INTRODUCTION

BANKING SECTOR OF INDIA

WHAT IS BANK?
 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 can 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, its name was (Bank of St. George).

Accepting Deposits from public/others
(Deposits). Lending money to public (Loans). Transferring money from one place to another (Remittances). Acting as trustees. Keeping valuables in safe custody. Government business.

FUNCTIONS OF BANKS

ACTING AS A TRUSTEES
Banks also act as trustees for various purposes. For example, whenever a company wishes to issue secured DEBENTURES, it has to appoint a financial intermediary as trustee who takes charge of the security for the debenture and looks after the interests of the debenture holders. Such entity necessarily have to have expertise in financial matters and also be of sufficient standing in the market/society to generate confidence in the minds of potential subscribers to the debenture. While Banks are the natural choice for the customers, Banks must possess the following to be effective and retain that: A track record of sufficient length. Facilities for safe keeping. Legal skills to take necessary steps for the trusteeship.

DEBENTURES
It is define as certicate of agreements of loans which is given under the companies stemps and ensure fixed returns on the basis of interest rate and the principal amount whenever debenture mature.
TYPES OF DEBENTURES1.NCD 2.PCD 3.OCD 4.FCD

TYPES OF BANKS
Public sector Banks Private sector Banks Co-operative Banks Development Bank/Financial institutions

Public sector Banks
Some Public Sector Banks in India: Central Bank of India Corporation Bank Dena Bank Bank of India Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank

Private sectors Banks
Old generation private banks New generation private banks

• •

ICICI Bank IDBI Bank Axis bank

Foreign banks operating in India
• HSBC BANK • CITI BANK • ABN-AMRO BANK • STANDARD CHARTED BANK

Upcoming foreign bank in India
 RBS(ROYAL BANK OF SCOTLAND GROUP)  INDUSTRIAL AND COMMERCIAL BANK OF
CHINA

Scheduled co-operative banks Non-scheduled bank

CO-OPERATIVE BANKS
The Co operative banks in India started functioning almost 100 years ago. The Cooperative bank is an important constituent of the Indian Financial System.They are setup to provide easy loans to farmers or other persons to set up his buisness. They are non profitable banks. Cooperative banks in India finance rural areas under: Farming Cattle Milk Hatchery Personal finance Some example of co-operative banks in IndiaIDBI BANK(INDUSTRIAL DEVELOPMENT BANK OF INDIA) IFCI BANK(INDUSTRIAL FINANCE COOPERATION OF INDIA) APEX BANK

Development Banks/Financial Institutions
These banks are mainly used for devoloping industries and countries Some ExamplesFederal Bank HDFC Bank HSBC ICICI Bank Indian Overseas Bank ING Vysya Bank

WHO CONTROLS OVER BANKS?

The Reserve Bank of India (RBI)
History:-

 Become operational on April 1,1935  Nationalized in the Year 1949.
Major objectives:-

 Regulate the issue of banknote.  Maintain reserves with a view to securing monetary 

stability. To operate the credit and currency system of the country to its advantage.

Functions of RBI
The fuctions are classified into three heads:-

Traditional functions  Promotional functions Supervisory functions

Traditional functions
Monopoly of currency notes issue Banker to the Government (both the central
and state) Fight against economic crisis and ensures stability of Indian economy. Controller of ForEx and credit Maintaining the external value of domestic currency

Promotional functions
Extension of the facilities for the small
scale industries Innovating the new banking business transactions. Extension of the facilities for the provision of the agricultural credit through NABARD

Supervisory functions
Granting licence to Banks. Periodical review of the work of the
commercial banks. Control the non-banking finance corporation.

HOW IT CONTROLS BANK & ECONOMY
TOOLS: CRR( CASH RESERVE RATIO): 5.5%

 REPO RATES(RR):7.5%  REVERSE REPO RATE(RRR): 6.0%  STATUTORY LIQUIDTY RATIO (SLR):24%  BANK RATE: 6.0%

Overview of Indian Banking Sector

A Glimpse of Banking sector
 Phase-1 Early phase from 1786 to 1969 of Indian Banks  Phase-2  Nationalization of Indian Banks and up to 1991
prior to Indian banking sector Reforms  Phase-3 New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991

Phase-1
 GENERAL BANK OF INDIA 1786(FIRST BANK)  RESERVE BANK OF INDIA 1935  SLOW GROWTH AND PERIODIC FAILURE  THE BANKING COMPANY ACT 1949  PEOPLE Mostly SAVE IN POSTAL DEPOSITS

Phase-2
 Nationalization of imperial bank of India and
formation of sate bank of India(1955)

 Nationalization of SBI and Subsidiaries(1960)  Insurance cover extended to deposits  Creation of credit guarantee corporation  Creation of regional rural banks

Phase-3
 Entry of Foreign Banks  Phone Banking and Net-Banking  Shelter from external macroeconomic shock  System become more convenient and swift

Challenges faced by Indian banks
 Lack of product expertise
Traditionally focused on limited range of products
Primarily for corporate clients

Need for acquiring skills in
Retail, structured finance

 Lack of distribution expertise
Reliance on branch channel and human intervention Relatively high unit cost of delivery given small transaction sizes

 Limited use of technology
Across both customer-facing and internal functions

Continued
Inefficient capital allocation Competition in market
Post office  Insurance Financial Institution Foreign Banks

Ways Ahead
Technological Advancement Rural Banking Improving Risk Management Developing a flexible model for rapid
scale-up at optimal cost

FACTS AND FIGURES
   
Indian banking sector has 6th rank in all over the world. SBI has 6500+ ATMs all over the country. ICICI bank has 3500+ ATMs all over the country. RBI had printed 6,39,948 lakhs crore notes till 6TH Nov 2008.  IN Indore SBI has 45+ ATMs .  SBI provides the facility and it is tie with 9200+ banks to use their ATMs.  Acc. To business magazine survey the no. of ATMs grew 28% yearly.  Inspite of it India has 23+ ATMs per million people, China has 55+ ATMs and South Korea has 1600+ ATMs per million people.  Transaction done through ATMs is around 70,000 crore in a year. ICICI bank has largest no. branches in foreign also.

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