EVALUATION AND STRUCTURE OF COMMERCIAL BANKS IN INDIA

Vinod Raina, ACS, Company Secretary Anani Tec!no"a#t Limited, Noida

Introd$ction
In the earlier societies functions of a bank were done by the corresponding institutions
dealing with loans and advances. Britishers brought into India the modern concept of
banking by the start of Bank of England in 1694. In 1!"# the bank of England was given
the monopoly for the issue of currency notes by an $ct. In nineteenth century various
banks started operations# which primarily were receiving money on deposits# lending
money# transferring money from one place to another and bill discounting.
%i#tory o& Ban'in( in India)
Banking in India has a very old origin. It started in the %edic period where literature
shows the giving of loans to others on interest. &he interest rates ranged from two to five
percent per month. &he payment of debt was made pious obligation on the heir of the
dead person.
'odern banking in India began with the rise of power of the British. &o raise the
resources for the attaining the power the East India (ompany on )
nd
*une 1"!6 promoted
the Bank of (alcutta. In the mean while two other banks Bank of Bombay and Bank of
'adras were started on 1+
th
$pril 1"4! and 1
st
*uly# 1"4, respectively. In 1"6) the right
to issue the notes was taken away from the presidency banks. &he government also
withdrew the nominee directors from these banks. &he bank of Bombay collapsed in
1"6 and was put under the voluntary li-uidation in 1"6" and was finally wound up in
1"). &he bank was however able to meet the liability of public in full. $ new bank
called new Bank of Bombay was started in 1"6.
.n )
th
*anuary 19)1 all the three presidency banks were merged together to form the
Imperial Bank by passing the Imperial Bank of India $ct# 19)!. &he bank did not have
the right to issue the notes but had the permission to manage the clearing house and hold
/overnment balances. In 19,4# 0eserve Bank of India came into being which was made
the (entral Bank and had power to issue the notes and was also the banker to the
/overnment. &he Imperial Bank was given right to act as the agent of the 0eserve Bank
of India and represent the bank where it had no braches.
In 19++ by passing the 1tate Bank of India 19++# the Imperial Bank was taken over and
assets were vested in a new bank# the 1tate Bank of India.
Ban' Nationa"i*ation)
$fter the independence the ma2or historical event in banking sector was the
nationali3ation of 14 ma2or banks on 19
th
*uly 1969. &he nationali3ation was deemed as a
ma2or step in achieving the socialistic pattern of society. In 19"! si4 more banks were
nationali3ed taking the total nationali3ed banks to twenty.
Vario$# Type# o& +an'in( #er,ice#5
&he flow chart below shows the various types of banking services5
(ommercial
Banks
1peciali3ed
banks
Institutional
banks
6on Banking
7inancial Institutions
6ationalised
banks 8)!9
1BI and
$ssociate
Banks
:rivate 1ectors
Banks
7oreign Banks
.ld private
sector banks
6ew private
sector banks
CENTRAL BANK

;and 'ortgage I7(I
0ural (redit 17(s
'utual 7unds
Industrial <ev. I0BI
=ousing 7inance 6$B$0<
E>I' Bank =<7(
1I<BI
:rivate 1ector
6B7(
Str$ct$re o& #c!ed$"e commercia" +an'#)
&he composition of the board of directors of a scheduled commercial bank shall consist
of whole time chairman. 1ection 1!$ of the Banking 0egulation $ct# 1949 provides that
not less than fifty?one per cent# of the total number of members of the Board of directors
of a banking company shall consist of persons# who shall have special knowledge or
practical e4perience in respect of one or more of the matters including accountancy#
agriculture and rural economy# banking# co?operation# economics# finance# law# small?
scale industry# or any other matter the special knowledge of# and practical e4perience in#
which would# in the opinion of the 0eserve Bank# be useful to the banking company. .ut
of the aforesaid number of directors# not less than two shall be persons having special
knowledge or practical e4perience in respect of agriculture and rural economy# co?
operation or small?scale industry.
Besides the above the board of the scheduled bank shall consist of the directors
representing workmen and officer employees. &he 0eserve Bank of India and the (entral
/overnment also has right to appoint their nominees into the board of the banks.
-re#ent #cenario o& t!e +an'# in India)
Banks are e4tremely useful and indispensable in the modern community. &he banks
create the purchasing power in the form of bank notes# che-ues bills# drafts etc# transfers
funds bring borrows and lenders together# encourage the habit of saving among people.
&he banks have played substantial role in the growth of Indian economy. 7rom the
meager start in 1"6! the banks have come to long way. $t present in India there are )!
nationali3ed banks# 1tate bank of India and its seven $ssociate banks# )1 old private
sector banks and " new private sector banks. Besides them there are more than ,! foreign
banks either operating themselves or having their branches in India. &he statistical table
hereunder shows the financial position of the banks as on ,1.!,.)!!+.
Stati#tica" ta+"e &or +an'# in India ./ear 01123145
80s. In (rores9
State +an' o& India and it# a##ociate#
6ame of bank @ear of
incorporation
6o. of
.ffices
6etworth <eposits $dvances Interest
income
6et 6:$
ratio
1tate Bank of Bikaner A
*aipur
1966 ",, 1)9" 19!," 1)!!9 141 1.61
1tate Bank of =yderabad 1941 94, 16+ )"9,! 1+6!! ),)+ !.61
1tate Bank of India
19++B. 9161 )4!) ,6!4" )!),4 ,)4)" ).6+
1tate Bank of Indore
196! 4+6 9!4 1,"! 9!41 111! 1.!!
1tate Bank of 'ysore
191, 6,9 +6 1,+"+ ""1 16" !.9)
1tate Bank of :atiala
191 +4 )!4+ )6496 1+,+9 )1,, 1.),
1tate Bank of 1aurashtra
19!) 4)9 94 1)61, 614 11,) 1.4!
1tate Bank of &ravancore
194+ 6"1 11,! )41,, 14"4" )!!" 1."1
B 7rom )
th
*anuary 19)1 to ,!
th
*une 19++ it was Imperial Bank of India# which came about by
merger of Bank of Bengal 8)
nd
*une 1"!69# Bank of Bombay 81+
th
$pril 1"4!9 and Bank of
'adras 81
st
*uly# 1"4,9.
Nationa"i*ed Ban'#
6ame of bank @ear of
incorporation
6o. of
.ffices
6etworth <eposits $dvances Interest
income
6et 6:$
ratio
$llahabad Bank 1"6+ )!) ),)" 4!6) )11+1 ,1"6 1.)"
$ndhra Bank 19), 11+9 1", )++1 1+1 )), !.)"
Bank of Baroda 19!" )) +6)" "1,,, 4,4!! 64,1 1.4+
Bank of India 19!6 )66" 446+ "")1 +6!1, 6!,) ).
Bank of 'aharashtra 19,+ 1,,! 1+4, )""44 1,!6) ),6" ).1+
(anara Bank 19!6 )6) 61!9 969!" 6!4)1 +) 1.""
(entral Bank of India 1911 ,),9 ,)6+ 6!+) )) +)!+ ).9"
(orporation Bank 19!6 99 ,!+4 )),, 1"+46 ))+! 1.1)
<ena Bank 19," 1!) 11!4 )!!96 11,!9 1)+ +.),
Indian Bank 19! 141 +9,6 ,4"!9 1",6! )"1 1.,+
Indian .verseas Bank 19, 1+", )++ 44)41 )+)!+ ,9+1 1.)
.riental Bank of (ommerce 194, 1166 ,,) 4"+! )+)99 ,+) 1.)9
:un2ab A 1ind Bank 19!" " 44! 1411 6,)) 1)49 ".11
:un2ab 6ational Bank 1"9+ 411 "161 1!,16 6!41, "46! !.)!
1yndicate Bank 19)+ 19!+ )199 46)9+ )6)9 ,+" 1.+9
C(. Bank 194, 1"!1 )!49 494! )6+6 ,+4 ).9,
Cnion Bank of India 1919 )14! ,614 61",1 4!1!+ 49! ).64
Cnited Bank of India 19+! 1,4, 19+ )+,4" 11,9! )1,, ).4,
%i2aya Bank 19,1 966 1+9! )+61" 14,,6 )!94 !.+9
O"d pri,ate Sector Ban'#
6ame of bank @ear of
incorporation
6o. of
.ffices
6etworth <eposits $dvances Interest
income
6et 6:$
ratio
Bank of 0a2asthan 194, ,"" ,+1 "1)! )"96 +)) ).+!
Bharat .verseas Bank 19, 91 199 )49 16+1 )19 1.+6
(atholic 1yrian Bank 19)! ,14 )1! 4!)1 ))"9 ,6" ,."!
(ity Cnion Bank 19!4 1, )41 ,!9+ )!1, )91 ,.,
<evelopment (redit Bank 199+BB "" )!! ,"9+ )!!1 ,!, 6.",
<hanalakshmi Bank 19) 1"! 114 ),,9 141! 19) ,.9)
7ederal Bank 19,1 41 )4 1+19, ""), 1191 ).)1
/anesh Bank of Durundwad ?? ,1 11 )1 9+ 1" ".,)
I6/ %ysya Bank 19,! ,"1 1! 1)+69 9!"1 991 ).1,
*ammu A Dashmir Bank 19," 4,9 166+ )164+ 11+1 1+49 1.41
Darnataka Bank 19)4 ,9" 9" 1!", 6)" "4! ).)9
Darur %ysya Bank 19)6 )49 61 66) 46)! +91 1.66
;akshmi %ilas Bank 19)6 ),9 ),! ,496 ),1" )9" 4.9"
;ord Drishna Bank 194! 11" 1"1 )16 1," 19+ 4.))
6ainital Bank 19)) 69 6 9,, ,6, 4 !.!!
0atnakar Bank 194, + 4+ "4 4)4 66 +.+4
1angli Bank 194" 19) "+ 19"+ "1) 1, 4.,!
1BI (omm. A Intl. Bank 199, , "" ,,1 ),1 )6 .6+
1outh Indian Bank 19)9 4," 4+6 "49) +,6+ !9 ,."1
&amilnad 'ercantile Bank 19)1 1", ++9 4") )6)6 +1, ).9+
Cnited Eestern Bank 19,6 ), )44 64+, ,96 4" +.9
BB (onverted to a private sector commercial bank on ,1st 'ay# 199+. 1tarted as a (redit
1ociety set up by the followers of =is =ighness the $ga Dhan in the 19,!s and later
converted into (o?operative Bank.
Ne6 -ri,ate Sector +an'#
6ame of bank @ear of
incorporation
6o. of
.ffices
6etworth <eposits $dvances Interest
income
6et 6:$ ratio
Bank of :un2abB 199+ 1)! )41 4,! )41 ,)9 4.64
(enturion Bank 1994 +9! ,+,! )194 ,46 ).+1
=<7( Bank 1994 446 4+)! ,6,+4 )++66 ,!9, !.)4
I(I(I Bank 1994 +19 1)9!! 99"19 914!+ 941! 1.6+
I<BI Bank ;td. 1994 1+ +9)9 1+1!, 4+414 )6+6 1.4
IndusInd Bank 199+ 1) ",! 1,114 9!!! 11,4 ).1
Dotak 'ahindra Bank 19"+ +4 + 4,!! 4!1 4)! 1.+6
C&I Bank 1994 )49 )4)) ,11) 1+6!, 19)4 1.,9
@es Bank )!!, , )1 66, 61 ,! !.!!
B now merged with (enturion Bank
Forei(n Ban'#
6ame of bank 6o. of .ffices 6etworth <eposits $dvances Interest income 6et 6:$ ratio
$B' $mro Bank 19 1,4 ! 9",1 9! !.,+
$bu <habi (ommercial
Bank
) 1 166, 9! 1+! 1).,
$merican E4press Bank " ,!1 ))64 14", )! !.99
$ntwerp <iamond Bank 1 1)" +! 4,4 )6 !.!!
$rab Bangladesh Bank 1 4+ ), )) , !.)"
Bank International
Indonesia
1 4 11 )! 1."1 1!.49
Bank of $merica + 14, 199, ,)19 )+ !.!!
Bank of Bahrain A
Duwait
) 6 ,94 )64 ,4 +.+,
Bank of (eylon 1 +4 1!4 +9 " 1,.6
Bank of 6ova 1cotia + )+ 16!) )!+, 1+9 ,.!"
Bank of &okyo 'itsubishi , ,69 +,) ++9 + !.!1
Barclays Bank 1 69" + ) ,1 !.!!
B6: :aribas 9 ,,, 164 119 16 !.!!
(alyon Bank 4 ,)" 1,!6 64 11 !.,!
(hinatrust (ommercial
Bank
1 4+ 4" +9 9 6.!)
(ho =ung Bank 1 ) 9 69 !.99 !.!!
(itibank ,+ ,,1! )14"4 1"111 ))!, 1.!!
<B1 Bank 1 ++6 611 +6! ,! !.!!
<eutsche Bank + 1),) ,6)+ )+41 ,9! !.!!
=ongkong A 1hanghai
Banking (orpn.
,9 ,+" 1!1, 1)6)1 16) !.+!
*: 'organ (hase Bank 1 )66 9,! 1+! 4! !.!!
Drung &hai Bank 1 4! ,4 16 4 !.!!
'ashre- Bank ) +" )69 19 )9 !.!!
'i3uho (orporate Bank 1 164 11! )6 1 !.!!
.man International Bank ) 161 ))+ 1, 1" ++.!+
1ociete /enerale ) ,)1 +) 1+9 , !.!!
1onali Bank 1 6 )) 6 1 1.9!
1tandard (hartered Bank "+ ,),4 ))+)) 199! )49, 1.1)
1tate Bank of 'auritius , 1)6 14" ))) ,6 4.!"
C7* Bank 1 ))" 1 1!) 16 !.!!
81ource5 $ profile on banks )!!4?!+# 0BI99
&he banks in India are operating through +++,! branches. $ll the banks together had the
net worth of 0s. 149,"+ crores as on ,1
st
'arch# )!!+. &he banks also had the deposit
base of 0s. 1",69"+ crores and the advances of 0s. 11+111, crores taking the total
business to 0s. )9""!9" crores. <uring the year )!!4?!+ the banks had earned the
interest income of 0s. 1+461 crores. &he average net 6:$ ratio of the banks was also
less ,."4F in year )!!+.

F$t$re i# +ri(!t)
&he Information &echnology 8I&9 is becoming an important component of the banking
sector. &he customers have become more demanding and they need value added services
from the banks. &he foreign banks have raised the e4pectations of the customers causing
the bank to invest strongly on I&. &he Indian banks have started to meet the e4pectations
of the people by opening both onsite and offsite $&'s. Banks have also started
telebanking# anytimeGanywhere banking# mobile banking and Internet banking to give the
facilities to the customers. Banks have also following the 0BI sponsored technology
programmes like mail messaging# Electronic fund transfers 8E7&9# 1tructured 7inancial
'essaging 1ystem 817'19# 80eal &ime /ross 1ettlement 80&/19# (entrali3ed 7und
'anagement 1ystem 8(7'19 and 6egotiated <ealing 1ystem G :ublic <ebt .ffice
86<1G:<.9.
Banks have been given more teeth to tackle the 6on performing assets by passing the
1ecuritisation and 0econstruction of 7inancial $ssets and Enforcement of 1ecurity
Interest $ct# )!!). Cnder this $ct# the banks can take over the assets of the defaulters
either by themselves or with the help of (ourt. &he power is in addition to the power to
recover through the <ebt 0ecovery &ribunal. &he $sset 0econstruction (ompanies have
been formed which also take over the distress assets from the banks.
Conc"$#i,e Remar'#
Banking 1ector in India is likely to undergo a ma2or change. &his change will be in the
form of mergers and ac-uisitions and takeovers. &he 1tate Bank of India may merge all
its associate banks with itself to make a one bank. &he banks based in 1outh India may
look for a bank in 6orth India to have presence in 6orth. 1imilarly banks in 6orth may
look for banks in 1outh to increase its area of operations. (onsolidation will be the key to
the banking sector in future.