BANKING SECTOR

PROJECT ON BANKING SECTOR IN INDIA

PRESENTED BY:KIRAN MAHAJAN FYBMS
SEMISTER:-2

Submitted to

K J SOMAIYA COLLEGE OF SCI & COMM

ACKNOWLEDGEMENT
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I wish to thank all those Skillful persons who helped me to make this project possible. I wish To Thank Mr. Shyam S.Bhatia who gave me opportunity for development of this project and provided me with required information.

My sincere thanks to Prof (HOD of B.M.S DEPARTMENT) for her kind approval to prepare and submit report.

I also thank Mam suggestions.

who provided us with

With Due regards, I express my sincere thanks to The Principal of our college for having facilitated us with essential Infrastructure and resources without which this project had been impossible to implement.

Contents
Contents........................................................................................................... 2

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Origin of the word Bank................................................................................5 ......................................................................................................................... 5 TYPES OF BANKS IN INDIA .........................................................................7 Types of retail banks:..................................................................................10 Types of investment banks:........................................................................13 Both combined :..........................................................................................13 ORIGIN AND NATURE OF BANKING.................................................................16 DEFINITION OF BANK......................................................................................19 The National Banking System.........................................................................22 ....................................................................................................................... 22 Indian Banking Industry..................................................................................23 Nationalization:..............................................................................................24 NET Banking ....................................................................................................................... 28 REGULATORY..................................................................................................29 RESERVE BANK OF INDIA................................................................................29 Conclusion:-....................................................................................................31

BANKING SECTOR IN INDIA

Introduction :-

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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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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 Romethat of the Imperial Mint.
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The earlierst evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350-325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern Greek the word Trapeza () means both a table and a bank.

A bank is licensed by a government.Its primary activity is to lend money. Many other financial activities were allowed over time.. The level of government regulation of the banking industry varies widely, with counties such as Iceland, the United Kingdom and the United States having relatively light regulation of the banking
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sector, and countries such as China having relatively heavier regulation (including stricter regulations regarding the level of reserves).

TYPES OF BANKS IN INDIA

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

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

an option for just FSLIC coverage for S&Ls that can satisfy certain requirements. A building and loan association is a special type of S&L that restricts its lending to home mortgages. 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.
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Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations. Central banks are normally governmentowned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.

Types of retail banks:

Commercial bank: the term used for a normal bank to distinguish it from an
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investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, 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. Community Banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners. 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. Private banks: banks that manage the assets of high net worth individuals. Offshore banks: banks located in jurisdictions with low taxation and
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regulation. Many offshore banks are essentially private banks. Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreachand by their socially responsible approach to business and society. Building societies and Landesbanks: institutions that conduct retail banking. Ethical banks: banks that prioritize the transparency of all operations and
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make only what they consider to be socially-responsible investments. Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks:

Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions. Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.

Both combined :

Universal banks, more commonly known as financial services companies, engage in several of these activities. For example, Citigroup is a large American bank involved in commercial and retail lending, with subsidiaries in tax havens offering
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offshore banking services to customers in other countries. Other large financial institutions are similarly diversified and engage in multiple activities. In Europe and Asia, big banks are very diversified groups that, among other services, also distribute insurancehence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity. Public Sector Banks in India. Private banking in India. Rural banking in India. Foreign Banks 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
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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 Private banking in India. 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. National Bank for Agriculture and Rural Development (NABARD). Sindhanur Urban Souharda Co-operative Bank. United Bank of India. Foreign Banks in India ABN-AMRO Bank
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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

ORIGIN AND NATURE OF BANKING

The term bank is supposed to be derived from banco, the Italian word for bench, the Lombard Jews in Italy having benches in the market-place where they exchanged money and bills. When a banker failed, his bench was broken by the people, and he was called a bankrupt.
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This derivation of the term, however, is probably wrong. "The true original meaning of banco,"says MacLeod,"is a heap, or mound, and this word was metaphorically applied to signify a common fund, or joint stock, formed by the contributions of a multitude of persons." A brief account of the first banking operations in Venice will dispel the haze enveloping this subject. In 1171 the financial condition of Venice was strained in consequence of the wars in which the people were engaged. The great council of the republic finally determined to raise a forced loan. "A banker," says Gilbart is a dealer in capital, or, more properly, a dealer in money. He is an intermediate party between the borrower and the lender." The difference between the rate received by the banker, for the use of the money loaned by him,, and the rate he has to pay for it, is his profit. There are several kinds of banks. They may be divided first into private and public banks. Private banks are conducted by individuals without
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incorporation. They are very numerous in our country. The number given in the Banker's Almanac and Register, not including brokers, for the year 1884, was 3,387. They exist in all the States and Territories. Some of them have flourished for a long period, and are regarded very sound, and worthy of the highest credit. Chartered banks may be divided into two classes: those organized and existing under the laws of the United States; and State institutions. The latter may be again divided into Deposit and Discount banks, Savings banks and Trust companies. Each class will be described hereafter. The business of banking consists (1) in receiving deposits of money on which interest may or may not be allowed; (2) in making advances of money, principally in the way of discounting notes; (3) in effecting the transmission of money from one place to another. This is true of the ordinary banks of deposit and discount, both State and National. The disposable means of a bank consists (1) of the capital paid down by the shareholders; ( 2 ) the money deposited
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with it by its customers; (3) the notes it can circulate; (4) the money it receives in the course of transmission, and which, of course, it must repay at another place. The expenses of a bank may be thus classified: rent, taxes and repairs of the banking-house, salaries of officers, stationery and postage. To this may be added interest upon deposits, if allowed.The profits of a bank consist of that portion of its total receipts, including discount, interest, dividends and commissions, which exceed the total amount of expenses.

DEFINITION OF BANK

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The definition of a bank varies from country to country. Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as

conducting current accounts for his customers paying cheques drawn on him, and collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques do not depend on how the bank is organised or regulated.

"banking business" means the business of either or both of the following:

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Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. 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, even if they do not pay and collect cheques

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The National Banking System

As we have seen, the business of banking consists in getting a common fund of money, and in lending a part of it. With this general conception is associated the discounting of bills of exchange, the collection of notes and drafts and the issuing of circulating notes. The business may be conducted by one person, who is called a banker; or by partners, as in any ordinary businesses, which also are called bankers. Again, a number of men may join their capital under a State law, and organize a State bank or association, the capital of which is divided into shares. Capitalists may also unite under the laws of the United States, and form a National banking association.

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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. This was followed by Bank of Hindustan. Both these banks are now defunct. 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. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865.
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By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers.

Nationalization:
By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, 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." The paper was received with positive enthusiasm. Thereafter, her move was
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swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill, and it received the presidential approval on 9th August, 1969.

Nationalization Pros Branch Expansion Banks started opening branches in rural areas Post nationalization, 800% increase in no. of branches Deposit Mobilization Banks contributed to the development of banking habit among common people through sustained publicity, extensive
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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 Banking Regulation Act 1949 Maintenance of adequate liquid assets in the form of Cash Gold Government securities Access to capital markets

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Freedom of operations to increase competitive edge New private sector banks allowed Local area banks encouraged

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

NET Banking
Net Banking is conducting ones banking or bank account online through a computer and a net connection. The system is updated immediately after every transaction automatically. In other words it is said that it is updated 'on-line, real time'. Through net banking one can check the status of his/her account, place queries and also can be facilitated with a wide range of transactions simultaneously. 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. Few banks provide interaction facility between the banks and its customers. Banks are coming up with arrangements of utility payments, like telephone bills, electricity bills, etc.
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REGULATORY RESERVE BANK OF INDIA

Indias Central Bank

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Establishment Established on April 1,1935 with share capita of five crores on recommendation of Hilton young commission. RBI was Nationalized in year 1949. 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. Duvvuri Subbarao.

RBI Office Head office in Mumbai Has 22 regional offices, most of them in state capitals

Preamble The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as: "...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary
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stability in India and generally to operate the currency and credit system of the country to its advantage."

Conclusion:Thanks & Regards, From the Above we come to know that: Banking Industry is the booming industry Banks plays an important role in the corporate world Banking is the need of time Bank has an vital role in business as well as in common life Bank is one of the most important service sectors in the world It has various characertistics of its own Bank provides various employment apportunities in urban as well as in rural areas Bank provides various services to the public such as : ATM Facility Debit & Credit Cards ECS Facility
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Demat Account Net Banking 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

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