BANKING IN INDIA

AN INTRODUCTION TO THE BANKING

SYSTEM IN THE COUNTRY.
RESERVE BANK OF INDIA
• APEX BANK OF THE COUNTRY. SERVING AS THE BANKER’S BANK AND THE
GOVT.’S BANK.
• ESTABLISHED : APRIL1, 1935 (UNDER THE RBI ACT, 1934)
• NATIONALISED : JANUARY1, 1949
• BODY AND BRANCHES
-HEAD QUARTERS : MUMBAI
-ZONAL HEADS : CHENNAI, DELHI, MUMBAI, KOLKATA
-REGIONAL OFFICES : 19 OFFICES IN MAJOR CITIES
(AHMEDABAD, BANGALORE, BHOPAL, BHUBANESWAR,
CHANDIGARH, CHENNAI, DELHI, GUWAHATI, HYDERABAD, JAIPUR, JAMMU, KANPUR, KOCHI,
KOLKATA, LUCKNOW, MUMBAI NAGPUR, PATNA AND THIRUVANANTHAPURAM)
-THERE ARE 11 SUB-OFFICES AS WELL
• GOVERNER : MR. URJIT PATEL
(SERVING AS THE 24TH GOVERNER OF THE RBI SINCE SEPTEMBER 2016 TILL
DATE.)
RESERVE BANK OF INDIA : FUNCTIONS
(AT A GLANCE)
• ISSUE OF BANK NOTES
• BANKER TO GOVERNMENT
• CUSTODIAN OF CASH RESERVES OF COMMERCIAL
BANKS
• CUSTODIAN OF COUNTRY’S FOREIGN CURRENCY
RESERVES
• LENDER OF LAST RESORT
• CENTRAL CLEARANCE AND ACCOUNTS
SETTLEMENT
• CONTROLLER OF CREDIT
BANKING LADDER IN INDIA
(PART 1)

RBI

Scheduled Banks

Non-Scheduled Banks
Commercial CO-Operative
Banks Banks
 (PART 2)

Commercial Banks

Public Sec. Banks Pvt. Sec. Banks Foreign Banks

SBI & Nationalize Other Pub

Axis Bank HDFC ICICI
RRBs
Associates d Banks Sec Banks HSBC DBS
WHAT IS WHAT??!!
SCHEDULED BANK
• SCHEDULED BANKS REFER TO THOSE BANKS WHICH HAVE BEEN
INCLUDED IN THE SECOND SCHEDULE OF RESERVE BANK OF
INDIA ACT, 1934.
• THESE BANKS BASICALLY ENJOY TWOFOLD BENEFITS
1. IT BECOMES ELIGIBLE FOR DEBTS/LOANS AT THE BANK RATE FROM
THE RBI.
2. IT AUTOMATICALLY ACQUIRES THE MEMBERSHIP OF CLEARING
HOUSE.
• IN SHORT, SCHEDULED BANKS ARE THE BANKS WHICH ARE
MONITORED, DEVELOPED AND SUPERVISED BY RBI.
COMMERCIAL AND CO-OPERATIVE BANKS

Commercial banks

Its main function is

Offers banking Accepting deposits
services to Work for from public and Nominal Interest
individuals and granting loans to Rates
profit individuals and
businesses
businesses.
PUBLIC SECTOR BANK
• PUBLIC SECTOR BANKS (PSBS) ARE BANKS
WHERE A MAJORITY STAKE (I.E. MORE THAN
50%) IS HELD BY THE GOVERNMENT.
• MOSTLY PSBS CHARGE LESS FOR THE SERVICES
THEY OFFER BUT THE SERVICES ARE NOT AS
GOOD AS THE PVT. BANKS.
• THEY MAY PROVIDE LOWER RATES OF LOANS
• PSBS ARE SHACKLED BY RED-TAPISM AND ARE
SLOW ON TECHNOLOGICAL ADVANCEMENTS.
PRIVATE BANK
• IN A PRIVATE SECTOR BANK MAJORITY OF THE STAKE IS
OWNED BY PRIVATE SHAREHOLDERS, INCLUDING
CORPORATIONS AND INDIVIDUALS.
• THESE BANKS TRY TO ATTRACT CUSTOMERS WITH
BETTER INTEREST RATES AND BETTER FACILITIES.
• THEY GENERALLY DEMAND A HIGHER MINIMUM
BALANCE FOR ACCOUNTS AND MAINLY HAVE
CORPORATE SALARIED CUSTOMER BASE.
• GENERALLY A PVT. BANK CHARGES A HIGHER AMOUNT
AS BANK CHARGES.
• TO COUNTER THE STRONGHOLD OF THE PSBS THEY
BRING IN LATEST ADVANCEMENTS AND USE SUPERIOR
TECHNOLOGIES.
FOR NEXT CLASS…

• REVISE YOUR NOTES

• READ MORE ABOUT TERMS USED TODAY
• READ ABOUT THE LIBERALISATION,
PRIVATISATION AND GLOBALISATION OF
THE ECONOMY.
(IN BRIEF…)
FOREIGN BANKS
• A FOREIGN BANK IS A BANK WHICH HAS A PARENT BANK IN
ANOTHER COUNTRY AND AN OPERATING BRANCH IN INDIA.
• THESE BANKS HAVE TO FOLLOW BANKING REGULATIONS OF BOTH
THE PARENT COUNTRY AND THE HOST COUNTRY, I.E., INDIA.
• THESE BANKS USUALLY HAVE A HIGHER CAPITAL AND ARE THUS
ABLE TO OFFER HIGHER AMOUNTS OF LOANS.
• WHY WOULD A FOREIGN BANK ENTER INDIA?
• SINCE INDIA IS A GROWING ECONOMY, AND THE BANKING SECTOR
HAS SHOWN A STEADY GROWTH OVER THE YEARS, FOREIGN BANKS
ARE EAGER TO TAP THE OPPORTUNITY.
• LIKE PVT. BANKS, THESE BANKS TRY TO LURE CUSTOMERS WITH
ATTRACTIVE FACILITIES AND EASE OF OPERATIONS.
REGIONAL RURAL BANKS
• REGIONAL RURAL BANKS OR THE RRBS ARE LOCAL LEVEL
BANKING BRANCHES.
• THESE ARE CREATED MAINLY TO SERVE THE RURAL ECONOMY
WITH THE BASIC BANKING FUNCTIONS.
• THEY WORK FOR THE UPLIFTMENT OF THE SMALL AND
MARGINAL FARMERS, AGRICULTURAL LABORERS, ARTISANS
AND SMALL ENTREPRENEURS.
• RRBS ARE GOVERNED AND MONITORED BY THE NABARD, ALSO
KNOWN AS THE NATIONAL BANK FOR AGRICULTURE AND
RURAL DEVELOPMENT.
• RECENTLY, RRBS ARE ALSO OPERATING IN SEMI-URBAN AND
URBAN AREAS WITH THE AIM OF PROMOTING
ENTREPRENEURSHIP AND SMALL SCALE INDUSTRIES.