Subject - Banking Operations - 1

Course Code - 315F

Class - M.B.A

Semester - III

History of Banking Video Clip

BANKS AND BANKING

The Banking Companies Act of 1949, defines :

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.

Structure of Banks in India

Stages in History of Banking in India

History of Banking has been divided into Stages like:

• Pre-independence stage

• Post Independence stage

• Nationalisation of Banks

• Introduction of Financial Sector Reforms

History of Banking in India(Pre-Independence Stage)

There were three oldest Banks called Presidency Banks.

• Bank of Bengal (Earlier Bank of Calcutta)

• Bank of Bombay

• Bank of Madras

They merged in 1925 to form the Imperial Bank of India, which after

independence became State Bank of India.

Reserve Bank of India came into existence in 1935 which took the

responsibility of regulating Banking sector as Central Bank in India.

Banking Scenario after Independence

• In 1948, the Reserve Bank of India was nationalized, and it became

an institution owned by the Government of India.

• In 1949, the Banking Regulation Act was enacted which empowered

the Reserve Bank of India (RBI) "to regulate, control, and inspect

the banks in India."

Nationalisation of Banks

• On July 19, 1969, 14 major banks were nationalised.

• On April 15, 1980 another 6 banks were nationalised.

• With the nationalisation, the banking in India shifted from

‘Class’ banking to ‘Mass’ Banking

Liberalisation• In the early 1990s the Govt embarked on a

policy of liberalisation and gave licences to a small number of private banks, which came to be known as New Generation tech-savvy banks like Global Trust Bank, UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank.

Narasimham Committee

The first Narasimham Committee was set up in 1991 to suggest remedial

measures for strengthening the banking system encompassing:

Banking Policy

Institutional Structure

Supervisory System

Legislative changes

technological changes

Thrust of reformsThe main thrust of economic reforms was on:

1. Removal of structural bottlenecks

2. Improvement in trading, clearing and settlement practices

3. Introduction of new players and instruments

4. Introduction of free pricing of financial assets

5. Relaxation of quantitative restrictions

6. Promotion of institutional infrastructure

7. Ensuring of technological upgradation.

Current Banking Scenario• Currently, India has 81 scheduled commercial banks (SCBs) – 28 (19

Nationalised banks + 8 SBI Group + 1 IDBI), 29 Foreign banks and 24

Private banks.

• They have a combined network of over 53,000 branches and 17,000

ATMs.

• The public sector banks hold over 75 percent of total assets of the

banking industry, with the private and foreign banks holding 18% and 7%

respectively.

Banking & Indian Economy A study of the economic history of western country shows that without the evolution of

commercial banks in the 18th and 19th centuries, the industrial revolution would not have

taken place in Europe.

The economic importance of banks to the developing countries may be viewed thus:

1. PROMOTING CAPITAL FORMATION

2. ENCOURAGING INNOVATION

3. MONETSATION

4. INFLUENCE ECONOMIC ACTIVITY

5. FACILITATOR OF MONETARY POLICY

Manav Agarwal manavs87@gmail.com9823962733