INTRODUCTION OF A BANK

The Banking Companies Act of 1949, define
Banking Company as a company which transacts the business of banking in India. It defines banking as, accepting for the purpose of lending or investment of deposit money from the public, repayable on demand or otherwise and withdraw able by cheque draft , order or otherwise

A bank as an institution dealing in money and credit. It safeguard of the savings of the public and gives loans and advances.

both meaning “bench”. In ancient Greece around 2000 B. Banking is as old as the authentic history and origins of modern Commercial banking tare traceable to ancient times. The famous temples of Ephesus. Delphi and Olympia were used as depositories for peoples surplus funds and these temples were the centers of Money lending transaction.C . cognate with the French word“Banque” and the Italian word “Banca” . The New Testament mention about activities of the money changers in the temple of Jerusalem. banking had become a full fledged activity and during the Smriti period which followed the Vedic period and Epic age the business of banking was carried on by the members of the Vaish community.The word of “Bank” is said to be of Germanic origin . . Origin of Banking In. In India The Ramayana and Mahabharata eras. India the ancient Hindu scriptures refer to money lending activities in the Vedic period.

The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. Indian merchants in Calcutta established the Union Bank in 1839. which almost immediately became the Bank of Bengal . but it failed in 1848 as consequence of the economic crisis of 1848-49. established in 1865 and still functioning today. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. The next was the Punjab National Bank. which originated in the Bank of Calcutta in June 1806. all three of which were established under charters from the British East India Company. The first banks were The General Bank of India which started in 1786. established in Lahore in 1895. the other two being the Bank of Bombay and the Bank of Madras. established in 1881 in Faizabad.The first entirely Indian joint stock bank was the Oudh Commercial Bank. . It failed in 1958. which has survived to the present and is now one of the largest banks in India. The oldest bank in existence in India is the State Bank of India. All these banks operated in different segments of the economy. This was one of the three presidency banks. concentrated on financing foreign trade.Pre Independence banking system of India Banking in India originated in the last decades of the 18th century. is the oldest Joint Stock bank in India. The Allahabad Bank. and the Bank of Hindustan. both of which are now defunct. mostly owned by Europeans. The exchange banks.

Post Independence Banking system of India In the post-independence period. internal autonomy and absence of competition contaminated the health of the commercial banks and threatened their future survival. non-transparent accounting system coupled Non existence of operational flexibility. . one in 1969 and the other in 1980. high operating costs. The policy of directed investment in the form high SLR and CRR. extra administrative interference in credit decision making. The entry activities of private sector and foreign banks were restricted through branch licensing and regulation norms. acute problem arises in productivity. There were two nationalizations of banks in India. The over regulated and over administered polices eroded the capital base of most of the public Sector banks and recapitalization of 19 nationalized banks was made by government through of budgetary provision Nevertheless. regulated interest rates. directed credit programs. efficiency and profitability front of the commercial banks. India observed the emergence of large number of institutions for providing finance to different sectors of the economy.

2) Competition has infused by allowing the operation of new private sector banks and more liberal entry of foreign banks.Liberal policies facilitate to increase market competition among banks to augment efficiency and by productivity by the management to choose independent decisions about input-output and their prices individual banks. 3) Measures to broaden the ownership base of PSBs have also taken. 5) It introduced ratification of the legal structure to strengthen banks position in the areas of loan and default loan. 1998) suggested the road map for second -generation reform to keep pace with liberalization of financial sector in other parts of the world. 4) The system has also observed greater levels of transparency and standards of disclosure. The Committee on Financial Systems (GOI. . The other remarkable developments to enhance competition in banking sector reforms 1) It abolished administered interest rate regime by allowing banks to determine lending and deposit rates.

A such over 90 percent of the banking activity in the country is brought under into the public sector. In short. seven subsidiary State Banks were also nationalised to form the SBI Group.Nationalization of Indian banking system Indian marched towards the establishment of public sector banking through The progressive nationalisation of commercial banks. It has resulted in the evolution of public sector banking. Nationlisation of 6 more commercial banks in 1980. Later on in 1959-60. There were three phases of bank nationalisation: • • • Nationalistion of Imperial Bank of India in1955 and its seven associate banks in 1959-60. Nationlisation of the 14 major commercial banks in 1969. the Government of India pursued the banking of policy control of banks. aiming at an equitable and purposeful distribution of credit towards developmenta -l needs. On July 1. nationalization of banks implied a bold and major economic step in the process of banking reforms in the country. . The establishment of the State Bank of India was a pioneering attempt in public introducing sector banking in the country. 1955 the government of India nationlised the Imperial Bank of India and converted it into the State Bank of India. For a short period during December 1967 to June 1969.

Types of Banks 1) Central Bank A bank which is entrusted with the functions of guiding and regulating the banking system of a country is known as its Central bank. 2) Commercial Banks Commercial banks are of three types (i) Public Sector Banks (ii) Private Sectors Banks (iii) Foreign Banks .

or for expansion and modernization. (ii) Central Co-operative Banks (iii) State Co-operative Banks .3) Development Banks Business often requires medium and long-term capital for purchase of machinery and equipment. 4) Co-operative Banks (i) Primary Credit Societies There are three types of co-operative banks operating in our country. Such financial assistance is provided by Development banks. for using latest technology.

(i) Export Import Bank of India (EXIM Bank) (ii) Small Industries Development Bank of India (SIDBI) (iii) National Bank for Agricultural and Rural Development (NABARD) .5) Specialised Banks There are some banks. Let us know about them. They engage themselves in some specific area or activity and thus. which cater to the requirements and provide overall support for setting are examples of such banks. are called Specialised banks.

Proper classification of assets and full disclosure and transparency of of accounts of banks and other financial institutions. 4) Delegation of direct lending activity of the IDBI to a separate corporatebody .Policies of Indian Banking System during 1991 Recommendations of Narasimhan committee: 1) Establishment of 4 tier hierarchy for the banking structure with 3 to 4 large banks at the top and rural banks at bottom mainly engaged in agriculture and allied activities. 2) The supervisory functions over banks and financial institutions can be assigned to aquasi autonomous body sponsored by RBI. 3) Phased achievement of 8 % capital adequacy ratio. Deregulation of interest rates which are related to the bank rateCompetition among financial institutions on a syndicating or participating approach . Abolition of branch licensing policy. Phased reduction in Statutory Liquidity Ratio. 5) Setting up Asset Reconstruction Fund to make over a portion of the loan portfolio of banks whose recovery has become difficulty .

in the banking sector. a few of them will emerge as global competitors in the near future”. 2) Discussion of the opportunities and challenges faced by the banking sector in India.the banking sector in India. Publicly owned banks handle more than 80% of the banking business in India and the rest is in the hands of private sector banks. . “Indian Banking Sector Analysis (2006-2007)”. banking in both the government and private sector is being revolutionized by this latest phenomenon called “globalization ”. 3) Future forecast of the banking industry in India till the year 2010. by RNCOS“The banking sector in India is heading towards consolidation. with 30competitors from each of the public. However.Globalization Of Indian Banking System Banking sector in India is expanding at an incredibly faster pace. private and foreign sectors With so many players present in the banking sector in India. The report highlights: 1) An overview of the current trends in banking sector in India to enable the clients Profiles of 5 prominent players. As per the latest market research report named. with more and more banks reliazing the benefits offered by globalization.published. There are about 90 players in . private and foreign segment. from each of the public.

and issued 45. 1906 under Act VI of 1882 with an authorized capital of Rs. Today Bank of India has been spread with 2594 branches including 93 specialised branches controlled by 48 Zonal Offices. founded on 7th September in the year 1906 was nationalised along with 13 other banks in July 1969.000 to the public by way of IPO on 3 October. Bank of India came up with its maiden public issue in the year 1997 and the total number of shareholders stands to 3.17.50 lakh with only 50 employees and the only office in Mumbai The promoters incorporated the Bank of India on 7 September. Then its paid-up capital was Rs. The promoters placed 55. 1906. 100. 1 crore divided into 100. the bank commenced operations on 1 November.000 shares each of Rs. • • . 1906.890 as on 30/06/2004.Bank of India • • Bank of India.000 shares privately.

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