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BANKING MODULE
CHAPTER: 1
INTRODUCTION OF BANK
Introduction Of Bank: Banks is an establishment authorized by Government Regulatory to accepts
deposits pay interest, Clear Checks, make loans and act as an intermediary in financial transactions and
provide others financial services and products to its consumers. And the term Finance is a process of
money management where banking, investments, credit, asset and liabilities in three categories like
Public Finance, Private Finance and commercial Finance. Finance is the life blood of trade, commerce
and industry. Now-adays banking sectors act as the backbone of modern business, development of any
country mainly depends upon the banking systems. The term bank is either derived from an old Italian
word “banca” or from a French word “banque” both mean a bench or money exchange table. In olden
days European money lenders or money changes used to display coins of different countries big quantity
for the purpose of exchanging.
1. Acceptance of Deposit: A bank accepts money from the people in the form of deposits which
are usually repayable on demand or after the expiry of a fixed period. It gives safety to the
deposits of its customers. It also acts as a custodian of funds of its customers.
2. Providing Advances: A bank lends out money in the form of loans to those who require it for
different purposes.
3. Payment and Withdrawal: A bank provides easy payment and withdrawal facility to its
customers in the form of cheques and drafts; It also brings bank money in circulation. This
money is in the form of cheques, drafts, through ATM and others facilitated systemized.
History Of Bank:
1. The origin of western type commercial Banking in India dates back to the 18th century. The story of
banking starts from Bank of Hindustan established in 1770 and it was first bank at Calcutta under
European management. It was liquidated in 1830-32.
2. From Bank of Hindustan in 1770, the evolution of banking in India can be divided into three different
periods as follows:
3. In 1786 General Bank of India was set up. Since Calcutta was the most active trading port in India,
mainly due to the trade of the British Empire, it became a banking center.
4. Three Presidency banks were set up under charters from the British East India Company-
• Bank of Calcutta
• Bank of Bombay
• Bank of Madras.
5. The Bank of Calcutta established in 1806 immediately became Bank of Bengal.
6. In 1921 these 3 banks merged with each other and Imperial Bank of India got birth.
**Imperial Bank of India was later renamed in 1955 as the State Bank of India. Thus, State bank of
India is the oldest Bank of India.
7. In 1839, there was a fruitless effort by Indian merchants to establish a Bank called Union Bank. It
failed within a decade.
8. Next came Allahabad Bank which was established in 1865 and working even today.
9. The oldest Public Sector Bank in India having branches all over India and serving the customers for the
last 145 years is Allahabad Bank. .
10. The first bank purely managed by Indians was Punjab National Bank, established in Lahore in 1895.
The Punjab national Bank has not only survived till date but also is one of the largest banks in India.
11. The first Indian commercial bank which was wholly owned and managed by Indians was Central Bank
of India which was established in 1911. So, Central Bank of India is called India‟s First Truly Swadeshi
bank.
Banking Appetite.
1. First India bank Got ISO : Canara Bank
2. First Governor of RBI : Mr. Osborne Smith
3. First Indian governor of RBI : Mr. C D Deshmukh
4. First Bank to Introduce ATM in India : HSBC
5. First Bank to introduce saving Bank in India : Presidency bank in 1830
6. First Bank to Introduce Cheque system in India : Bengal Bank 1784
7. First Bank to introduce Internet Banking : ICICI BANK
8. First Bank to introduce Mutual Fund : State Bank of India
9. First Bank to introduce Credit Card in India : Central Bank of India
10. First Foreign Bank in India : Comptoired‟ Escompte de Paris of France in 1860
11. First Bank Set Up in India : Bank of Hindustan in 1770
12. First Joint Stock Bank of British India : State Bank of India
13. First Joint Stock Bank of India : Allahabad Bank
14. First Bank that is oldest Public Bank in India : Allahabad Bank
15. First national bank that is merged with Punjab National Bank : New Bank of India in 1993
16. First Indian bank to open branch outside India in London in 1946 : Bank of India
17. First Indian Bank started with Indian capital /indigenous Bank of India : Punjab National Bank
1. Reduced CRR and SLR: The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are gradually
reduced during the economic reforms period in India. By Law in India the CRR remains between 3-15%
of the Net Demand and Time Liabilities. It is reduced from the earlier high level of 15% plus incremental
CRR of 10% to current 4% level. Similarly, the SLR Is also reduced from early 38.5% to current minimum
of 25% level. This has left more loanable funds with commercial banks, solving the liquidity problem.
2. Deregulation of Interest Rate: During the economic reforms period, interest rates of commercial
banks were deregulated. Banks now enjoy freedom of fixing the lower and upper limit of interest on
deposits. Interest rate slabs are reduced from Rs.20 Lakhs to just Rs. 2 Lakhs. Interest rates on the bank
loans above Rs.2 lakhs are full decontrolled. These measures have resulted in more freedom to
commercial banks in interest rate regime.
3. Fixing prudential Norms: In order to induce professionalism in its operations, the RBI fixed prudential
norms for commercial banks. It includes recognition of income sources. Classification of assets,
provisions for bad debts, maintaining international standards in accounting practices, etc. It helped
banks in reducing and restructuring Non-performing assets (NPAs).
4. Introduction of CRAR: Capital to Risk Weighted Asset Ratio (CRAR) was introduced in 1992. It resulted
in an improvement in the capital position of commercial banks, all most all the banks in India has
reached the Capital Adequacy Ratio (CAR) above the statutory level of 9%.
Products Of Bank:
1. Accounts
2. Investment Policies
3. Insurance
4. Finance (Loan)
5. Others Services. (Debit cards, Credit cards, Lockers, ATM, NEFT, RTGS, IMPS & Others.)