Banking – An Introduction

8/7/2023 1
 Indian Banking -
Introduction
•Reserve Bank of India was established on 1st April
1935, after the enactment of the Reserve Bank of India
Act 1934 (RBI Act).
•The RBI was initially privately owned but was
nationalized in 1949 by the enactment of the Banking
Regulation Act.
•Banking Regulation Act,1949 (BR Act)gave wide powers
to RBI as regards to establishment of new
banks/mergers and amalgamation of banks, opening of
new branches, etc
•BR Act,1949 gave RBI powers to regulate, supervise
and develop the banking system in India

8/7/2023 2
8/7/2023 3
Progress of banking in India
•In the liberalised, privatised and globalised environment, banks
opeating in India have diversified their banking activities by offering
Para Banking facilities like
– Merchant banking/Mutual funds
– ATMs/Credit Cards/Internet banking
– Venture capital funds
– Factoring
– Bancassurance

8/7/2023 4
RBI’s Major Functions
Supervisory & Regulatory

Promotional & Developmental

Refinance Activities

8/7/2023 5
RBI’s Major Functions
Supervisory & Regulatory

Promotional & Developmental

Refinance Activities

8/7/2023 6
RBI’s Major Functions
SUPERVISORY & REGULATORY

ISSUANCE CREDIT EXCHANGE TRANSFER

OF CONTROL CONTROL OF FUNDS
CURRENCY
NOTES

8/7/2023 7
RBI’s Major Functions
Supervisory & Regulatory

Promotional & Developmental

Refinance Activities

8/7/2023 8
RBI’s Major Functions
PROMOTIONAL & DEVELOPMENTAL

Banker to Banker to Finance Training

Government Bankers

Agriculture

Industry

Exports

8/7/2023 9
RBI’s Major Functions
Supervisory & Regulatory

Promotional & Developmental

Refinance Activities

8/7/2023 10
 RBI’s Major Functions
REFINANCE ACTIVITIES

LENDER OF LAST RESORT REFINANCE OPERATIONS

8/7/2023 11
 Banks in India

Legal frame work

of
Banks

Banking Regulation Reserve Bank of India

Act,1949 Act,1934

8/7/2023 12
Banking Regulation Act,1949 (BR Act)-1
- BR Act covers banking companies and
cooperative banks, with certain modifications.
- BR Act is not applicable to
a) primary agricultural credit societies
b) land development banks
-BR Act allows RBI (Sec 22) to issue licence for banks

8/7/2023 13
 BANKING -Definition
Section 5 (b) of Banking Regulation Act 1949 defines banking as “ acceptance of
deposits of money from the public for the purpose of lending or investment”
Under Section 49A of the Act , no person other than a Bank is authorised to accept
deposits which can be withdrawn by cheques except SB Schemes run by government
or a firm notified by the government.
Section 6 (1) gives the list of permissible business
Section 8 gives details of activities that are prohibited

8/7/2023 14
Reserve Bank of India Act,1934(RBI Act)-1
-RBI Act was enacted to constitute the Reserve Bank of India
-RBI Act has been amended from time to time
-RBI Act deals with the constitution, powers and functions of RBI

8/7/2023 15
Reserve Bank of India Act,1934(RBI Act)-2
-RBI Act deals with:
1. incorporation, capital management and
business of banks
2. central banking functions
3. financial supervision of banks and financial
institutions
4. management of forex/reserves
5. control functions : bank rate,audit,accounts,
penalties for violation

8/7/2023 16
 Classification of Banks-1
Regional Central
Rural Bank
Banks RBI

Co-operative Public Sector

Banks Banks

New Private
Foreign Banks Sector
Banks

Old
Private
Sector

8/7/2023 17
Classification of Banks-2

PUBLIC SECTOR
BANKS

STATE BANK OF
SBI ASSOCIATE NATIONALISED
INDIA
BANKS BANKS
SBI

8/7/2023 18