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Banks in India

Banks in India

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Banks in India
India has a well developed banking system. Most of the banks in India were founded by Indianentrepreneurs and visionaries in the pre-independence era to provide financial assistance totraders, agriculturists and budding Indian industrialists. The origin of banking in India can betraced back to the last decades of the 18th century. The General Bank of India and the Bank of Hindustan, which started in 1786 were the first banks in India. Both the banks are now defunct.The oldest bank in existence in India at the moment is the State Bank of India. The State Bank of India came into existence in 1806. At that time it was known as the Bank of Calcutta. SBI is presently the largest commercial bank in the country.The role of central banking in India is looked by the Reserve Bank of India, which in 1935formally took over these responsibilities from the then Imperial Bank of India. Reserve Bank was nationalized in 1947 and was given broader powers. In 1969, 14 largest commercial bankswere nationalized followed by six next largest in 1980. But with adoption of economicliberalization in 1991, private banking was again allowed.The commercial banking structure in India consists of: Scheduled Commercial Banks andUnscheduled Banks. Scheduled commercial Banks constitute those banks, which have beenincluded in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI includes onlythose banks in this schedule, which satisfy the criteria laid down vide section 42 (6) (a) of theAct.Indian banks can be broadly classified into public sector banks (those banks in which the Government of India holds a stake), private banks(government doe not have a stake in these banks; they may be publicly listed and traded on stock exchanges) and foreign banks.Bank Fixed Deposits
 
Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit Account, a certain
 
sum of money is deposited in the bank for a specified time period with a fixed rate of interest.The rate of interest for Bank Fixed Deposits depends on the maturity period. It is higher in caseof longer maturity period. There is great flexibility in maturity period and it ranges from 15days
 
to 5 years.Current AccountCurrent Account is primarily meant for businessmen, firms, companies, public enterprises etc.that have numerous daily banking transactions. Current Accounts are cheque operated accountsmeant neither for the purpose of earning interest nor for the purpose of savings but only for convenience of business hence they are non-interest bearing accountsDemat AccountDemat refers to a dematerialised account. Demat account is just like a bank account where actualmoney is replaced by shares. Just as a bank account is required if we want to save money or make cheque payments, we need to open a demat account in order to buy or sell shares.
 
Recurring Bank DepositsUnder a Recurring Deposit account (RD account), a specific amount is invested in bank onmonthly basis for a fixed rate of return. The deposit has a fixed tenure, at the end of which the principal sum as well as the interest earned during that period is returned to the investor.Reserve Bank of IndiaThe Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the
 
Reserve Bank of India Act, 1934. Though initially RBI was privately owned, it wasnationalized in 1949. Its central office is in Mumbai where the Governor of RBI sits.Savings Bank AccountSavings Bank Accounts are meant to promote the habit of saving among the citizens whileallowing them to use their funds when required. The main advantage of 
 
Savings Bank Account isits high liquidity and safety.Senior Citizen Saving Scheme 2004The Senior Citizen Saving Scheme 2004 had been introduced by the Government of India for the benefit of senior citizens who have crossed the age of 60 years. However, under somecircumstances the people above 55 years of age are also eligible to enjoy the benefits of thisscheme.Foreign Banks in IndiaForeign banks have brought latest technology and latest banking practices in India. They havehelped made Indian Banking system more competitive and efficient. Government has come upwith a road map for expansion of foreign banks in India. Nationalised Banks Nationalised banks dominate the banking system in India. The history of nationalised banks inIndia dates back to mid-20th century, when Imperial Bank of India was nationalised (under the
 
SBI Act of 1955) and re-christened as State Bank of India (SBI) in July 1955.Private Banks in IndiaInitially all the banks in India were private banks, which were founded in the pre-independenceera to cater to the banking needs of the people. In 1921, three major banks i.e. Banks of Bengal,
 
Bank of Bombay, and Bank of Madras, merged to form Imperial Bank of India.
Reserve Bank of India
The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. Though initially RBI was privately owned, it wasnationalized in 1949. Its central office is inMumbai where the Governor of RBI sits. RBI has 22 regional offices and most of them arelocated in state capitals. The Reserve Bank of India also has three fully owned subsidiaries:
 
 National Housing Bank (NHB), Deposit Insurance and Credit Guarantee Corporation of India(DICGC), Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL).The functions of Reserve Bank are governed by central board of directors. The board isappointed by the Government of India. The directors are nominated / appointed for a period of four years. As per the Reserve Bank of India Act there are Official Directors and Non-OfficialDirectors. The Official Directors are appointed by the government and include Governor andDeputy Governors of RBI. There cannot be more than four Deputy Governors. Non-OfficialDirectors are nominated by the government. These include ten Directors from various fields andone government official. Apart from these, there are four other Non-Official Directors, one eachfrom four local boards in Mumbai, Kolkata, Chennai and New Delhi.
Main Functions of RBI
Reserve Bank of India is the main monetary authority of the country. It formulates,implements and monitors the monetary policy and thereby plays a key role in maintaining price stability and ensuring adequate flow of credit to productive sectors.
RBI is the regulator and supervisor of the financial system in the country. It prescribes broad parameters of banking operations within which the country's banking and financialsystem functions.
It manages the foreign exchange of the country.
Performs merchant banking function for the central and the state governments; also actsas their banker.
Maintains banking accounts of all scheduled banks.
Issues and exchanges or destroys currency and coins not fit for circulation.
Nationalised Banks in India
 Nationalised banks dominate the banking system in India. The history of nationalised banks inIndia dates back to mid-20th century, when Imperial Bank of India was nationalised (under theSBI Act of 1955) and re-christened as State Bank of India (SBI) in July 1955. Then on 19th July1960, its seven subsidiaries were also nationalised with deposits over 200 crores. Thesesubsidiaries of SBI were State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad(SBH), State Bank of Indore (SBIR), State Bank of Mysore (SBM), State Bank of Patiala (SBP),
 
State Bank of Saurashtra (SBS), and State Bank of Travancore (SBT).However, the major nationalisation of banks happened in 1969 by the then-Prime Minister IndiraGandhi. The major objective behind nationalisation was to spread banking infrastructure in ruralareas and make cheap finance available to Indian farmers. The nationalised 14 major commercial banks were Allahabad Bank, Andhra Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Corporation Bank, Dena Bank, Indian Bank,Indian Overseas Bank, Oriental Bank of Commerce (OBC), Punjab and Sind Bank, Punjab National Bank (PNB), Syndicate Bank, UCO Bank, Union Bank of India, United Bank of India

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