It safeguard of the savings of the public and gives loans and advances.INTRODUCTION OF A BANK The Banking Companies Act of 1949. . accepting for the purpose of lending or investment of deposit money from the public. order or otherwise A bank as an institution dealing in money and credit. define Banking Company as a company which transacts the business of banking in India. repayable on demand or otherwise and withdraw able by cheque draft . It defines banking as.

C . In India The Ramayana and Mahabharata eras. The New Testament mention about activities of the money changers in the temple of Jerusalem. both meaning ³bench´. Banking is as old as the authentic history and origins of modern Commercial banking tare traceable to ancient times. Delphi and Olympia were used as depositories for peoples surplus funds and these temples were the centers of Moneylending transaction. India the ancient Hindu scriptures refer to money lending activities in the Vedic period. 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. .Origin of Banking The word of ³Bank´ is said to be of Germanic origin . In. In ancient Greece around 2000 B. The famous temples of Ephesus. cognate with the French word³Banque´ and the Italian word ³Banca´ .

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

high operating costs.Post Independence Banking system of India In the post-independence period. 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. India observed the emergence of large number of institutions for providing finance to different sectors of the economy. The policy of directed investment in the form high SLR and CRR. efficiency and profitability front of the commercial banks. extra administrative interference in credit decision making. directed credit programs. one in 1969 and the other in 1980. . The entry activities of private sector and foreign banks were restricted through branch licensing and regulation norms. There were two nationalizations of banks in India. acute problem arises in productivity. 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. regulated interest rates.

4) The system has also observed greater levels of transparency and standards of disclosure. 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. . The Committee on Financial Systems (GOI. 1998) suggested the road map for second -generation reform to keep pace with liberalization of financial sector in other parts of the world. 5) It introduced ratification of the legal structure to strengthen banks position in the areas of loan and default loan. 3) Measures to broaden the ownership base of PSBs have also taken.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. 2) Competition has infused by allowing the operation of new private sector banks and more liberal entry of foreign banks.

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

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 .

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

5) Specialised Banks There are some banks. Let us know about them. (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) . are called Specialised banks. 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.

(1922) and Hooghly Bank Ltd. the United Bank of India Ltd. Comilla Union Bank Ltd. (1914). United Bank of India is one of the 14 major banks which were nationalised on July 19.. (1932). ‡ This Public Secotor Bank India has implemented 14 point action plan for strengthening of credit delivery to women and has designated 5 branches as specialized branches for women entrepreneurs. in the Public Sector Banks. Bengal Central Bank Ltd.Public sector bank ‡ Among the Public Sector Banks in India. was formed in 1950 with the amalgamation of four banks viz. Its predecessor. 1969. Comilla Banking Corporation Ltd. . (1918).

to set up a bank in the private sector banks in India as part of the RBI's liberalisation of the Indian Banking Industry. It is one of the fastest growing Bank Private Sector Banks in India. ‡ It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and commenced operations as Scheduled Commercial Bank in January 1995.Private sector bank ‡ The first Private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. ‡ IDBI ranks the tenth largest development bank in the world as Private Banks in India and has promoted a world class institutions in India. . ‡ The first Private Bank in India to receive an in principle approval from the Reserve Bank of India was Housing Development Finance Corporation Limited.

‡ The cooperative banks in India plays an important role even today in rural financing. their ability to catch the nerve of the local clientele. ‡ Co operative Banks in India are registered under the Co-operative Societies Act. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act. . ‡ Though the co operative movement originated in the West. The businesses of cooperative bank in the urban areas also has increased phenomenally in recent years due to the sharp increase in the number of primary co-operative banks. but the importance of such banks have assumed in India is rarely paralleled anywhere else in the world. personal interaction with customers. 1965. ‡ This exponential growth of Co operative Banks in India is attributed mainly to their much better local reach. The cooperative bank is also regulated by the RBI.Co operative banks in India ‡ The Co operative banks in India started functioning almost 100 years ago.

. commonly called as HARCOBANK plays a vital role in rural banking in the economy of Haryana State and has been providing aids and financing farmers. entrepreneurs. cottage and village industries. rural artisans. ‡ The Haryana State Cooperative Apex Bank Ltd. in the state and giving service to its depositors.Rural banking ‡ Rural banking in India started since the establishment of banking sector in India. It provides and regulates credit and gives service for the promotion and development of rural sectors mainly agriculture. small scale industries. ‡ National Bank for Agriculture and Rural Development (NABARD) is a development bank in the sector of Regional Rural Banks in India. handicrafts. agricultural labourers. etc. Rural Banks in those days mainly focussed upon the agro sector.

on its terms) and their Indian subsidiaries will not be able to open branches freely. the banking sector in India also become competitive and accurative. . After the set up foreign banks in India.Foreign banks in India ‡ Foreign Banks in India always brought an explanation about the prompt services to customers. ‡ New policies are introduced by RBI for them ± The policy conveys that foreign banks in India may not acquire Indian ones (except for weak banks identified by the RBI.







Services given by banks ‡ Demat account ‡ Lockers ‡ Cash management ‡ Insurance product ‡ Mutual fund product ‡ Loans ‡ ECS(Electronic clearance system) ‡ Taxes .