1.banking introduction

8/9/2019 1.Banking Introduction

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BANKING SYSTEM

History of Banking in India.

Nationalization of Banks in India.

Scheduled Commercial Banks in India.


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History of Banking in India

Without a sound and effective Banking System In

India. It can not have healthy economy. For thepast three decades Indias banking system has

Several outstanding achievements to its credits.

The most striking is its extensive reach. Indian

Banking System has reached even to the remotecorners of the country.


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Phase - I

General Bank of India setup in 1786.

Bank of Bengal (std by East India Co.) setup in 1809.

Bank of Bombay (std by East India Co.) setup in 1840.

Bank of Madras (std by East India Co.) setup in 1809.

These banks are known as presidency banks.

Amalgamated in 1920 and Imperial Bank of India was

established which started as private shareholders

banks, mostly European shareholders.


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Phase I (Continued)

In 1885 Allahabad Bank was established.

In 1894 Punjab National Bank Ltd was established

Exclusively by Indians.

Between 1906 1913 Bank of India, Central Bank of

India, Bank of Baroda, Cenara Bank, Indian Bank and

Bank of Mysore were setup. In 1935 reserve Bank of India came up.


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Phase I (Continued)

There were approx 1100 banks, Mostly small.

To streamline the functioning & activities of commercialBanks, the Government of India came up with Banking

Companies Act 1949 which was later changed to

Banking Regulation Act 1949.

RBI was vested with extensive powers for thesupervision of banking in India as the Central Bank

Authority.


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Phase II

Government took major steps in Indian Banking sector

reforms after Independence.

In 1955 Imperial Bank of India was nationalised.

SBI 1ST JUL 1955 was formed to act as a principal agent

of RBI.

Seven banks forming subsidiary of State Bank of India

was nationalised in 1960.

In 1961 Insurance cover extended to deposits.

On 19th July 1969 major process of nationalisation was

carried out. Due to the efforts of the then Prime Minister,

14 major Commercial Banks in the country were


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Phase II (Continued)

Second Phase of the nationalisation in 1980 seven

more banks were nationalised. 1971 Creation of Credit Guarantee Corporation.

1975 Creation of regional rural banks give public the

implicit faith and immense confidence about

sustainability of these institutions. The branches of public sector banks rose by 800%

DEeposit and advances took a huge jump by 11,000%.


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Phase III (Continued)

The Financial system in India has shown a great deal of

resilience. It is sheltered from any crisis triggered by anexternal macroeconomics shocks as other East Asian

Countries Suffered. This is due to a

Flexible exchange rate regime.

The foreign reserves are high. The capital account is not yet fully convertible.

Banks and their customers have a limited foreign

exposure.


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Scheduled Commercial BanksIn India

The Commercial banking structure in India consist of

Scheduled Commercial Banks in India. Unscheduled Commercial Banks in India.

Scheduled Commercial Banks in India constitute those

Banks which have been included in the second scheduleof RBI act 1934. Only hose banks which satisfy the

criteria laid down UIS 45 (6)(a) of the act are included in

the schedule.


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Scheduled Commercial BanksIn India (Continued)

Non scheduled Bank in India in India means banking

co. as defined in clause (c) of Section 5 of the B R Act1949. Which is not a scheduled bank.

List of Scheduled banks

(Public Sectors)

(Private Sectors) (Foreign Banks)


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Banks in India

Public Sector Banks Private Sector Banks

Co-operative Banks

Regional Banks

Foreign Banks


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Banking Services

Bank Accounts Plastic Money

Loans

Money Transfer

Visa Money Transfer


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Financial institution in India

Central Bank

Commercial Banks Credit Rating Agencies

Credit Reporting and Debt collection

Financial Authorities CBDT

CBEC

RBI

SEBI


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Financial institution in India(Continued)

Insurance Companies

GIC LIC

New India Assurance Co.

United India Assurance Co.

Merchant Banks

Mutual Funds

Venture Capitalists


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Financial institution in India(Continued)

Specialized Financial Institutions

ECGCEXIM

GIC

ICICI

IDBI

IFCI

UTI

IIBI

IDFC

NABARD

NSICNBFC

NEDFC

RTEC

SIDBI

SFCSIDC

TFCI

NHB


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Function of a Bank

Transaction Services

Intermediation

-Channalising the savings of surplus sectors to deficit sectors- Brokerage and asset transformation

Transformation Services

- Liability, asset and size transformation- Maturity Transformation

- Risk transformation Payment and settlement system

Real Time Gross Settlement (RTGS)

OtherFinancial Services

- Depository services-PMS-Non discretionary services viz. Advisory services, Transaction

support and Custodial services-


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Challenges and Trend in Banking

Technological revolution

Disintermediation and securitization

Service proliferation

Rising competition

Deregulation

Rising funding costs and shrinking spreads

Consolidation and geographic expansion

Globalization of banking

Increased risk of failure and the weakness of governmentdeposit insurance system


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FIs

Money market intuitions Capital market intuitions

Caters to the notions of the savers

Of high liquidity and safety along

with Profitability

Provides WC to trade and industry

In the form of loans and advances

Reservoir of short- term funds


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FIs

Money market intuitions Capital market institutions

Medium & long term financial trends

Investing Institutions Development Banks

Garner the savings of people provides Capitalenterprise and KNOW- HOW to

business Enterprises

By offering their own shares and To foster the Industrial

stocks provides Long term funds in Growth

the form of direct investment in

securities and underwriting capitalissues of business Enterprises

These include merchant banks

investment companies, Mutual

Funds & insurance companies


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Deregulation measures-Freeing up the direct controls over

ownership

Liberalizing interest rates and credit allocation

Deregulation of foreign exchange transaction controls

Freeing up the entry of new firms

Expanding and broadening the base of banking system,both

at national and international level Developed NBFIs,Securities markets and Money markets to

mobilize and allocate savings

In the post liberalization era banking and

finance sector is witnessing a completemetamorphosis-


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Narrow Banking V/S Universal Banking

Benefits of Narrow banking- 100% reserve banking

Locks bank assets in high-quality instruments thereby minimizing

liquidity and credit risk

Prohibited from supplying risky loans would collateralize deposits

with high quality assets

Payment-system access restricted payments would be fullysecured


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Universal Banking

One-stop financial supermarket offering broad

range of services It denotes combination of banking, insurance

and investment activities

ICICIs decision to turn itself into a universal

bank ushered a new era in the bankingscenario.


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CONTD-

Volume of on-line business transactions is

increasing at exponential rate

Internet revolutions-most dramatic impact on

financial services and banking industry.Banks with

large physical branch network will gradually lose

their competitive edge.

Traditional businesses forced to innovate and re-

think the way they conduct business

1.banking introduction

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