of very lowvalue transactions, use of credit cards will significantly reduce the profit margin
or cause the merchant to lose money on the transaction. Merchants with very low
average transaction prices or very high average transaction prices are more
averse to accepting credit cards. In some cases merchants may charge users a
"credit card supplement", either a fixed amount or a percentage, for payment by
credit card. This practice is prohibited by most credit card contracts in the United
States, and is actually illegal in 10 states, although the contracts allow the
merchants to give discounts for cash payment.
Merchants are also required to lease processing terminals, meaning merchants
with low sales volumes may have to commit to long lease terms. For some
terminals, merchants may also need to subscribe to a separate telephone line.
Merchants must also satisfy data security compliance standards which are highly
technical and complicated. In many cases, there is a delay of several days before
funds are deposited into a merchant's bank account. Because credit card fee
structures are very complicated, smaller merchants are at a disadvantage to
analyze and predict fees.
Finally, merchants assume the risk of chargebacks by consumers.
45

Parties involved

Cardholder: The holder of the card used to make a purchase; the

consumer.

Card-issuing bank: The financial institution or other organization that

issued the credit card to the cardholder. This bank bills the consumer for
repayment and bears the risk that the card is used fraudulently. American
Express and Discover were previously the only card-issuing banks for
their respective brands, but as of 2007, this is no longer the case. Cards
issued by banks to cardholders in a different country are known as
offshore credit cards.

Merchant: The individual or business accepting credit card payments for

products or services sold to the cardholder.

Acquiring bank: The financial institution accepting payment for the

products or services on behalf of the merchant.

Independent sales organization: Resellers (to merchants) of the services of

the acquiring bank.

Merchant account: This could refer to the acquiring bank or the

independent sales organization, but in general is the organization that the
merchant deals with.

Credit Card association: An association of card-issuing banks such as

Discover, Visa, MasterCard, American Express, etc. that set transaction
terms for merchants, card-issuing banks, and acquiring banks.

Transaction network: The system that implements the mechanics of the

electronic transactions. May be operated by an independent company, and
one company may operate multiple networks.

Affinity partner: Some institutions lend their names to an issuer to attract

customers that have a strong relationship with that institution, and get
paid a fee or a percentage of the balance for each card issued using their
name. Examples of typical affinity partners are sports teams, universities,
charities, professional organizations, and major retailers.

46

Insurance providers: Insurers underwriting various insurance protections

offered as credit card perks, for example, Car Rental Insurance, Purchase
Security, Hotel Burglary Insurance, Travel Medical Protection etc.

The flow of information and money between these parties always through the
card associations is known as the interchange, and it consists of a few steps.
This section requires expansion. (April 2010)
Transaction steps

Authorization: The cardholder presents the card as payment to the

merchant and the merchant submits the transaction to the acquirer
(acquiring bank). The acquirer verifies the credit card number, the
transaction type and the amount with the issuer (Card-issuing bank) and
reserves that amount of the cardholder's credit limit for the merchant. An
authorization will generate an approval code, which the merchant stores
with the transaction.

Batching: Authorized transactions are stored in "batches", which are sent

to the acquirer. Batches are typically submitted once per day at the end of
the business day. If a transaction is not submitted in the batch, the
authorization will stay valid for a period determined by the issuer, after
which the held amount will be returned to the cardholder's available credit
(see authorization hold). Some transactions may be submitted in the batch
without prior authorizations; these are either transactions falling under the
merchant's floor limit or ones where the authorization was unsuccessful
but the merchant still attempts to force the transaction through. (Such may
be the case when the cardholder is not present but owes the merchant
additional money, such as extending a hotel stay or car rental.)

Clearing and Settlement: The acquirer sends the batch transactions

through the credit card association, which debits the issuers for payment

47

and credits the acquirer. Essentially, the issuer pays the acquirer for the
transaction.

Funding: Once the acquirer has been paid, the acquirer pays the
merchant. The merchant receives the amount totaling the funds in the
batch minus either the "discount rate," "mid-qualified rate", or "nonqualified rate" which are tiers of fees the merchant pays the acquirer for
processing the transactions.

Chargebacks: A chargeback is an event in which money in a merchant

account is held due to a dispute relating to the transaction. Chargebacks
are typically initiated by the cardholder. In the event of a chargeback, the
issuer returns the transaction to the acquirer for resolution. The acquirer
then forwards the chargeback to the merchant, who must either accept the
chargeback or contest it.

Secured credit cards

A secured credit card is a type of credit card secured by a deposit account owned
by the cardholder. Typically, the cardholder must deposit between 100% and
200% of the total amount of credit desired. Thus if the cardholder puts down
$1000, they will be given credit in the range of $500$1000. In some cases,
credit card issuers will offer incentives even on their secured card portfolios. In
these cases, the deposit required may be significantly less than the required
credit limit, and can be as low as 10% of the desired credit limit. This deposit is
held in a special savings account. Credit card issuers offer this because they have
noticed that delinquencies were notably reduced when the customer perceives
something to lose if the balance is not repaid.
The cardholder of a secured credit card is still expected to make regular
payments, as with a regular credit card, but should they default on a payment,
the card issuer has the option of recovering the cost of the purchases paid to the
merchants out of the deposit. The advantage of the secured card for an individual
48

with negative or no credit history is that most companies report regularly to the
major credit bureaus. This allows building a positive credit history.
Although the deposit is in the hands of the credit card issuer as security in the
event of default by the consumer, the deposit will not be debited simply for
missing one or two payments. Usually the deposit is only used as an offset when
the account is closed, either at the request of the customer or due to severe
delinquency (150 to 180 days). This means that an account which is less than
150 days delinquent will continue to accrue interest and fees, and could result in
a balance which is much higher than the actual credit limit on the card. In these
cases the total debt may far exceed the original deposit and the cardholder not
only forfeits their deposit but is left with an additional debt.
Most of these conditions are usually described in a cardholder agreement which
the cardholder signs when their account is opened.
Secured credit cards are an option to allow a person with a poor credit history or
no credit history to have a credit card which might not otherwise be available.
They are often offered as a means of rebuilding one's credit. Fees and service
charges for secured credit cards often exceed those charged for ordinary nonsecured credit cards, however, for people in certain situations, (for example, after
charging off on other credit cards, or people with a long history of delinquency
on various forms of debt), secured cards are almost always more expensive than
unsecured credit cards.
Sometimes a credit card will be secured by the equity in the borrower's home.
Prepaid "credit" cards
A prepaid credit card is not a true credit card, since no credit is offered by the
card issuer: the card-holder spends money which has been "stored" via a prior
deposit by the card-holder or someone else, such as a parent or employer.
However, it carries a credit-card brand (such as Discover, Visa, MasterCard,
49

American Express, or JCB etc.) and can be used in similar ways just as though it
were a regular credit card. Unlike debit cards, prepaid credit cards generally do
not require a PIN. An exception are prepaid credit cards with an EMV chip.
These cards do require a PIN if the payment is processed via Chip and PIN
technology.
After purchasing the card, the cardholder loads the account with any amount of
money, up to the predetermined card limit and then uses the card to make
purchases the same way as a typical credit card. Prepaid cards can be issued to
minors (above 13) since there is no credit line involved. The main advantage
over secured credit cards (see above section) is that the cardholder is not
required to come up with $500 or more to open an account. With prepaid credit
cards purchasers are not charged any interest but are often charged a purchasing
fee plus monthly fees after an arbitrary time period. Many other fees also usually
apply to a prepaid card.
Prepaid credit cards are sometimes marketed to teenagers for shopping online
without having their parents complete the transaction.
Prepaid cards can be utilized globally. The prepaid card is convenient for payees
in developing countries like Brazil, Russia, India and China, where international
wire transfers and bank checks are time consuming, complicated and costly
Because of the many fees that apply to obtaining and using credit-card-branded
prepaid cards, the Financial Consumer Agency of Canada describes them as "an
expensive way to spend your own money" The agency publishes a booklet
entitled Pre-paid Cards which explains the advantages and disadvantages of this
type of prepaid card.
Features
As well as convenient, accessible credit, credit cards offer consumers an easy
way to track expenses, which is necessary for both monitoring personal
50

expenditures and the tracking of work-related expenses for taxation and

reimbursement purposes. Credit cards are accepted worldwide, and are available
with a large variety of credit limits, repayment arrangement, and other perks
(such as insurance protection, rewards schemes in which points earned by
purchasing goods with the card can be redeemed for further goods and services
or cashback).
Some countries, such as the United States, the United Kingdom, and France,
limit the amount for which a consumer can be held liable due to fraudulent
transactions as a result of a consumer's credit card being lost or stolen.
Security problems and solutions
Credit card security relies on the physical security of the plastic card as well as
the privacy of the credit card number. Therefore, whenever a person other than
the card owner has access to the card or its number, security is potentially
compromised. Once, merchants would often accept credit card numbers without
additional verification for mail order purchases. It's now common practice to
only ship to confirmed addresses as a security measure to minimise fraudulent
purchases. Some merchants will accept a credit card number for in-store
purchases, whereupon access to the number allows easy fraud, but many require
the card itself to be present, and require a signature. A lost or stolen card can be
cancelled, and if this is done quickly, will greatly limit the fraud that can take
place in this way. European banks can require a cardholder's security PIN be
entered for in-person purchases with the card.
The PCI DSS is the security standard issued by The PCI SSC (Payment Card
Industry Security Standards Council). This data security standard is used by
acquiring banks to impose cardholder data security measures upon their
merchants.

51

A smart card, combining credit card and debit card properties. The 3 by 5 mm
security chip embedded in the card is shown enlarged in the inset. The contact
pads on the card enable electronic access to the chip.
The goal of the credit card companies is not to eliminate fraud, but to "reduce it
to manageable levels". This implies that high-cost low-return fraud prevention
measures will not be used if their cost exceeds the potential gains from fraud
reduction as would be expected from organisations whose goal is profit
maximisation.
Internet fraud may be by claiming a chargeback which is not justified ("friendly
fraud"), or carried out by the use of credit card information which can be stolen
in many ways, the simplest being copying information from retailers, either
online or offline. Despite efforts to improve security for remote purchases using
credit cards, security breaches are usually the result of poor practice by
merchants. For example, a website that safely uses SSL to encrypt card data
from a client may then email the data, unencrypted, from the webserver to the
merchant; or the merchant may store unencrypted details in a way that allows
them to be accessed over the Internet or by a rogue employee; unencrypted card
details are always a security risk. Even encryption data may be cracked.
Controlled Payment Numbers which are used by various banks such as Citibank
(Virtual Account Numbers), Discover (Secure Online Account Numbers, Bank
of America (Shop Safe), 5 banks using eCarte Bleue and CMB's Virtualis in
France, and Swedbank of Sweden's eKort product are another option for
protecting against credit card fraud. These are generally one-time use numbers
52

that front one's actual account (debit/credit) number, and are generated as one
shops on-line. They can be valid for a relatively short time, for the actual amount
of the purchase, or for a price limit set by the user. Their use can be limited to
one merchant. If the number given to the merchant is compromised, it will be
rejected if an attempt is made to use it again.
A similar system of controls can be used on physical cards. Technology provides
the option for banks to support many other controls too that can be turned on and
off and varied by the credit card owner in real time as circumstances change (i.e.,
they can change temporal, numerical, geographical and many other parameters
on their primary and subsidiary cards). Apart from the obvious benefits of such
controls: from a security perspective this means that a customer can have a Chip
and PIN card secured for the real world, and limited for use in the home country.
In this eventuality a thief stealing the details will be prevented from using these
overseas in non chip and pin EMV countries. Similarly the real card can be
restricted from use on-line so that stolen details will be declined if this tried.
Then when card users shop online they can use virtual account numbers. In both
circumstances an alert system can be built in notifying a user that a fraudulent
attempt has been made which breaches their parameters, and can provide data on
this in real time. This is the optimal method of security for credit cards, as it
provides very high levels of security, control and awareness in the real and
virtual world.
Additionally, there are security features present on the physical card itself in
order to prevent counterfeiting. For example, most modern credit cards have a
watermark that will fluoresce under ultraviolet light. Most major credit cards
have a hologram. A Visa card has a letter V superimposed over the regular Visa
logo and a MasterCard has the letters MC across the front of the card. Older Visa
cards have a bald eagle or dove across the front. In the aforementioned cases, the
security features are only visible under ultraviolet light and are invisible in
normal light.

53

The United States Secret Service, Federal Bureau of Investigation, and U.S.
Postal Inspection Service are responsible for prosecuting criminals who engage
in credit card fraud in the United States,[citation

needed]

but they do not have the

resources to pursue all criminals. In general, federal officials only prosecute

cases exceeding US$5,000. Three improvements to card security have been
introduced to the more common credit card networks but none has proven to
help reduce credit card fraud so far. First, the on-line verification system used by
merchants is being enhanced to require a 4 digit Personal Identification Number
(PIN) known only to the card holder. Second, the cards themselves are being
replaced with similar-looking tamper-resistant smart cards which are intended to
make forgery more difficult. The majority of smart card (IC card) based credit
cards comply with the EMV (Europay MasterCard Visa) standard. Third, an
additional 3 or 4 digit Card Security Code (CSC) is now present on the back of
most cards, for use in card not present transactions. Stakeholders at all levels in
electronic payment have recognized the need to develop consistent global
standards for security that account for and integrate both current and emerging
security technologies. They have begun to address these needs through
organizations such as PCI DSS and the Secure POS Vendor Alliance.[28]
Credit card numbering
The numbers found on credit cards have a certain amount of internal structure,
and share a common numbering scheme.
The card number's prefix, called the Bank Identification Number, is the sequence
of digits at the beginning of the number that determine the bank to which a credit
card number belongs. This is the first six digits for MasterCard and Visa cards.
The next nine digits are the individual account number, and the final digit is a
validity check code.
In addition to the main credit card number, credit cards also carry issue and
expiration dates (given to the nearest month), as well as extra codes such as issue
54

numbers and security codes. Not all credit cards have the same sets of extra
codes nor do they use the same number of digits.
Credit cards in ATMs
Many credit cards can also be used in an ATM to withdraw money against the
credit limit extended to the card, but many card issuers charge interest on cash
advances before they do so on purchases. The interest on cash advances is
commonly charged from the date the withdrawal is made, rather than the
monthly billing date. Many card issuers levy a commission for cash withdrawals,
even if the ATM belongs to the same bank as the card issuer. Merchants do not
offer cashback on credit card transactions because they would pay a percentage
commission of the additional cash amount to their bank or merchant services
provider, thereby making it uneconomical.
Many credit card companies will also, when applying payments to a card, do so,
for the matter at hand, when applying payments to a card, at the end of a billing
cycle, and apply those payments to everything before cash advances. For this
reason, many consumers have large cash balances, which have no grace period
and incur interest at a rate that is (usually) higher than the purchase rate, and will
carry those balances for years, even if they pay off their statement balance each
month.
Credit cards as funding for entrepreneurs
Credit cards are a risky way for entrepreneurs to acquire capital for their start
ups when more conventional financing is unavailable. It's widely reported that
Len Bosack and Sandy Lerner used personal credit cards to start Cisco Systems.
It is rumoured that Larry Page and Sergey Brin's start up of Google was financed
by credit cards to buy the necessary computers and office equipment, more
specifically "a terabyte of hard disks". Similarly, filmmaker Robert Townsend
financed part of Hollywood Shuffle using credit cards.[53] Director Kevin Smith
funded Clerks in part by maxing out several credit cards. Actor Richard Hatch
55

also financed his production of Battlestar Galactica: The Second Coming partly
through his credit cards. Famed hedge fund manager Bruce Kovner began his
career (and, later on, his firm Caxton Associates) in financial markets by
borrowing from his credit card. UK entrepreneur James Caan (as seen on
Dragon's Den) financed his first business using several credit cards.

56

SBI Advantage Gold Card

Worldwide Acceptance
Your SBI Advantage Gold Card can be used in over 24 million outlets across the
globe, including 3, 25,000 outlets in India. Just look for the Visa/MasterCard
sign of acceptance and present your card for payment.
Credit Facility
You SBI Advantage Gold Card now offers you great flexibility of payment. With
the extended credit option from one of the best credit card you can plan your
outstanding payments as is suitable to you. You can pay any amount from the
minimum amount due to the total outstanding amount due as shown in your
Monthly Statement. You can then carry forward the unpaid balance at one of the
lowest finance charges available.
Cash on the go
As an SBI Cardholder, you can withdraw cash from over 1 million
VISA/MasterCard ATMs (Please check the logo on the front of your card before
using) across the globe, including 18,000 ATMs in India. In addition to this, you
get access to over 10,000 SBI ATMs across 100 plus cities in India.
Book your railway tickets online
Now book your railway tickets online and getting them delivered at your
doorstep. Experience the convenience of booking your tickets online with your
SBI Advantage Gold Credit Card. All you need to do is:
1. Register free of cost on www.irctc.co.in
2. Log-in with your username and password on www.irctc.co.in
3. Book your ticket as per instructions on the website
57

4. Make payment through your SBI Gold Credit Card on the website through
either of the two payment gateways which accept all MasterCards. Kindly note:
All transactions on www.irctc.co.in are governed by terms & conditions of
www.irctc.co.in
Credit Convenience
Credit free period of upto 50 days and extended credit facility with very low
interest rate of 2.25% p.m
Ready Cash
As an SBI Cardholder, you can avail credit card cash withdrawal service from
over 1 million VISA/MasterCard ATMs (Please check the logo on the front of
your card before using) across the globe, including 18,000 ATMs in India. In
addition to this, you get access to over 10,000 SBI ATMs across 100 plus cities
in India and enjoy up to 100% cash withdraw limit.
Convenient Application Procedure
SBI Advantage Gold Card can be availed on the basis of a Fixed Deposit with
State Bank Group.
Add-on cards - Enhanced Power to your family
You can now conveniently take care of the needs of your loved ones. Your SBI
Advantage Gold Card now lets you apply for add-on cards for your spouse,
parents, children or siblings above the age of 18.
Utility Bill Payment Facility
With the Easy Utility Bill Payment facility from SBI Visa Card you can be rest
assured you will never ever forget paying your utility bills on time. All your
utility bills like electricity, insurance, telephone will get paid before the due date
with this facility from SBI Gold Credit Card.
58

Guaranteed peace of mind

Your sense of security is our priority.SBI Card automatically gives you complete
peace of mind with our SBI Card Customer Helpline and 24-hr
VISA/MasterCard (Please check the logo on the front of your card before using)
Global Customer Assistance Services available across the world in case of any
emergency.
Balance Transfer on low interest rates
Heres your chance to save money while paying your credit card dues! SBI brings
you a fast and convenient way to transfer the outstanding amount from your
other card to your SBI card at the lowest rates of Interest.
Flexipay
Flexipay, the easy installment plan from SBI Visa Card lets you buy just about
anything and repay in easy monthly installments. Choose the plan best suited to
your financial needs and avail of a low rate of interest. All this through a simple
phone call within 10 days of your purchase. Call the Helpline for details now!
Easy Money Facility
Now you can order a bank draft any time by just making a local phone call to the
SBI Card Customer Helpline. The amount of the draft will be billed directly to
your SBI Card. You'll find it useful for payments of various bills, taxes, fees and
a lot more. For more details please call the SBI Card helpline.
Convenience of Technology

59

E-statement
No postal delays. No lost statements. No late payments. Just the convenience of
getting your monthly statement delivered directly to your email inbox. Giving
you global access 24 hours and seven days a week.
SBI Card Alerts
SBI Card Alerts enables you to receive information regarding your credit card
details status, as an SMS on your mobile phone. These include Mini Statement
Alerts, Cheque Alerts, Credit & Cash limit Alerts & Payment Assistance Alerts.
So, no matter where you are, we will keep you informed! To subscribe to SBI
Card visit us at www.sbicard.com or call your local SBI Card Customer
Helpline.
SBI Card Online
Manage your SBI Card account. Whether it is checking your statement online or
requesting an address change, locating the nearest SBI ATM and winning
exciting prizes on our special offers. It's all now click away. To get started, log
on to www.sbicard.com and take advantage of these credit card benefits.
SBI Card Drop Box Locator
Now locate the SBI Card Drop Box nearest to you. Simply
1. Type "PIN" < space > your 6 digit pin code xxxxxx \
2. Send SMS to 56767
3.You

will

receive

the

list

of

Yes, it's that simple!

60

drop

boxes

in

your

area

IndusInd Bank Classic Credit Card

You can apply for up to 5 add-on IndusInd Bank Classic Credit Card for your
dependents* on your primary IndusInd Bank Classic Credit Card. The add-on
cards will have the same credit limit as on your primary Credit Card. Add-on
cardholders will receive all the benefits of an IndusInd Bank Classic Credit Card
except complimentary insurance unless specified.
All the transactions made using the add-on IndusInd Bank Classic Credit Card
will reflect in the monthly statement for the primary IndusInd Bank Classic
Credit Card. The add-on cardholders will not receive separate monthly
statement. Dependents* will include your spouse, parents, parents-in-law,
brother, sister or your children above 18 years.
Classic Assurance
Total Protect:
You don't need to worry about fraudulent usage of your card anymore. 'Total
Protect' is a first- of- its- kind program which covers you for a sum up to the
credit limit on your Credit Card and is available on add-on cards as well.
'Total Protect' covers you for the following:

Unauthorized Transactions in case of loss / theft of Card: An insurance

cover is provided up to 48 hours prior to you reporting the loss of your
card.

Counterfeit Fraud: The IndusInd Bank IndusInd Gold Credit Card offers
you insurance to protect yourself against incidents of counterfeit fraud.

61

Canara Credit Card

Canara Credit Card is designed to meet your life style with anything you might
need to make your experience a sheer pleasure. No matter where you are across
the world, luxury and comfort is always at hand.
Our cards enjoy the privilege of worldwide acceptance and free insurance
coverage against the risk of death due to accident. Canara Credit Cards are
backed by a wide network of CANARA BANK branches and 24 Card Service
centers located at many important cities spread across the country. CANARA
BANK is the principal member of VISA-WORLDWIDE and MASTERCARD
INC.
Our Credit Card Products
1.VISA Credit Cards
Classic
Gold
2.Master Credit Cards
Standard
Gold
3.Corporate Credit Card
CANARA CREDIT CARD PRIVILEGES:

Canara Credit Card is accepted throughout the world

Minimum Gross income to get CANARA CARD is Rs.60,000 p.a. only.

Liberal Card limit. Get up to 30% of your gross annual income as your
Card limit. Fixing of the limit is at the sole discretion of Canara Bank.

Cash withdrawal limit up to 50% of your card limit (Maximum Rs.

50,000 only). Cash withdrawal charges only Rs.30 per thousand.
Minimum Rs.30 only.
62

Free Credit period from 20-50 days

Cash withdrawal facility at all ATMs of Canara bank & other Bank
ATMs.

No Interest on cash withdrawal if paid by the due date. If not paid by

the DUE DATE,
interest is charged from DUE DATE only and not from the DATE OF
CASH
WITHDRAWAL.

No financial charges! i.e., interest on subsequent transactions till it

becomes due, for the customers having revolving facility.

Opt for Revolving Payment system and pay only 5% of the billed amount
and defer the
payment. Carried over balance attracts service charges at 2.5% p.m. plus
applicable
service tax only.

We provide free accident Insurance to you and your spouse too against
the risk of
death due to accident.

Lost Card protection! Liability restricted to Rs.1,000 only from the time
of reporting.

Free card replacement in case of mutilation / loss of card.

Free SMS alerts on all transactions. Please provide your Mobile Phone
number for activating this facility

Bonus Loyalty Points:

National Electronic Fund Transfer (NEFT) facility available for payment

of Card dues.
IFSC CODE: CNRB0001912 Account number as Card number.

Get free Demand Draft from any of the branches towards payment of
your card dues. You can also remit cash or Cheque at any branches of
Canara Bank towards repayment of card dues.

63

You may cover your family with Floating Medical Insurance Cover under
Family CANARA MEDICLAIM Policy with United India Insurance
Company Limited at discounted rates. Avail cashless hospitalization
facility, at networked hospitals.

CANARA CREDIT CARD FOR DIFFERENT SEGMENT OF CUSTOMERS:

The credit card has become a vital part of every one's life on account of benefits
derived from it. The cardholder has the privilege of paying for hotels and
restaurant expenses, services, shopping Airlines bills, Telephone bills and other
shopping needs, through the card. This eliminates the need to carry cash, which
is inconvenient and risky. We offer wide range of products backed by excellent
customer service. Please follow the links for more details.
Contact

Us

We have an exclusive Customer Relations section functioning at our Division

and; the contact numbers are: Toll Free No. 1800 425 2470. Collect call No. 08025584171, 080-25582470

64

Other Banking Services In Varanasi

Although the nature of services offered by a bank depends upon the
type of the bank and the country, the primary services provided
include taking deposits from the general public and issuing checking
and savings accounts, keeping money safe while also allowing
withdrawals when needed providing loans to individuals, businesses
& Corporate enchasing cheque Facilitating money transactions such
as wire transfers and cashiers checks (Inter Bank, Intra Bank,
Inter/Intra country etc) Issuing credit cards, ATM, and debit cards
Storing valuables, particularly in a safe deposit box facilitation of
standing orders and direct debits, so that payments for bills can be
made automatically
ICICI Bank has formulated a Code of Business Conduct and Ethics
for its directors and employees.
1) Mobile prepaid card recharge
Through this facility you can use your ATM / Debit Card at any ICICI
Bank ATM to purchase mobile re-charge cards.
All you have to do is to select the right combination of Operator and
the Circle and a recharge code will be displayed on your ATM Screen.
You will also get this recharge code on your transaction slip.
Currently the Service is available for following Operators:
The following are the operators you can purchase Mobile Recharge
Codes for:

65

Airtel - Delhi, Kolkata, Hyderabad & AP

BPL - Mumbai, Maharashtra & Goa
Spice Quickie - Punjab, Karnataka
RPG Chennai
How to get the recharge code:
Select Payments --> Services --> Mobile pre paid --> Select the
relevant operator for which re-charge card is desired.
Please Note:
Please be sure while selecting the operator and corresponding circle
before entering into the transaction. ICICI Bank does not take any
responsibility for a transaction done by selecting a wrong circle or a
wrong operator.

HDFC
Capital Structure
The authorized capital of HDFC Bank is Rs550 crore (Rs5.5 billion).
The paid-up capital is Rs424.6 crore (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 Foreign Institutional Investors (FIIs) and the bank
66

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'.

67

RESEARCH OBJECTIVES

68

RESEARCH OBJECTIVES

To find out the market potential of SBI card in Varanasi.

To know customers perceptions about various credit schemes

of different banks.

To compare the credit schemes of different banks.

To find out main obstacles while getting finance under various

credit schemes.

69

RESEARCH
METHODOLOGY

70

RESEARCH METHODOLOGY

The research methodology has many dimensions & research methods

do constitute a part of the research methodology. The scope of
research methodologys wider then that of research methods. Thus
when we talk of research methodology. we not only talk of the
research methods but also consider the logic behind the methods we
use in the context of our research study & explain why we are using a
particular methods or technique & why we not using others so that
research results are capable of being evaluated either by the research
himself or by other.
METHODOLOGY:In this the methods have been discussed with which the survey was
conducted. The topic of the survey was the "Banking Services :
Measuring Customer

Satisfaction

Of

Different

Banks".

For

conducting the survey the methods, which I have used is a general

one. It is descriptive type of research so method which I have chose Is
descriptive .
Descriptive research:
It is to provide an accurate picture of some aspects of market
environment. Descriptive research is used when the objective I to
provide a systematic description that is as factual and accurate as
possible. It provides the number of time something occurs, or

71

frequency, lends itself to satisfied calculations such as determining

average number of occurrences.
ACTUAL COLLECTION OF DATA
Data sources:
The sources of data include either secondary data or primary data and
even some times the combination of both. The present study is more
concentration on both primary and secondary data.
Primary data:
Primary data is collected through face-to face interaction with
employees of the insurance companies, by meeting them in personal.
Secondary data:
The secondary data used for their study are inclusive of the data
collected from the Internet, catalogues and brochures and magazines.
In this research report I have chosen secondary data.

SIGNIFICANCE OF THE STUDY:This report will present a view about the customers view and
preferences with regard to the service provided by the Different Banks.

72

SAMPLE SIZE:Sample size refers to the number to be selected from the universe to
constitute the sample for conducting a Summer Tanning Project Report.
Therefore the sample size taken is of 100 customers.

UNIVERSE:The universe in the entire group of item the researcher wants to study and
generallize. In other words it can define as the region constitution the
population about which the research is conducted, the universe chosen was
Varanasi and the study was organized to this region only.

SAMPLING TECHIQUE:As the universe is quite large so a relatively small group of individuals are
selected who are representing the whole universe. The project is done
through SIMPLE RANDOM SAMPLING METHOD, is which every
element of the universe is given an equal chance of being selected.

RESEARCH DESIGN:To know the present condition or status regarding particular item
DESCRIPTIVE AND CONCLUSIVE RESEARCH has been conducted.

DATA ANALYSIS TECHNIQUE:The data analysis technique used was QUANTITIATIVE in nature and the
data analysis instrument used for conducting the research is tabulation, bar
charts and pie chart.

73

SURVEY ANALYSIS
&
INTERPRETATION

74

Q.1

Awareness level about various credit facilities of SBI Banks

Yes

No

92

08

Most of the respondent are well awared about the credit facilities of
SBI Banks

75

Q.2

Are you availing credit facility from any bank ?

Yes

No

88

12

Most of the respondent are availing credit facilities from Banks.

76

Q3.

Since when you are availing this facility.

More than 3

2 to 3

1 to 2

Less than One

23%

36%

27%

14%

Most of the respondents are availing the credit facilities ranging from 2 to
3 years.

77

Q4. Are you satisfied with your existing bank ?

Yes

No

76

24

Customers are highly satisfied with their banks.

78

Q.5 Tick the name of banks whose credit facilities are known to you ?

SBI

PNB

ICICI

Other

33%

27%

22%

18%

The credit facilities of SBI and PNB are well known to every respondent.

79

Q.6

Ranking of banks on the basis of interest rate

SBI

PNB

ICICI

Other

35%

30%

25%

10%

SBI and PNB are the most preferred banks in regard of interest rates.

80

Q.7

Preference order of different parameters

Interest

Collateral

Rate

Security

30

20

Attitude
of Bank

Services

Emp.
05

30

Document
requirement
10

Customer prefer low interest rates followed by services.

81

Validity
05

Q.8

Awareness level of SBI Card

Yes

No

76

24

A good awareness level is exist about SBI cards.

82

Q.9

Sources of information about SBI card

Friend

Bank Employees

Advertisement

20

55

25

Most of the respondents gets information about SBI card from bank
employees.

83

FINDINGS

84

FINDINGS
After critical analysis of the view of respondents (100 units).

The

following findings have come out which are as follows: Majority of the people use banking facilities.
Nearness of the banks is the most important factor that influences
customers from opening on account in a particular bank.
Good Services by the bank employee and the bank was the main
expectation from majority of the customers.

Most of the respondent are availing credit facilities from Banks.

Most of the respondents are availing the credit facilities ranging
from 2 to 3 years.
Customers are highly satisfied with their banks.
The credit facilities of SBI and PNB are well known to every
respondent

SBI and PNB are the most preferred banks in regard of interest
rates.
Customer prefer low interest rates followed by services.

A good awareness level is exist about SBI cards.

85

 Most of the respondents gets information about SBI card from bank
employees.

FOCUS OF THE PROBLEM

86

FOCUS OF THE PROBLEM

The study has been conducted at SBI Bhiwani. The main focus of the study
is to know about customers perceptions about various credit
schemes. As SBI card is an integral part of SBF (small business
financing). So the due weightage is given to SBI card. This study
has been conducted by classifying customers into two categories.

SBI Card holders

Non SBI Card holders

87

CONCLUSION

CONCLUSION

88

On the basis of data analysis and interpretations, the following conclusion

can be made.
RBI Should reduce the SLR and CRR to increase the credit creation
capacity of the banks.
All the nationalized banks should try to improve their service level
to face the stiff competition given by private banks..
Banks should reduce the time length between sanction and
disbursement of loan.
SBI should increase the limit under SBI card to fulfill the growing
requirement of the customers.
Bank employees should bring more professionalism in their attitude
while dealing with customers to retain and attract more customers
Banks should narrow down the spread between PLR and deposit
rates.
Banks should advertise and conduct special awareness programs to
make SBI cards more popular among customers.

89

LIMITATIONS

90

LIMITATIONS

The time was very limited as for requirement of study.

Taking Sample has carried out the study. Therefore, all the
limitations associated with sampling.

Sometimes the respondent does not want to disclose some relevant

information.

The information provided by the respondent may not be authentic.

The sample size was restricted to Varanasi only.

91

QUESTIONNAIRE

92

QUESTIONNAIRE
I am Barkha Singh Student of B.B.A. VI rh semester of RAJARSHI
SCHOOL OF MANAGEMENT & TECHNOLOGY. Please cooperate
and help me by giving your valued answers on the questionnaire given
below, which will help me in compiling and reaching nearer to my goal.
This is here by declared that this study is purely academic in nature. There
is no commercial use and it is a part of our curriculum of my B.B.A. VIrh
semester course.
NAME ......
AGE ..
Educational qualification ...
Contact No ...

Q1. Are you aware of various credit facilities of SBI banks ?

a) Yes

b) No

Q2. Are you availing credit facility from any bank ?

a) Yes
Q3.

b) No

Since when you are availing this facility.

a)

More than 3 year

b)

2-3 years

c)

1-2 years

d)

Less than 1 year

Q4. Are you satisfied with your existing bank ?

93

a) Yes
Q.5

b) No

Tick the name of banks whose credit facilities are known to you ?
a)

SBI

b)

PNB

c) ICICI

d) Other
Q6.

Rate the banks on the basis of following parameters :

Factors Interest Collateral Attitude Services Document Renewal

Rate

Security

of Field

required

process

officer

Banks
SBI
PNB
ICICI
Other

Q7.

According to you what is the main obstacle while getting finance under
various credit facilities?
a)

Security

b)

c)

Guarantee requirement

d)

Document Requirement
Attitude of bank employees

Q8. Which banks name comes to your mind first while availing credit facility
and why?
..
..
Q9. Do you want to give any suggestions to banks?

94

.
.

95

BIBLIOGRAPHY

96

BIBLIOGRAPHY
PUBLICATION BOOKS
Khothari, C.R. Research Methodology Vikas
publication.
M.L. Seth, Money & Banking .
Economics Time
India Today
Business News
WEBSITES
www.sbi.com
www.hdfc.com
www.icici.com
www.google.co.in
www.bankersindhi.com
BROACHER
Broacher of SBI
Broacher of ICICI
Broacher of HDFC

97