Universal Banking

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ICICI – A Universal Bank

Presented By

Under the guidance of Prof. Hemal

Submission Date : 21/02/2010

We are greatly indeed to our honorable Prof. Hemal for all her encouragement support and facilities strength in getting this project to its present stage.

Developing any project is not an easy job. It needs lots of human efforts, dedication and togetherness among the people involved in it. These things mean a lot only when there is strong driving force and continuous support behind the team in every stage of development. This driving force and support in our case was by our own project guide: Prof. Hemal.

We would like to thank our parents for providing us with all their support and encouragement’s right from the projects budding stage to its current maturity. Above all we would like to thank the almighty for giving us courage.



Universal Banking is a multi-purpose and multi-functional financial supermarket (a company offering a wide range of financial services e.g. stock, insurance and real-estate brokerage) providing both banking and financial services through a single window.

Definition of Universal Banking:
As per the World Bank, "In Universal Banking, large banks operate extensive network of branches, provide many different services, hold several claims on firms (including equity and debt) and participate directly in the Corporate Governance of firms that rely on the banks for funding or as insurance underwriters".


The entry of banks into the realm of financial services was followed very soon after the introduction of liberalization in the economy. Since the early 1990s structural changes of profound magnitude have been witnessed in global banking systems. Large-scale mergers, amalgamations and acquisitions between the banks and financial institutions resulted in the growth in size and competitive strengths of the merged entities. Thus, emerged new financial conglomerates that could maximize economies of scale and scope by building the production of financial services organization called Universal Banking.

By the mid-1990s, all the restrictions on project financing were removed and banks were allowed to undertake several in-house activities. Reforms in the insurance sector in the late 1990s, and opening up of this field to private and foreign players also resulted in permitting banks to undertake the sale of insurance products. At present, only an 'arm's length relationship between a bank and an insurance entity has been allowed by the regulatory authority, i.e. IRDA (Insurance Regulatory and Development Authority).

The phenomenon of Universal Banking as a distinct concept, as different from Narrow Banking came to the forefront in the Indian context with the Narsimham Committee (1998) and later the Khan Committee (1998) reports recommending consolidation of the banking industry through mergers and integration of financial activities.


The solution of Universal Banking was having many factors to deal with, which can be further analyzed by the pros and cons.

Advantages of Universal Banking

* Economies of Scale: The main advantage of Universal Banking is that it results in greater economic efficiency in the form of lower cost, higher output and better products. Many Committees and reports by Reserve Bank of India are in favour of Universal banking as it enables banks to exploit economies of scale and scope. * Profitable Diversions: By diversifying the activities, the bank can use its existing expertise in one type of financial service in providing other types. So, it entails less cost in performing all the functions by one entity instead of separate bodies. * Resource Utilization: A bank possesses the information on the risk characteristics of the clients, which can be used to pursue other activities with the same clients. A data collection about the market...
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