BANKING IN INDIA

 IMPORTANCE OF BANKING:

 Mobilizing savings for capital formation.

 Financing industries, trade, agriculture and consumer activities.

 Employment Generation.

 Granting of credit.

 Channelizing funds into production investments.

 Protecting the funds of investors.

 Acts as a medium of exchange.

 Innovative services.
 FUNCTIONS OF INDIGENOUS BANKERS:
 Accept deposits on current and fixed accounts.

 They buy and sell hundis for remitting funds.

 They accept valuables of their clients for safe custody.

 They finance inland trade, including movement of agricultural

commodities like cotton, sugar, oil seeds etc. but they do not
give direct loans to farmers.

 They give loans to artisans and small urban traders against

collateral security or personal security.

 Provide working capital to small scale industries.

 DRAWBACKS OF
INDIGENOUS BANKERS:

 They combine banking and non banking activities which

may involve commission on agency and speculation
activities. This results in their inability to concentrate
on banking activities.

 Interest rate charged by them are very high.

 They may charge brokerage in addition to interest. All

these are additional cost to the borrower.

 Different indigenous bankers operate independently

without coordination among them. Their activities do
not come under the purview of RBI.
  Modern Banking:
The following are the list of new developments in
modern banking:

 Internet Banking.
 Mobile Banking.
 Debit and Credit Cards.
 ATM.
 Electronic fund transfer.
 Magnetic Ink Character Reader Technology.
 Lease.
 Factoring.
 Tax consultancy services etc.
 FUNCTIONS OF COMMERCIAL BANKS:

 Primary Functions:
 Accepting Deposits.
 Lending of funds or advancing of loans.

1)Money at call.
2) Overdraft.
3) Discounting of bills.
4) Cash Credit.
5) Loans and Advances.
6) Investment of funds.
 Secondary Functions(Agency Functions):
1) Transfer of funds.
2) Collection and payment of various items.
3) Purchase and sale of foreign exchange.
4) Purchase and sale of securities.
5) Income tax consultancy.
6) Trustee and Executor.