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Indian Banking Industry

Indian Banking Industry

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Published by: rahul_tar on Apr 15, 2011
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11/12/2012

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LOVELY INSTITUTE OF MANAGEMENT
 COURSE TITLE- Assignment Of Marketing Management SUBMITTED TO- SUBMITTED BY
Mr Krishan Gopal Rahul Targotra11000047RT 1002 A 17
 
Indian Banking Industry
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HISTORY OF THE BANKING INDUSTRY
– 
The first bank of India - The General Bank of India was set up in the year 1786. In early phase,Indian banks were established as private banks, with mostly private shareholders. In 1865,Allahabad Bank was established exclusively by Indians for the first time.Reserve Bank of India was set up in 1935. To regulate the functioning and activities of commercial banks, the Government of India carried out The Banking Companies Act, 1949,which was later changed to Banking Regulation Act 1949 with Reserve Bank of Indiaempowered over banking sector. In 1955, India government nationalized Imperial Bank of Indiaon a large scale especially in rural and semi-urban areas and formed State Bank of India. From1955 to 1969, SBI subsidiaries and 14 major banks in India had been nationalized. In the second phase of Indian Banking Sector Reform in 1980, seven more banks were nationalized, whichhave brought 80% of the banking segment in India under Government ownership. After thenationalization reform, branches of the public sector bank India rose to approximately 800% indeposits and advances surged by 11,000%. In 1991, India government embarked on the policy of liberalization of banking sector. A small number of banks have been licensed and rules onforeign direct investment have been relaxed. The banking industry in any economy provides itsfinancial backbone. This places it on a completely different platform from any other industry,including regulated utilities. While its criticality for theeconomy is undisputed, it is this criticality that also makes it vulnerable tofailure. This is the reason the banking industry is regulated, albeit in differentdegrees, in every economy. A fair amount of research, both international and Indian has goneinto determining the factors that affect bank performance. However, the relationship between performance and stock returns has not received much attention. With more and more banks inIndia getting listed in the stock markets, shareholder value creation has assumed importancealong with the other traditional objectives these banks (especially nationalized banks) were setup for. The challenge before banks is to create such value by differentiating themselves fromcompetition on the one hand, while working within the regulatory boundaries on the other . The last decade has seen many positive developments in the Indian banking sector. The policymakers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related
 
government and financial sector regulatory entities, have made several notable efforts to improveregulation in the sector. The sector now compares favorably with banking sectors in the regionon metrics like growth, profitability and non-performing assets (NPAs). A few banks haveestablished an outstanding track record of innovation, growth and value creation. This isreflected in their market valuation. However, improved regulations, innovation, growth andvalue creation in the sector remain limited to a small part of it. The cost of bankingintermediation in India is higher and bank penetration is far lower than in other markets. India’s banking industry must strengthen itself significantly if it has to support the modern and vibranteconomy which India aspires to be. While the onus for this change lies mainly with bank managements, an enabling policy and regulatory framework will also be critical to their success.The failure to respond to changing market realities has stunted the development of the financialsector in many developing countries. A weak banking structure has been unable to fuel continuedgrowth, which has harmed the long-term health of their economies
MAJOR PLAYERS:
The major players in the Indian banking sector are:Reserve Bank of IndiaState Bank of IndiaICICI Bank AXIS Bank HDFC Bank HSBC Bank 
Referred as the Central Bank of India, RBI is a premier bank of India having about 22 regionaloffices across the nation and most of the offices are in the capitals of the Indian states. RBI is

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