Banking in India
History of Indian Banking (Pre Independence)
1770 - Bank of Hindustan
1865 - Allahabad Bank
1881 - Oudh Commercial Bank
1894 - Punjab National Bank
1911 - Central Bank of India
Now Imperial Bank
of India worked as
Central Bank
Presidency Bank
1809 - Bank of Bengal
1840 - Bank of Bombay
1843 - Bank of Madras
All 3 Presidency Bank
merged and renamed as
Imperial Bank of India
 History of Indian Banking (Pre Independence)
1930 - approx. 1200 banks
Registered under Company Law
1934 - RBI act 1934
1935 - RBI (establishment)
1949 - Nationalization of RBI
All India Rural Credit Survey Committee recommended the
creation of a state-partnered and state-sponsored bank by
taking over the Imperial Bank of India, and integrating with
it, the former state-owned or state-associate banks. An act
was accordingly passed in Parliament in May 1955 and the
State Bank of India was constituted on 1 July 1955.
 History of Indian Banking (Post Independence)
Problems :
Banks like SBI, ICICI, BOB, PNB
Focus : Merchant, Industrialist,Branch expansion
No focus : Rural Sector, Five year plan achievement

Nationalization of Banks
19th July 1969 : 14 Banks, min. capital 50 Cr.
15th April 1980 : 6 banks, min. capital 200 Cr.
 Nationalization : Problems..
High reserve
Administered Interest Rates
ratios
Political Interference
High Reserve Ratios CRR : 15%
SLR : 40%
High interest on Business credit
Total reserve :
High cost of credit
55%
Business expansion
Job creation
Tax collection
Government borrowing
Exports
Current Account Deficit
 1991 Narsimhan committee 1 (GOI)
Ex RBI Governor M Narsimhan
Deregulation of Interest rate
BPLR Reduce CRR, SLR
BASE RATE Bank License
PSL @ normal interest rate
Debt Recovery Tribunal - 1993 : SARFAESI 2002
Liberal Branch expansion policy: 25% Rural
 1998 Narsimhan Committee 2
VRS
Legal reforms for loan recovery
Computerization, Electronic fund transfer, Legal framework
Payment and settlement act - Retail (ECS, NEFT, Card)+ Wholesale (RTGS)
Permit new private/foreign banks.

Year 2013 - Once again License

 Raghuram Rajan formed 3 committees
Urjit Patel : Monetary Policy
Nachiket Mor : Financial Services
Bimal Jalan : Bank License
What is Financial Inclusion ?
Major efforts made in the last five decades include

Nationalization of banks
Building up of robust branch network
Priority sector lending targets
Lead bank scheme
Self-help groups
Permitting BCs/BFs
Zero balance BSBD accounts
 Extent of Financial Exclusion

(a) NSSO 59thRound Survey Results

(b) Government of India Population Census 2011
(c) CRISIL-Inclusix
(d) RBI Working Paper Series Study on ‘Financial
Inclusion in India: A Case-study of West Bengal’
(e) World Bank ‘Financial Access Survey’ Results.
 Financial Inclusion – RBI Policy Initiatives

Basic Saving Bank Deposit Account (BSBDA)

Relaxed and simplified KYC norms
Simplified Branch Authorization Policy Compulsory
Kisan Credit Cards (KCC) Issued
Requirement of Opening Branches in Un-banked Villages
Expansion of ATM Network
 Jan Dhan Yojana

Each family one account

Rupay debit card
1 lakh accident cover
5k overdraft if good credit history
Financial literacy campaign
Credit guarantee fund to cover losses
 Criticism

Insurance cover only if Rupay

card used/45days. (NPCL)
BCA 2% commissioncc
Hawala via smurfing
 Rupay card
National Payment Corporation of India (NPCI)
Cheque Truncation System (CTS)
Aadhar Enabled Payment System (AEPS)
 Rupay Card
300 cr/year

Mastercard
Visacard
Maestro
Payment Gateways

Rupay Card 300 cr@40% less

 Types of Deposits
Current Account No interest
OD facility
Demand Deposits
Min. interest
Saving Account
Min.- 6 months
Recurring Account
Max.- 10 years
Term/Time Deposits
Min.- 7 days
Fixed Account
Max.- 10 years
 Classification of Banks
Public Sector Banks
Central Bank Private Sector Banks
Commercial Banks Foreign Banks
Co-operative Banks
Development Banks
Payment Banks
Small Finance Bnaks
 Small Finance Banks and Payment Banks
Minimum Capital Requirement 100 Cr.
Nachiket Mor Committee

Small Finance Banks Payment Banks

Deposit, loan, small area
Small farmers, MSME, unorganized sector
MFI, NBFC can convert
25% Rural branches
50% MSME loans
Only CASA, Net Banking, Prepaid cards
No RAFA, No loans
75% Gsec investment
Payment, remittances for poor
Max. balance : 1 lakh Rs.