BANKING SECTOR

Thane Branch of WIRC
Information Technology Centre
BATCH NO: THANE-05/10/53 BATCH PERIOD: MAY-2010

PROJECT ON BANKING SECTOR IN INDIA PRESENTED BY PUNITH RAO
Registration No: WRO0337839 Address:9/170,jai shastri nagar,mulund(w),Mumbai-82 CONTACT NO.9870749258 Email ID:punitrao18@yahoo.com

Date: (Punith rao)
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BANKING SECTOR

Contents
Introduction .................................................................................................................... 3 Origin of the word Bank ............................................................................................... 4 TYPES OF BANKS IN INDIA ............................................................................................... 6 Types of retail banks: ................................................................................................ 9 Types of investment banks:.................................................................................... 11 Both combined : ...................................................................................................... 11 ORIGIN AND NATURE OF BANKING ................................................................................ 14 HOME............................................................................................................................ 19 DEFINITION OF BANK..................................................................................................... 19 HOME............................................................................................................................ 22 The National Banking System ........................................................................................ 22 HOME............................................................................................................................ 32 Indian Banking Industry ................................................................................................. 32 HOME............................................................................................................................ 33 Nationalization: ............................................................................................................. 33 Easy bank ...................................................................................................................... 38 HOME............................................................................................................................ 39 NET Banking .................................................................................................................. 39 HOME............................................................................................................................ 40 REGULATORY ................................................................................................................. 40 RESERVE BANK OF INDIA ....................................................................................... 40 HOME............................................................................................................................ 44 :-Conclusion:- ................................................................................................................ 44

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BANKING SECTOR

BANKING SECTOR IN INDIA
HOME

Introduction :-

A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money. An institution where one place and borrow money and take care of financial affairs; A branch office of such an institution. The first modern bank was founded in Italy in Genoa in 1406. Banking dates back to 1786, the first bank established in India, then the nationalisation of banks in 1969 and recently the liberalisation of the same since 1991.

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BANKING SECTOR

HOME

Origin of the word Bank

The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in ancient times. In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome³that of the Imperial Mint.
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Its primary activity is to lend money. and countries such as China having relatively heavier regulation (including stricter regulations regarding the level of reserves).BANKING SECTOR The earlierst evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea. c. the United Kingdom and the United States having relatively light regulation of the banking sector. presented in the British Museum in London.. Page | 5 . even today in Modern Greek the word Trapeza ( ) means both a table and a bank. a pun on the name of the city. The coin shows a banker's table (trapeza) laden with coins. Many other financial activities were allowed over time. The level of government regulation of the banking industry varies widely. modern Trabzon. A bank is licensed by a government. 350-325 BC. with counties such as Iceland. In fact.

savings and loan associations. commercial long-term loans. A commercial bank not only serves its depositors but also can offer installment loans. Page | 6 . provide services for fiduciary funds. A commercial bank is authorized to receive demand deposits (payable on order) and time deposits (payable on a specific date). it can also be used to refer to savings institutions. issue letters of credit. and credit cards. lend money. and accept and pay drafts.BANKING SECTOR HOME TYPES OF BANKS IN INDIA The term bank is generally used to refer to commercial banks. however. and building and loan associations.

Page | 7 . mortgages. The Federal Home Loan Banks System also provides membership options for state-chartered S&Ls and an option for just FSLIC coverage for S&Ls that can satisfy certain requirements. although. An S&L can be granted its charter by either a state or the federal government. Federally chartered S&Ls have their own system.000 for each account. and construction. By law. which functions in a manner similar to that of the Federal Reserve System. some S&Ls have entered into educational loans for their customers. Like the Federal Reserve System. It traditionally restricts the loans it makes to housing-related purposes including mortgages. Its primary goal is to serve its depositors through providing loans for purposes such as home improvement. called the Federal Home Loan Banks System. home improvement. A SAVINGS AND LOAN ASSOCIATION (S&L) is similar to a savings bank in offering savings accounts. and education. this program is called the Federal Savings and Loan Insurance Corporation (FSLIC). the Federal Home Loan Banks System provides an insurance program of up to $100.BANKING SECTOR A savings bank does not offer as wide a range of services. a savings bank can offer a higher interest rate to its depositors than can a commercial bank. the organization is known as a federal savings and loan. in the case of a federal charter.

private enterprises. corporate banking. some are owned by government. private banking. Central banks are normally government-owned and charged with quasi-regulatory responsibilities. such as supervising commercial banks. business banking. However. directed at large business entities. Most banks are profit-making. providing services to mid-market business. relating to activities on the financial markets. and investment banking. or are non-profit organizations. The distinction between these financial organizations has become narrower as federal legislation has expanded the range of services that can be offered by each type of institution. providing wealth management services to high net worth individuals and families. or controlling the cash interest rate. Banks' activities can be divided into retail banking. dealing directly with individuals and small businesses.BANKING SECTOR A building and loan association is a special type of S&L that restricts its lending to home mortgages. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis. Page | 8 .

Salt Lake City 1908 National Copper Bank. Salt Lake City 1911 y y y y y Commercial bank: the term used for a normal bank to distinguish it from an investment bank. Congress required that banks only engage in banking activities. Since the two no longer have to be under separate ownership. Page | 9 . Community development banks: regulated banks that provide financial services and credit to under-served markets or populations. Postal savings banks: savings banks associated with national postal systems. Community Banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners. After the Great Depression. the U.BANKING SECTOR Types of retail banks: National Bank of the Republic. Private banks: banks that manage the assets of high net worth individuals. some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.S. whereas investment banks were limited to capital market activities.

Their original objective was to provide easily accessible savings products to all strata of the population. savings products. Nowadays. socially committed individuals created foundations to put in place the necessary infrastructure. credits and insurances for individuals or small and medium-sized enterprises. Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments. providing local and regional outreach³and by their socially responsible approach to business and society. Savings bank: in Europe. Apart from this retail focus. Islamic banks: Banks that transact according to Islamic principles. European savings banks have kept their focus on retail banking: payments. savings banks were created on public initiative.BANKING SECTOR y y y y y Offshore banks: banks located in jurisdictions with low taxation and regulation. savings banks take their roots in the 19th or sometimes even 18th century. Building societies and Landesbanks: institutions that conduct retail banking. Page | 10 . they also differ from commercial banks by their broadly decentralised distribution network. In some countries. Many offshore banks are essentially private banks. in others.

with subsidiaries in tax havens offering offshore banking services to customers in other countries. big banks are very diversified groups that. a portmanteau word combining "banque or bank" and "assurance".BANKING SECTOR Types of investment banks: y y Investment banks "underwrite" (guarantee the sale of) stock and bond issues. Other large financial institutions are similarly diversified and engage in multiple activities. they tend not to invest in new companies. Merchant banks were traditionally banks which engaged in trade finance. Citigroup is a large American bank involved in commercial and retail lending. more commonly known as financial services companies. In Europe and Asia. Unlike venture capital firms. among other services. and advise corporations on capital market activities such as mergers and acquisitions. trade for their own accounts. The modern definition. Both combined : y Universal banks. also distribute insurance³hence the term bancassurance. engage in several of these activities. For example. however. make markets. refers to banks which provide capital to firms in the form of shares rather than loans. signifying that both banking Page | 11 .

Private banking in India. Public Sector Banks in India Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharastra Canara Bank Central Bank of India Corporation Bank Dena Bank IDBI Bank State Bank of India State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Saurastra State Bank of Travancore Page | 12 . Public Sector Banks in India. Rural banking in India.BANKING SECTOR and insurance are provided by the same corporate entity. Foreign Banks in India.

Foreign Banks in India ABN-AMRO Bank Abu Dhabi Commercial Bank Bank of Ceylon BNP Paribas Bank Citi Bank China Trust Commercial Bank Deutsche Bank HSBC JPMorgan Chase Bank Standard Chartered Bank Scotia Bank Taib Bank Page | 13 .BANKING SECTOR Private banking in India. United Bank of India. Sindhanur Urban Souharda Co-operative Bank. National Bank for Agriculture and Rural Development (NABARD). Bank of Punjab Bank of Rajasthan Catholic Syrian Bank Centurion Bank City Union Bank Dhanalakshmi Bank Development Credit Bank Federal Bank HDFC Bank Rural banking in India Haryana State Cooperative Apex Bank Limited.

is probably wrong. however. In 1171 the financial condition of Venice was strained in consequence of the wars in which the Page | 14 . "The true original meaning of banco. the Italian word for bench. formed by the contributions of a multitude of persons. or mound. This derivation of the term. and this word was metaphorically applied to signify a common fund. the Lombard Jews in Italy having benches in the market-place where they exchanged money and bills. his bench was broken by the people. When a banker failed."says MacLeod. or joint stock." A brief account of the first banking operations in Venice will dispel the haze enveloping this subject. and he was called a bankrupt.BANKING SECTOR HOME ORIGIN AND NATURE OF BANKING The term bank is supposed to be derived from banco."is a heap.

mentioned the "three bankes" at Venice. Thus an English . two more loans were contracted. a joint stock fund. the commissioners gave stock certificates bearing interest. 547. says. "it is known that the first Bank. I. The loan had several names in Italian. and the German word Banck came into use as well as its Italian equivalent Monte. Compera." Other Page | 15 . Afterward. and in exchange for the money contributed by the citizens. or Monte. Mutuo. but the most common was Monte. or Public Debt. by which he meant the three public loans. The public revenues were mortgaged to secure the interest. p. Likewise Count Cibrario. was erected at Venice in 1171. and the public loans or debts were called Monti or Banchi. At this period the Germans were masters of a great part of Italy. vol.BANKING SECTOR people were engaged. that we have described.writer. * Principles of Economic Philosophy. The Italians ere long changed Banck into Banco. The great council of the republic finally determined to raise a forced loan. Benbrigge. who wrote in 1646. and commissioners were appointed to pay the interest to the fundholders and to transfer the stock. Every citizen was obliged to contribute the hundredth part of his possessions to the State. who wrote a work on Political Economy in the Middle Age. receiving therefor interest at the rate of five per cent. and which could be sold and transferred.

while a De Quincey would hearken with profound emotion and awe to the "sound-pealing anthems. "A banker. has been likened to that of a dam put across a stream. a dealer in money. more properly. it is true. is his profit. and the Bank of Venice was really the first funding system." In other words. The function of a bank in storing up capital. to the diversity and beauty of the scene. the stream gave forth an unregarded music. To the poet. contributing.BANKING SECTOR proof of the same nature might be added to show that Banco in Italian meant a fund formed by several contributions." The difference between the rate received by the banker. as Page | 16 ." says Gilbart ´is a dealer in capital. Before the erection of the structure. He is an intermediate party between the borrower and the lender. and thus increasing its power. and at the same time furnishes accommodation to those who have need of additional capital to carry on their business. and the rate he has to pay for it. or system of public debts. or. "By this means he draws into active operations those small sums of money which were previously unproductive in the hands of private individuals. for the use of the money loaned by him. the waters coursed their way through wood and meadow. beside satisfying a needful want of man and beast. a bank is a means for organizing capital whereby its full power may be utilized..

Chartered banks may be divided into two classes: those organized and existing under the laws of the United States. for the year 1884. Some of them have flourished for a long period. (2) in making advances of money. and State institutions. principally in the way of discounting notes. They may be divided first into private and public banks.387. Private banks are conducted by individuals without incorporation. The latter may be again divided into Deposit and Discount banks. They exist in all the States and Territories. The number given in the Banker's Almanac and Register. and worthy of the highest credit. not in-cluding brokers." But by storing up the waters. The business of banking consists (1) in receiving deposits of money on which interest may or may not be allowed. There are several kinds of banks. and thus ministering in a very potent way to advance the material prosperity of man. Each class will be described hereafter. and are regarded very sound. (3) in effecting the transmission of money from one place Page | 17 . They are very numerous in our country.BANKING SECTOR if streaming from the open portals of some illimitable cathedral. a force is collected which can be used for running the largest factory. Savings banks and Trust companies. was 3.

(3) the notes it can circulate. dividends and commissions. it must repay at another place.BANKING SECTOR to another. stationery and postage.The profits of a bank consist of that portion of its total receipts. salaries of officers. including discount. and which. The expenses of a bank may be thus classified: rent. ( 2 ) the money deposited with it by its customers. taxes and repairs of the banking-house. This is true of the ordinary banks of deposit and discount. interest. both State and National. The disposable means of a bank consists (1) of the capital paid down by the shareholders. Page | 18 . if allowed. (4) the money it receives in the course of transmission. which exceed the total amount of expenses. of course. To this may be added interest upon deposits.

a banker is defined as a person who carries on the business of banking.BANKING SECTOR HOME DEFINITION OF BANK The definition of a bank varies from country to country. which is specified as y y y conducting current accounts for his customers paying cheques drawn on him. In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments. and collecting cheques for his customers. Under English common law. including Page | 19 .

paying and collecting cheques drawn by or paid in by customers. most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. In particular. that they are defining the business of banking for the purposes of the legislation.BANKING SECTOR cheques. and includes such other business as Page | 20 . When looking at these definitions it is important to keep in mind. the definition above. whether incorporated or not. who carry on the business of banking' (Section 2. and this Act contains a statutory definition of the term banker: banker includes a body of persons. because it ensures that the legal basis for bank transactions such as cheques do not depend on how the bank is organised or regulated. in many cases the statutory definition closely mirrors the common law one. and not necessarily in general. Interpretation). The business of banking is in many English common law countries not defined by statute but by common law. However. the making of advances to customers. it is actually functional. Examples of statutory definitions: y "banking business" means the business of receiving money on current or deposit account. Although this definition seems circular. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business.

y "banking business" means the business of either or both of the following: 1. even if they do not pay and collect cheques Page | 21 .. Section 2. Interpretation). direct credit. savings or other similar account repayable on demand or within less than [3 months] . receiving from the general public money on current.. paying or collecting cheques drawn by or paid in by customers Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale). This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties. deposit.BANKING SECTOR the Authority may prescribe for the purposes of this Act. the cheque has lost its primacy in most banking systems as a payment instrument. 2. or with a period of call or notice of less than that period. (Banking Act (Singapore). direct debit and internet banking.

Again. and in lending a part of it. who is called a banker. Under these varying forms a banking business is done.BANKING SECTOR HOME The National Banking System As we have seen. the capital of which is divided into shares. or by partners. With this general conception is associated the discounting of bills of exchange. We may look at the reasons why men prefer one form to another. The business may be conducted by one person. as in any ordinary businesses. If a man has considerable Page | 22 . Capitalists may also unite under the laws of the United States. the collection of notes and drafts and the issuing of circulating notes. and organize a State bank or association. and form a National banking association. a number of men may join their capital under a State law. the business of banking consists in getting a common fund of money. which also are called bankers.

is governed by the same principles. is subject to the same inspection. All are treated \ alike. Another advantage of this system is the general Government having seen fit to permit these associations to issue promises to pay. they are bound by the law. But when men organize under a State law. of money used in their business. he may prefer to engage in banking alone. They are subject to inspection. and is under the same penalties for the violation of any duty. the poorest and humblest citizen knows Page | 23 . uses the same blanks in making returns to the Treasury Department at Washington. A firm may do the same thing. By a National bank is meant not that the Government owns or runs it. a coin reserve must be kept to pay them. to which they can appeal if injustice is done. of this system over any other is. The advantage to the people. but authorizes its creation and prescribes its mode of doing business. unfettered by State or National laws. based on the security of United States bonds held in Washington. the existence of a power above the bank. They may be a law unto themselves. He may conduct his business in his own way. If they issue promises to pay. Every association under this law.BANKING SECTOR means and enjoys the confidence of the community. for the absolute and prompt payment of every note issued on such security. whether in Maine or in Texas. They must pay a tax on the amount. and if the people do not like it they need not patronize him.

BANKING SECTOR when he gets his pay on Saturday night in a National bank bill. banking associations may be formed by five or more persons who must specify in their articles of association the general objects for thus uniting. and the only one by which banks now issue notes of their own. That system had existed many years. and the Government must pay for it in coin if the local banks fail. Hints relating to Banking. professor of Political Economy in Columbia College. The Rev. Dr. Page | 24 . entitled. As this is the principal banking system in the country. and in several respects was better than any system which had preceded it. was the author of the system. and set it forth in a letter to a member of the New York Legislature. John McVicker. for any bank must receive it for a debt due. it had furnished adequate protection to bill-holders. They must make "an organization certificate" specifying:  The name assumed by the association. written in 1827. By the National law. The National banking system was based on the system of banking existing in the State of New York in 1862. the chief features are worth describing in this place. He need not see what bank issued it. that he has the faith of the Government behind his paper promise to pay.

cashier and other officers. drafts.  The names and residences of the shareholders and the number of shares held by each. Any National banking association designated for the purpose by the Secretary of the Treasury.000 inhabitants.  The amount of its capital stock and the number of shares into which it is divided. Associations so designated must give satisfactory security by the deposit of United States bonds. vice-president. elect directors. may elect a president.000 capital is required. discount and negotiate promissory notes. except that banks with a capital of not less than $ 50. in turn. or otherwise. who. may become a depository of public money and be employed as financial agent of the Government. In cities with a population exceeding 50. No association may be organized with a less capital than $100. and Page | 25 . for the faithful performance of their duties.000 persons.  A declaration that the certificate is made to enable them to avail themselves of the advantages of the act.BANKING SECTOR  Its place of business.000.000. may. The association may sue and be sued. be organized in any place with a population not exceeding 6. bills of exchange. at least $200. with the approval of the Secretary of the Treasury.

buy and sell exchange. Annual meetings are held in January. The next step is the transmission by the association of a certificate to the Comptroller of the Currency (who is the chief official of the Government in this particular department) stating that fifty per cent. coin and bullion. issue and circulate its own notes. He then makes such an examination as may be thought necessary.BANKING SECTOR other evidences of debt. of the remainder monthly. of the capital has been paid. and that all the provisions of the law with reference to organizing a bank have been observed. receive deposits. and if he finds that the law has been properly complied with. he gives to the association a certificate to that effect. and is transferable. and that it is authorized to begin business. loan money on personal security. of the capital stock of an association must be paid in. This certificate Page | 26 . fifty per cent. and make all needful by-laws not inconsistent with the Banking Act. The liability of a shareholder is limited to a sum equal to the par value of his stock. Each director must own at least ten shares of the stock. Before beginning business. The capital stock is divided into shares of $100 each. until it is all paid. and ten per cent. There must be at least five directors. he holds his office until the election and qualification of his successor.

and are received at par everywhere in payment of taxes excises. except for duties on imports. After these notes have been signed by the president or vice-president and the cashier. public lands. and they can now issue as many as they please. Mr.* Formerly the entire amount of bank notes which the banks were permitted to issue was limited to $300. and all other dues to the Government. issued a very useful Government publication of forty pages. Knox.000. As a necessary preliminary to furnishing notes for circulation. to guard against counterfeiting and fraudulent alterations. and circulate the same as money. provided they have a certain amount of Government bonds deposited with the Treasurer. the Comptroller of the Currency under the direction of the Secretary of the Treasury. but in 1875 the law. is entrusted with the important duty of engraving plates in the best manner. and to print therefrom and number so many circulating notes in blank as may be required to supply the associations entitled to receive the same. they are issued. and also for all salaries and other debts owing *The former Comptroller of the Currency.000. entitled Instructions and Suggestions of Page | 27 . was changed.BANKING SECTOR must be published within sixty days from the time of issuing it.

BANKING SECTOR the Comptroller of the Currency in regard to the Organization. United States bonds equal in Page | 28 . and notes worn and unfit for circulation are then forwarded to the Comptroller of the Currency for destruction. All notes of National banks worn. and a summary of the principal restrictions and requirements of the National bank law. are forwarded to the Treasurer of the United States for redemption. except interest on the public debt and in redemption of the legal-tender notes. They are also a legal tender for any debt or liability to every National banking association. with National Banking Laws. After making a record of the notes thus received. fund. is published by Homans Publishing Co. National banks having a capital of $150. many of the forms required by the National law. mutilated. the Comptroller directs their destruction in the presence of four persons. defaced. Extension and Management of National Banks.000 or less are required to keep on deposit with the Treasurer of the United States. which. or otherwise unfit for circulation. which sum is counted as part of its lawful reserve. Such redemptions are reimbursed from the five per cent. an excellent set of by-laws. It contains. "by the United States. Every National banking association is required to keep on deposit in the Treasury of the United States a sum equal to five per centum of its circulation. among other matters.

BANKING SECTOR amount to one-fourth of their capital stock.  Land mortgaged to it in good faith to secure debts previously contracted. A National bank can hold real estate under the following conditions and no others:  The building needful to transact its business. comparing them with the books of the Comptroller. Every bank annually examines or has examined the bonds deposited in the office of the United States Treasurer.  Land conveyed to it in satisfaction of debts previously contracted in the course of business.000 in United States bonds. Upon a deposit of bonds the association making the same is entitled to receive from the Comptroller circulating notes equal in amount to ninety per centum of the par value of the United States bonds so deposited. and with its own record of them. Page | 29 . and if the bonds exist and the record of them is correct. executes a certificate to that effect to the Treasurer.  Land purchased under sales ordered by courts in order to secure debts due to the bank. Other banks are required to keep on deposit not less than $50.  In the last three cases the real estate cannot be held beyond five years. but the total amount of such notes issued to any association may not exceed ninety per centum of the amount of its capital stock actually paid in.

bill of exchange. reserve on deposit in the City of New York. may keep one-half of the required twenty-five per cent. Page | 30 . and the banks in other places must keep on hand fifteen per cent.BANKING SECTOR The rate of interest which a bank may take on any note. National banks in any of the sixteen cities excepting New York. nor make any dividend until the requisite proportion of reserve to circulation and deposits has been restored. Every bank in sixteen of the principal cities of the United States must keep on hand always in lawful money as a reserve fund. approved by the Comptroller of the Currency. The banks last mentioned. falls below that amount. for one class of banks and fifteen per cent. or other evidence of debt is the rate permitted by the laws of the State or Territory where the bank is located. may keep three-fifths of their reserve on deposit with such of the National banks as may be selected by them. of the amount of its deposits. for the other. the bank can make no new loans. of their deposits. and doing business in any of eighteen specified principal cities of the United States. twenty-five per cent. however. except by purchasing or discounting bills of exchange payable at sight. Whenever this reserve of twenty-five per cent.

They are also subject to examination by officers appointed by the Government. each association is required to make a sworn return to the Treasurer of the United States of the average amount of its notes in circulation. Page | 31 . of the amount of such dividend. These reports must be verified by the oath of the president or cashier and attested by the signatures of at least three of the directors. each association is required to make a sworn report within ten days after the declaration of any dividend.BANKING SECTOR They cannot make loans on the security of their own stock. nor can they pledge their own notes of circulation for the purpose of getting money to pay in their capital stock. In addition to the reports mentioned above. exhibiting in detail the resources and liabilities of the associations at the close of business on any past day specified by him. except to prevent a loss on a debt previously contracted. The banks must make reports to the Comptroller of the Currency according to the forms which he prescribes. . In order to enable the Treasurer to assess the duties. The Comptroller is required to call for not less than five such reports during each year. and the amount of the net earnings.

Calcutta was the most active trading port. A couple of decades later. This was followed by Bank of Hindustan. foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. which was established in 1865. mainly due to the trade of the British Empire. Both these banks are now defunct. At that point of time. and due to which banking activity took roots there and prospered.BANKING SECTOR HOME Indian Banking Industry Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. Page | 32 . The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. The first fully Indian owned bank was the Allahabad Bank.

in 1895 in Lahore and Bank of India. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. in 1906. the Indian banking industry has become an important tool to facilitate the development of the Indian economy. and a debate has ensued about the possibility to nationalize the banking industry. After India's independence in 1947." The paper was received with positive enthusiasm. the Reserve Bank was nationalized and given broader powers. At the same time. Page | 33 . it has emerged as a large employer.BANKING SECTOR By the 1900s. Indira Gandhi. HOME Nationalization: By the 1960s. the market expanded with the establishment of banks such as Punjab National Bank. in Mumbai .both of which were founded under private ownership. the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation.

closer to the average growth rate of the Indian economy. 1969. With the second dose of nationalisation." Within two weeks of the issue of the ordinance. Nationalization ² Pros ‡ Branch Expansion ± Banks started opening branches in rural areas Page | 34 . After this. until the 1990s. her move was swift and sudden. a national leader of India. Jayaprakash Narayan.BANKING SECTOR Thereafter. The stated reason for the nationalisation was to give the government more control of credit delivery. and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19. described the step as a "masterstroke of political sagacity. A second dose of nationalisation of 6 more commercial banks followed in 1980. the GOI controlled around 91% of the banking business of India. 1969. and it received the presidential approval on 9th August. the Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill. the nationalised banks grew at a pace of around 4%.

extensive branch banking and relatively prompt service Expansion of Bank Credit ± Banks started mobilising deposites to facilitate increasing demand for credit from agricultural and industrial sector Diversification ± Merchant Banking and underwriting ± Mutual Funds and Retail Banking ‡ ‡ ‡ ‡ Nationalization ² Cons Despite impressive quantitative achievements.BANKING SECTOR ± Post nationalization. productivity and efficiency of systems suffered ‡ Portfolio quality badly deteriorated ‡ Profitability eroded Page | 35 . of branches ‡ Deposit Mobilization ± Banks contributed to the development of banking habit among common people through sustained publicity. 800% increase in no.

used this liquidity to fund its own expenditure mainly for paying govt employee salaries Banking Regulation Act 1949 Maintenance of adequate liquid assets in the form of ± Cash ± Gold ± Government securities ± Government guaranteed securities Equal to not less than 25% of their total demand and time deposit liabilities Primarily known as SLR Page | 36 ‡ ‡ .BANKING SECTOR ‡ PSBs and FIs became weak.5% Rate of interest received on govt.5% cash was with RBI Govt. some were making losses YoY ‡ ‡ ‡ ‡ ‡ ‡ ‡ Narasimham Committee Report 1991 SLR which was initially at 25% was raised to 30% and then to 38. securities was much less than market rates Known as Tax on the banking system At the same time CRR was hiked up to 15% All in all 53.

75% as of today Decontrolled interest slabs Prudential norms on NPAs Capital adequacy norms Access to capital markets Freedom of operations to increase competitive edge New private sector banks allowed Local area banks encouraged Supervision of commercial banks Recovery of debts Page | 37 .5% to 25% CRR reduced from 15% to 5.BANKING SECTOR ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Reforms based on NCR SLR reduced from 38.

Now. Bill payments Fund transfers Check balances Page | 38 . almost every commercial banks gives ATM facilities to its customers. This is needed in today's fast business environment with unending deadlines for fulfillment and loads of appointments to meed and meetings to attend. at anytime and in any condition or anyhow. The first bank to cross 1. HDFC and IDBI counts more than 50% of the total ATMs in India.SBI is following the concept of 'ATMs in Quantity'.BANKING SECTOR HOME Easy bank :Automatic Teller Machine (ATM) The first bank to introduce the ATM concept in India was the Hongkong and Shanghai Banking Corporation (HSBC). But Private Sector Banks have taken the lead. It was in the year 1987. Mobile Banking "The account that travels with you". The following operations can be conducted through advanced mobile phones. With mobile banking facilities. ICICI. UTI. one can bank from anywhere.000 marks in installing ATMs in India is ICICI.

place queries and also can be facilitated with a wide range of transactions simultaneously. electricity bills. Few banks provide interaction facility between the banks and its customers. The system is updated immediately after every transaction automatically. etc. Banks are coming up with arrangements of utility payments. Through net banking one can check the status of his/her account. Page | 39 . In other words it is said that it is updated 'on-line. like telephone bills. Net Banking has three basic features. They are as follows: The banks offer only relevant information's about their products and services to the mass.BANKING SECTOR HOME NET Banking Net Banking is conducting ones banking or bank account online through a computer and a net connection. real time'.

BANKING SECTOR HOME REGULATORY RESERVE BANK OF INDIA India¶s Central Bank Page | 40 .

Structure RBI Have 20 Directors.  Four Director to represent Headquarter at Mumbai . Nominated by Govt. RBI was Nationalized in year 1949. Duvvuri Subbarao. Chennai &New Delhi. RBI Office Page | 41 .BANKING SECTOR Establishment Established on April 1.    One Govt. Appointed / Nominated for period of four year.1935 with share capita of five crores on recommendation of Hilton young commission.Official from Ministry of finance.  Fore deputy Governor.  The Governor. Ten Nominate Director. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937 The Governors of RBI is Dr. Calcutta .

Main Function (Act 1934) Banker to Government.BANKING SECTOR Head office in Mumbai Has 22 regional offices.to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage..  RBI has separate issue department to issue currency note.." Main Function (Act 1934) Bank of Issue (under sec 22)  RBI has sole right to issue one Rupees Notes and small coins in country as agent of government.  RBI maintain minimum reserve in Gold and Foreign Exchange reserve of which almost 55% should be Gold. Page | 42 . most of them in state capitals Preamble The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as: ".

Page | 43 . gen ce G nd e Government in India.es to the a s oc i Main Function (Act 1934) Banker¶s Bank & Lender of Last Report. Main Function (Act 1934) Controller of Credit  RBI holds the cash reserves of all schedule banks.BANKING SECTOR  RBnI tirsabl anokveerrnamenttsaandaall dsvtaistor of .  Every schedule bank have to keep cash reserve a fix percentage of their aggregate deposit liabilities.  RBIlohaenlpsatnhde GoovMearnmgeentPtuobflliocat new s t na . It holds credit operation of bank through quantities. RBI maintains banking accounts of all schedule bank.  RBI mStkaetseslolanalaanudthaodrvitaensc.  Bank always expect for help from RBI in time of banking crisis.

Every bank give weekly return showing assets and liabilities in details HOME :-Conclusion:Thanks & Regards.BANKING SECTOR RBI has power to ask bank or whole banking system not to lend particular g ro u p .RBI also cancel this license. Every bank have to get license from RBI for banking operation . From the Above we come to know that: y Banking Industry is the booming industry y Banks plays an important role in the corporate world y Banking is the need of time y Bank has an vital role in business as well as in common life y Bank is one of the most important service sectors in the world y It has various characertistics of its own Page | 44 .

BANKING SECTOR y Bank provides various employment apportunities in urban as well as in rural areas y Bank provides various services to the public such as :  ATM Facility  Debit & Credit Cards  ECS Facility  Demat Account  Net Banking y Bank has an key role in day to day business activities In the Sense Bank plays a significant role in almost all the sectors in world Date: Place: Thane Page | 45 .

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