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Syndicate Bank

Syndicate Bank

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Published by SamanaaSrinivas
A project report on syndicate bank
A project report on syndicate bank

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Published by: SamanaaSrinivas on Mar 27, 2013
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10/01/2013

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 1
CHAPTER 1
ORIGIN OF BANKS IN INDIA
Banking in India originated in the last decades of the 18th century. The first banks were TheGeneral Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, whichoriginated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from theBritish East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955.Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as aconsequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 andstill functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A companythat issues stock and requires shareholders to be held liable for the company's debt) It was notthe first though. That honor belongs to the Bank of Upper India, which was established in1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla.When the American Civil War stopped the supply of cotton to Lancashire from theConfederate States, promoters opened banks to finance trading in Indian cotton. With largeexposure to speculative ventures, most of the banks opened in India during that period failed.The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades untilthe beginning of the 20th century.Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoired'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC establisheditself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to thetrade of the British Empire, and so became a banking center.The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established inLahore in 1895, which has survived to the present and is now one of the largest banks inIndia.Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social,industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities.
 
 2
The presidency banks dominated banking in India but there were also some exchange banksand a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financingforeign trade. Indian joint stock banks were generally under capitalized and lacked theexperience and maturity to compete with the presidency and exchange banks. Thissegmentation let Lord Curzon to observe, "In respect of banking it seems we are behind thetimes. We are like some old fashioned sailing ship, divided by solid wooden bulkheads intoseparate and cumbersome compartments."The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshimovement. The Swadeshi movement inspired local businessmen and political figures tofound banks of and for the Indian community. A number of banks established then havesurvived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.The fervour of Swadeshi movement lead to establishing of many private banks in DakshinaKannada and Udupi district which were unified earlier and known by the name South Canara( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking".During the First World War (1914
 – 
1918) through the end of the Second World War (1939
 – 
1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with bankssimply collapsing despite the Indian economy gaining indirect boost due to war-relatedeconomic activities.
 
 3
BANKING REGULATIONS ACT 1949
1.
 
The Banking Regulation Act was passed as the Banking Companies Act 1949 andcame into force wef 16.3.49. Subsequently it was changed to Banking RegulationsAct 1949 wef 01.03.66. Summary of some important sections is provided hereunder.The section no. is given at the end of each item. For details, kindly refer the bare Act.2.
 
Banking means accepting for the purpose of lending or investment of deposits of money from public repayable on demand or otherwise and withdrawable by cheque,drafts order or otherwise (5 (i) (b)).3.
 
Banking company means any company which transacts the business of banking(5(i)(c)4.
 
Transact banking business in India (5 (i) (e).5.
 
Demand liabilities are the liabilities which must be met on demand and time liabilitiesmeans liabilities which are not demand liabilities (5(i)(f)6.
 
Secured loan or advances means a loan or advance made on the security of asset themarket value of which is not at any time less than the amount of such loan or advances and unsecured loan or advances means a loan or advance not secured(5(i)(h).7.
 
Defines business a banking company may be engaged in like borrowing, lockers,letter of credit, traveller cheques, mortgages etc (6(1).8.
 
States that no company shall engage in any form of business other than those referredin Section 6(1) (6(2).9.
 
For banking companies carrying on banking business in India to use at least one word bank, banking, banking company in its name (7).10.
 
Restrictions on business of certain kinds such as trading of goods etc. (8)11.
 
Prohibits banks from holding any immovable property howsoever acquired except asacquired for its own use for a period exceeding 7 years from acquisition of the property. RBI may extend this period by five years (9)12.
 
Prohibitions on employments like Chairman, Directors etc (10)13.
 
Paid up capital, reserves and rules relating to these (11 & 12)14.
 
Banks not to pay any commission, brokerage, discount etc. more than 2.5% of paid upvalue of one share (13)15.
 
Prohibits a banking company from creating a charge upon any unpaid capital of thecompany. (14) Section 14(A) prohibits a banking company from creating a floatingcharge on the undertaking or any property of the company without the RBI permission.16.
 
Prohibits payment of dividend by any bank until all of its capitalised expenses have been completely written off (15)17.
 
To create reserve fund and 20% of the profits should be transferred to this fund beforeany dividend is declared (17 (1))18.
 
Cash reserve - Non-scheduled banks to maintain 3% of the demand and timeliabilities by way of cash reserves with itself or by way of balance in a current accountwith RBI (18)19.
 
Permits banks to form subsidiary company for certain purposes (19)

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