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BANKING SECTOR
Thane Branch of WIRC
Information Technology Centre
BATCH NO: THANE-05/10/53
BATCH PERIOD: MAY-2010
PROJECT ON BANKING SECTOR IN INDIAPROJECT ON BANKING SECTOR IN INDIAPRESENTED BY PRESENTED BY
PUNITH RAO PUNITH RAO Registration No: WRO0337839
Address:9/170,jai shastri nagar,mulund(w),Mumbai-82
CONTACT NO.9870749258 Email ID:[email protected]
Date:Date:(Punith rao)(Punith rao)
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ContentsIntroduction.......................................................................................................................3
Origin of the word “Bank”..................................................................................................4
TYPES OF BANKS IN INDIA..................................................................................................6
Types of retail banks:.............................................................................................9
Types of investment banks:...............................................................................11
Both combined :.....................................................................................................11
ORIGIN AND NATURE OF BANKING..................................................................................14
HOME...............................................................................................................................19
DEFINITION OF BANK.......................................................................................................19
HOME...............................................................................................................................22
The National Banking System...........................................................................................22
HOME...............................................................................................................................32
Indian Banking Industry...................................................................................................32
HOME...............................................................................................................................33
Nationalization:................................................................................................................33
Easy bank.........................................................................................................................38
HOME...............................................................................................................................39
NET Banking.....................................................................................................................39
HOME...............................................................................................................................40
REGULATORY................................................................................................................... 40
RESERVE BANK OF INDIA.........................................................................................40
HOME...............................................................................................................................44
:-Conclusion:-...................................................................................................................44
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BANKING SECTOR
BANKING SECTOR IN INDIA
HOMEHOME
Introduction :-:-
A banker or bank is a financial institution whoseA banker or bank is a financial institution whose primary activity is to act as a payment agent forprimary activity is to act as a payment agent for
customers and to borrow and lend money.customers and to borrow and lend money.An institution where one place and borrow money andAn institution where one place and borrow money and take care of financial affairs; A branch office of suchtake care of financial affairs; A branch office of such
an institution.an institution.The first modern bank was founded in Italy in GenoaThe first modern bank was founded in Italy in Genoa
in 1406.in 1406.Banking dates back to 1786, the first Banking dates back to 1786, the first bankbank established established in India, then the nationalisation of banks in 1969 andin India, then the nationalisation of banks in 1969 and
recently the liberalisation of the same since 1991.recently the liberalisation of the same since 1991.
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HOME
Origin of the word “Bank”
The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in ancient times.
In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the
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foreign currency into the only legal tender in Rome—that of the Imperial Mint.
The earlierst evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350-325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city.
In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a bank.
A bank is licensed by a government.Its primary activity is to lend money. Many other financial activities were allowed over time..
The level of government regulation of the banking industry varies widely, with counties such as Iceland, the United
Kingdom and the United States having relatively light regulation of the banking
sector, and countries such as China having relatively heavier regulation
(including stricter regulations regarding the level of reserves).
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HOMEHOME
TYPES OF BANKS IN INDIA
The term bank is generally used to refer to commercial banks; however, it can also be used to refer to savings institutions, savings and loan associations, and building and loan associations.
A commercial bank is authorized to receive demand deposits (payable on order) and time deposits (payable on a
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specific date), lend money, provide services for fiduciary funds, issue letters of credit, and accept and pay drafts. A commercial bank not only serves its depositors but also can offer installment loans, commercial long-term loans, and credit cards.
A savings bank does not offer as wide a range of services. Its primary goal is to serve its depositors through providing loans for purposes such as home improvement, mortgages, and education. By law, a savings bank can offer a higher interest rate to its depositors than can a commercial bank.
A SAVINGS AND LOAN ASSOCIATION (S&L) is similar to a savings bank in offering savings accounts. It traditionally restricts the loans it makes to housing-related purposes including mortgages, home improvement, and construction, although, some S&Ls have entered into educational loans for their customers. An S&L can be granted its charter by either a state or the federal government; in the case of a federal charter, the organization is known as a federal savings and loan. Federally chartered S&Ls have their own system, which functions in a manner similar to
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that of the Federal Reserve System, called the Federal Home Loan Banks System. Like the Federal Reserve System, the Federal Home Loan Banks System provides an insurance program of up to $100,000 for each account; this program is called the Federal Savings and Loan Insurance Corporation (FSLIC). The Federal Home Loan Banks System also provides membership options for state-chartered S&Ls and an option for just FSLIC coverage for S&Ls that can satisfy certain requirements.
A building and loan association is a special type of S&L that restricts its lending to home mortgages.
The distinction between these financial organizations has become narrower as federal legislation has expanded the range of services that can be offered by each type of institution.
Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to
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high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.
Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.
Types of retail banks:
National Bank of the Republic, Salt Lake City 1908
National Copper Bank, Salt Lake City 1911
Commercial bank : the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress
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required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
Community Banks : locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners.
Community development banks : regulated banks that provide financial services and credit to under-served markets or populations.
Postal savings banks : savings banks associated with national postal systems.
Private banks : banks that manage the assets of high net worth individuals.
Offshore banks : banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
Savings bank : in Europe, savings banks take their roots in the 19th or
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sometimes even 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach—and by their socially responsible approach to business and society.
Building societies and Landesbanks: institutions that conduct retail banking.
Ethical banks : banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments.
Islamic banks : Banks that transact according to Islamic principles.
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Types of investment banks:
Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions.
Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.
Both combined :
Universal banks , more commonly known as financial services companies, engage in several of these activities. For example, Citigroup is a large American bank involved in commercial and retail lending, with subsidiaries in tax havens offering offshore banking services to customers in other countries. Other large financial institutions are similarly diversified and engage in
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multiple activities. In Europe and Asia, big banks are very diversified groups that, among other services, also distribute insurance—hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.
Public Sector Banks in India.Public Sector Banks in India.Private banking in India.Private banking in India.Rural banking in India.Rural banking in India.Foreign Banks in India.Foreign Banks in India.
Public Sector Banks in IndiaPublic Sector Banks in IndiaAllahabad BankAllahabad Bank
Andhra BankAndhra Bank Bank of BarodaBank of Baroda
Bank of IndiaBank of India Bank of MaharastraBank of Maharastra
Canara BankCanara BankCentral Bank of IndiaCentral Bank of India
Corporation BankCorporation BankDena BankDena BankIDBI BankIDBI Bank
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State Bank of IndiaState Bank of India State Bank of Bikaner & JaipurState Bank of Bikaner & Jaipur
State Bank of HyderabadState Bank of HyderabadState Bank of IndoreState Bank of IndoreState Bank of MysoreState Bank of Mysore
State Bank of SaurastraState Bank of SaurastraState Bank of TravancoreState Bank of Travancore Private banking in India.Private banking in India.
Bank of PunjabBank of PunjabBank of RajasthanBank of Rajasthan
Catholic Syrian BankCatholic Syrian BankCenturion BankCenturion BankCity Union BankCity Union Bank
Dhanalakshmi BankDhanalakshmi BankDevelopment Credit BankDevelopment Credit Bank
Federal BankFederal BankHDFC BankHDFC Bank
Rural banking in IndiaRural banking in IndiaHaryana State Cooperative Apex Bank Limited.Haryana State Cooperative Apex Bank Limited.
National Bank for Agriculture and Rural DevelopmentNational Bank for Agriculture and Rural Development ((NABARDNABARD).).
Sindhanur Urban Souharda Co-operative Bank.Sindhanur Urban Souharda Co-operative Bank.United Bank of India.United Bank of India.
Foreign Banks in IndiaForeign Banks in IndiaABN-AMRO BankABN-AMRO Bank
Abu Dhabi Commercial BankAbu Dhabi Commercial BankBank of CeylonBank of Ceylon
BNP Paribas BankBNP Paribas BankCiti BankCiti Bank
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China Trust Commercial BankChina Trust Commercial BankDeutsche BankDeutsche Bank
HSBCHSBCJPMorgan Chase BankJPMorgan Chase Bank
Standard Chartered BankStandard Chartered BankScotia BankScotia BankTaib BankTaib Bank
HOME
ORIGIN AND NATURE OF BANKING
The term bank is supposed to be derived from banco, the Italian word for bench, the Lombard Jews in Italy having benches in the market-place where they exchanged money and bills. When a banker failed, his bench was broken by the people, and he was called a bankrupt.
This derivation of the term, however, is probably wrong. "The true original meaning of banco,"says MacLeod,"is a
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heap, or mound, and this word was metaphorically applied to signify a common fund, or joint stock, formed by the contributions of a multitude of persons."
A brief account of the first banking operations in Venice will dispel the haze enveloping this subject. In 1171 the financial condition of Venice was strained in consequence of the wars in which the people were engaged. The great council of the republic finally determined to raise a forced loan. Every citizen was obliged to contribute the hundredth part of his possessions to the State, receiving therefor interest at the rate of five per cent. The public revenues were mortgaged to secure the interest, and commissioners were appointed to pay the interest to the fundholders and to transfer the stock. The loan had several names in Italian, Compera, Mutuo, but the most common was Monte, a joint stock fund. Afterward, two more loans were contracted, and in exchange for the money contributed by the citizens, the commissioners gave stock certificates bearing interest, and which could be sold and transferred.
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* Principles of Economic Philosophy, vol. I, p. 547.
At this period the Germans were masters of a great part of Italy, and the German word Banck came into use as well as its Italian equivalent Monte. The Italians ere long changed Banck into Banco, and the public loans or debts were called Monti or Banchi. Thus an English .writer, Benbrigge, who wrote in 1646, mentioned the "three bankes" at Venice, by which he meant the three public loans, or Monte, that we have described. Likewise Count Cibrario, who wrote a work on Political Economy in the Middle Age, says, "it is known that the first Bank, or Public Debt, was erected at Venice in 1171." Other proof of the same nature might be added to show that Banco in Italian meant a fund formed by several contributions; and the Bank of Venice was really the first funding system, or system of public debts.
"A banker," says Gilbart “is a dealer in capital, or, more properly, a dealer in money. He is an intermediate party between the borrower and the lender." The difference between the rate received by the banker, for the use of the money
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loaned by him,, and the rate he has to pay for it, is his profit.
"By this means he draws into active operations those small sums of money which were previously unproductive in the hands of private individuals, and at the same time furnishes accommodation to those who have need of additional capital to carry on their business." In other words, a bank is a means for organizing capital whereby its full power may be utilized. The function of a bank in storing up capital, and thus increasing its power, has been likened to that of a dam put across a stream. Before the erection of the structure, the waters coursed their way through wood and meadow, contributing, it is true, to the diversity and beauty of the scene, beside satisfying a needful want of man and beast. To the poet, the stream gave forth an unregarded music, while a De Quincey would hearken with profound emotion and awe to the "sound-pealing anthems, as if streaming from the open portals of some illimitable cathedral." But by storing up the waters, a force is collected which can be used for running the largest factory, and thus ministering in a very
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potent way to advance the material prosperity of man.
There are several kinds of banks. They may be divided first into private and public banks. Private banks are conducted by individuals without incorporation. They are very numerous in our country. The number given in the Banker's Almanac and Register, not in-cluding brokers, for the year 1884, was 3,387. They exist in all the States and Territories. Some of them have flourished for a long period, and are regarded very sound, and worthy of the highest credit.
Chartered banks may be divided into two classes: those organized and existing under the laws of the United States; and State institutions. The latter may be again divided into Deposit and Discount banks, Savings banks and Trust companies. Each class will be described hereafter.
The business of banking consists (1) in receiving deposits of money on which interest may or may not be allowed; (2) in making advances of money, principally in the way of discounting notes; (3) in effecting the transmission of money from
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one place to another. This is true of the ordinary banks of deposit and discount, both State and National.
The disposable means of a bank consists (1) of the capital paid down by the shareholders; ( 2 ) the money deposited with it by its customers; (3) the notes it can circulate; (4) the money it receives in the course of transmission, and which, of course, it must repay at another place.
The expenses of a bank may be thus classified: rent, taxes and repairs of the
banking-house, salaries of officers, stationery and postage. To this may be
added interest upon deposits, if allowed.The profits of a bank consist of
that portion of its total receipts, including discount, interest, dividends and
commissions, which exceed the total amount of expenses.
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HOME
DEFINITION OF BANK
The definition of a bank varies from country to country.
Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as
conducting current accounts for his customers
paying cheques drawn on him, and collecting cheques for his customers.
In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable
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instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques do not depend on how the bank is organised or regulated.
The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind, that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions:
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"banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).
"banking business" means the business of either or both of the following:
1. receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or with a period of call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment
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instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques
HOME
The National Banking System
As we have seen, the business of banking consists in getting a common fund of money, and in lending a part of it. With this general conception is associated the discounting of bills of exchange, the collection of notes and drafts and the
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issuing of circulating notes. The business may be conducted by one person, who is called a banker; or by partners, as in any ordinary businesses, which also are called bankers. Again, a number of men may join their capital under a State law, and organize a State bank or association, the capital of which is divided into shares. Capitalists may also unite under the laws of the United States, and form a National banking association.
Under these varying forms a banking business is done. We may look at the reasons why men prefer one form to another. If a man has considerable means and enjoys the confidence of the community, he may prefer to engage in banking alone, unfettered by State or National laws. He may conduct his business in his own way; and if the people do not like it they need not patronize him. A firm may do the same thing. They may be a law unto themselves. But when men organize under a State law, they are bound by the law. They are subject to inspection. They must pay a tax on the amount, of money used in their business. If they issue promises to pay, a coin reserve must be kept to pay them. By a National bank is meant not that the
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Government owns or runs it, but authorizes its creation and prescribes its mode of doing business. Every association under this law, whether in Maine or in Texas, is governed by the same principles, is subject to the same inspection, uses the same blanks in making returns to the Treasury Department at Washington, and is under the same penalties for the violation of any duty. All are treated \ alike. The advantage to the people, of this system over any other is, the existence of a power above the bank, to which they can appeal if injustice is done. Another advantage of this system is the general Government having seen fit to permit these associations to issue promises to pay, based on the security of United States bonds held in Washington, for the absolute and prompt payment of every note issued on such security, the poorest and humblest citizen knows when he gets his pay on Saturday night in a National bank bill, that he has the faith of the Government behind his paper promise to pay. He need not see what bank issued it; for any bank must receive it for a debt due, and the Government must pay for it in coin if the local banks fail.
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The National banking system was based on the system of banking existing in the State of New York in 1862. That system had existed many years; it had furnished adequate protection to bill-holders; and in several respects was better than any system which had preceded it. The Rev. Dr. John McVicker, professor of Political Economy in Columbia College, was the author of the system, and set it forth in a letter to a member of the New York Legislature, entitled, Hints relating to Banking, written in 1827. As this is the principal banking system in the country, and the only one by which banks now issue notes of their own, the chief features are worth describing in this place.
By the National law, banking associations may be formed by five or more persons who must specify in their articles of association the general objects for thus uniting.
They must make "an organization certificate" specifying:
The name assumed by the association. Its place of business.
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The amount of its capital stock and the number of shares into which it is divided.
The names and residences of the shareholders and the number of shares held by each.
A declaration that the certificate is made to enable them to avail themselves of the advantages of the act.
No association may be organized with a less capital than $100,000, except that banks with a capital of not less than $ 50,000, may, with the approval of the Secretary of the Treasury, be organized in any place with a population not exceeding 6,000 inhabitants. In cities with a population exceeding 50,000 persons, at least $200,000 capital is required. Any National banking association designated for the purpose by the Secretary of the Treasury, may become a depository of public money and be employed as financial agent of the Government.
Associations so designated must give satisfactory security by the deposit of United States bonds, or otherwise, for the faithful performance of their duties.
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The association may sue and be sued, elect directors, who, in turn, may elect a president, vice-president, cashier and other officers; discount and negotiate promissory notes, drafts, bills of exchange, and other evidences of debt; receive deposits, buy and sell exchange, coin and bullion; loan money on personal security, issue and circulate its own notes, and make all needful by-laws not inconsistent with the Banking Act.
There must be at least five directors. Each director must own at least ten shares of the stock; he holds his office until the election and qualification of his successor. Annual meetings are held in January. The capital stock is divided into shares of $100 each, and is transferable. The liability of a shareholder is limited to a sum equal to the par value of his stock.
Before beginning business, fifty per cent, of the capital stock of an association must be paid in, and ten per cent, of the remainder monthly, until it is all paid.
The next step is the transmission by the association of a certificate to the Comptroller of the Currency (who is the chief official of the Government in this
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particular department) stating that fifty per cent, of the capital has been paid, and that all the provisions of the law with reference to organizing a bank have been observed. He then makes such an examination as may be thought necessary, and if he finds that the law has been properly complied with, he gives to the association a certificate to that effect, and that it is authorized to begin business. This certificate must be published within sixty days from the time of issuing it.*
Formerly the entire amount of bank notes which the banks were permitted to issue was limited to $300,000,000, but in 1875 the law. was changed, and they can now issue as many as they please, provided they have a certain amount of Government bonds deposited with the Treasurer.
As a necessary preliminary to furnishing notes for circulation, the Comptroller of the Currency under the direction of the Secretary of the Treasury, is entrusted with the important duty of engraving plates in the best manner, to guard against counterfeiting and fraudulent alterations, and to print therefrom and
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number so many circulating notes in blank as may be required to supply the associations entitled to receive the same.
After these notes have been signed by the president or vice-president and the cashier, they are issued, and circulate the same as money, and are received at par everywhere in payment of taxes excises, public lands, and all other dues to the Government, except for duties on imports; and also for all salaries and other debts owing
*The former Comptroller of the Currency, Mr. Knox, issued a very useful Government publication of forty pages, entitled Instructions and Suggestions of the Comptroller of the Currency in regard to the Organization, Extension and Management of National Banks. It contains, among other matters, many of the forms required by the National law, an excellent set of by-laws, and a summary of the principal restrictions and requirements of the National bank law, which, with National Banking Laws, is published by Homans Publishing Co. "by the United States, except interest on the public debt and in redemption of the legal-tender notes. They are also a legal
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tender for any debt or liability to every National banking association.
Every National banking association is required to keep on deposit in the Treasury of the United States a sum equal to five per centum of its circulation, which sum is counted as part of its lawful reserve. All notes of National banks worn, defaced, mutilated, or otherwise unfit for circulation, are forwarded to the Treasurer of the United States for redemption. Such redemptions are reimbursed from the five per cent, fund, and notes worn and unfit for circulation are then forwarded to the Comptroller of the Currency for destruction. After making a record of the notes thus received, the Comptroller directs their destruction in the presence of four persons.
National banks having a capital of $150,000 or less are required to keep on deposit with the Treasurer of the United States, United States bonds equal in amount to one-fourth of their capital stock. Other banks are required to keep on deposit not less than $50,000 in United States bonds. Upon a deposit of bonds the association making the same is
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entitled to receive from the Comptroller circulating notes equal in amount to ninety per centum of the par value of the United States bonds so deposited, but the total amount of such notes issued to any association may not exceed ninety per centum of the amount of its capital stock actually paid in.
Every bank annually examines or has examined the bonds deposited in the office of the United States Treasurer, comparing them with the books of the Comptroller, and with its own record of them, and if the bonds exist and the record of them is correct, executes a certificate to that effect to the Treasurer.
A National bank can hold real estate under the following conditions and no others:
The building needful to transact its business.
Land mortgaged to it in good faith to secure debts previously contracted.
Land conveyed to it in satisfaction of debts previously contracted in the course of business.
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Land purchased under sales ordered by courts in order to secure debts due to the bank.
In the last three cases the real estate cannot be held beyond five years.
The rate of interest which a bank may take on any note, bill of exchange, or other evidence of debt is the rate permitted by the laws of the State or Territory where the bank is located.
Every bank in sixteen of the principal cities of the United States must keep on hand always in lawful money as a reserve fund, twenty-five per cent, of the amount of its deposits; and the banks in other places must keep on hand fifteen per cent, of their deposits. The banks last mentioned, however, may keep three-fifths of their reserve on deposit with such of the National banks as may be selected by them, approved by the Comptroller of the Currency, and doing business in any of eighteen specified principal cities of the United States.
National banks in any of the sixteen cities excepting New York, may keep one-half of the required twenty-five per cent, reserve on deposit in the City of New York.
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Whenever this reserve of twenty-five per cent, for one class of banks and fifteen per cent, for the other, falls below that amount, the bank can make no new loans, except by purchasing or discounting bills of exchange payable at sight, nor make any dividend until the requisite proportion of reserve to circulation and deposits has been restored.
They cannot make loans on the security of their own stock, except to prevent a loss on a debt previously contracted, nor can they pledge their own notes of circulation for the purpose of getting money to pay in their capital stock.
They are also subject to examination by officers appointed by the Government.
The banks must make reports to the Comptroller of the Currency according to the forms which he prescribes, exhibiting in detail the resources and liabilities of the associations at the close of business on any past day specified by him. The Comptroller is required to call for not less than five such reports during each year. These reports must be verified by the oath of the president or cashier and
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attested by the signatures of at least three of the directors.
In addition to the reports mentioned above, each association is required to make a sworn report within ten days after the declaration of any dividend, of the amount of such dividend, and the amount of the net earnings. In order to enable the Treasurer to assess the duties, each association is required to make a sworn return to the Treasurer of the United States of the average amount of its notes in circulation.
.
HOME
Indian Banking Industry
Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in
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1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865.
By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947,
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the Reserve Bank was nationalized and given broader powers.
HOME
Nationalization:
By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of
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political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill, and it received the presidential approval on 9th August, 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the GOI controlled around 91% of the banking business of India.
After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
Nationalization – Pros• Branch Expansion
– Banks started opening branches in rural areas
– Post nationalization, 800% increase in no. of branches
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• Deposit Mobilization– Banks contributed to the
development of banking habit among common people through sustained publicity, extensive branch banking and relatively prompt service
• Expansion of Bank Credit – Banks started mobilising
deposites to facilitate increasing demand for credit from agricultural and industrial sector
• Diversification– Merchant Banking and
underwriting– Mutual Funds and Retail
Banking
• Nationalization – Cons• Despite impressive quantitative
achievements, productivity and efficiency of systems suffered
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• Portfolio quality badly deteriorated
• Profitability eroded
• PSBs and FIs became weak, some were making losses YoY
• Narasimham Committee Report 1991
• SLR which was initially at 25% was raised to 30% and then to 38.5%
• Rate of interest received on govt. securities was much less than market rates
• Known as Tax on the banking system
• At the same time CRR was hiked up to 15%
• All in all 53.5% cash was with RBI• Govt. used this liquidity to fund its
own expenditure mainly for paying govt employee salaries
• Banking Regulation Act 1949• Maintenance of adequate liquid
assets in the form of – Cash– Gold
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– Government securities– Government guaranteed
securitiesEqual to not less than 25% of their
total demand and time deposit liabilities
Primarily known as SLR• Reforms based on NCR• SLR reduced from 38.5% to 25%
• CRR reduced from 15% to 5.75% as of today
• Decontrolled interest slabs
• Prudential norms on NPAs
• Capital adequacy norms
• Access to capital markets
• Freedom of operations to increase competitive edge
• New private sector banks allowed
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• Local area banks encouraged
• Supervision of commercial banks
• Recovery of debts
HOMEEasy bank :-:-
Automatic Teller Machine (ATM)Automatic Teller Machine (ATM)
The first The first bankbank to introduce the ATM concept to introduce the ATM concept in India was the Hongkong and Shanghai Bankingin India was the Hongkong and Shanghai Banking Corporation (HSBC). It was in the year 1987. Now,Corporation (HSBC). It was in the year 1987. Now,
almost every commercial banks gives ATM facilities toalmost every commercial banks gives ATM facilities to its customers.its customers.
The first bank to cross 1,000 marks in installing ATMsThe first bank to cross 1,000 marks in installing ATMs in India is ICICI.SBI is following the concept of 'ATMsin India is ICICI.SBI is following the concept of 'ATMs in Quantity'. But Private Sector Banks have taken thein Quantity'. But Private Sector Banks have taken the lead. ICICI, UTI, HDFC and IDBI counts more thanlead. ICICI, UTI, HDFC and IDBI counts more than
50% of the total ATMs in India. 50% of the total ATMs in India. Mobile BankingMobile Banking
"The account that travels with you". This is needed in"The account that travels with you". This is needed in today's fast business environment with unendingtoday's fast business environment with unending
deadlines for deadlines for fulfillmentfulfillment and loads of appointments to and loads of appointments to
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meed and meetings to attend. With mobile bankingmeed and meetings to attend. With mobile banking facilities, one can facilities, one can bankbank from anywhere, at anytime from anywhere, at anytime
and in any condition or anyhow. and in any condition or anyhow. The following operations can be conducted throughThe following operations can be conducted through
advanced mobile phones.advanced mobile phones.Bill Bill paymentspaymentsFund transfersFund transfers
Check balancesCheck balances
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NET Banking
Net Banking is conducting ones banking or bankNet Banking is conducting ones banking or bank account online through a computer and a netaccount online through a computer and a net
connection. The system is updated immediately afterconnection. The system is updated immediately after every transaction automatically. In other words it isevery transaction automatically. In other words it is
said that it is updated 'on-line, real time'. Through netsaid that it is updated 'on-line, real time'. Through net banking one can check the status of his/her account,banking one can check the status of his/her account, place queries and also can be facilitated with a wideplace queries and also can be facilitated with a wide
range of transactions simultaneously.range of transactions simultaneously.
Net Banking has three basic features. They are asNet Banking has three basic features. They are as follows: follows:
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The banks offer only relevantThe banks offer only relevant information's about their products andinformation's about their products and
services to the mass.services to the mass.Few banks provide interaction facilityFew banks provide interaction facility between the banks and its customers.between the banks and its customers.
Banks are coming up with arrangementsBanks are coming up with arrangements of utility of utility paymentspayments, like telephone bills,, like telephone bills,
electricity bills, etc.electricity bills, etc.
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REGULATORY
RESERVE BANK OF INDIA
India’s Central Bank
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EstablishmentEstablishmentEstablished on April 1,1935 with share capita of fiveEstablished on April 1,1935 with share capita of five
crores on recommendation of Hilton youngcrores on recommendation of Hilton young commission.commission.
RBI was Nationalized in year 1949.RBI was Nationalized in year 1949.The Central Office of the Reserve Bank was initiallyThe Central Office of the Reserve Bank was initially
established in Calcutta but was permanently moved toestablished in Calcutta but was permanently moved to Mumbai in 1937 Mumbai in 1937
The Governors of RBI is Dr. Duvvuri Subbarao. The Governors of RBI is Dr. Duvvuri Subbarao. StructureStructure
RBI Have 20 Directors.RBI Have 20 Directors.
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The Governor.The Governor. Fore deputy Governor.Fore deputy Governor.
One Govt.Official from Ministry ofOne Govt.Official from Ministry of finance.finance.
Ten Nominate Director,Ten Nominate Director, Nominated Nominated by Govt.by Govt.
Four Director to representFour Director to represent Headquarter at Mumbai , Calcutta ,Headquarter at Mumbai , Calcutta ,
Chennai &New Delhi.Chennai &New Delhi. Appointed / Nominated for period ofAppointed / Nominated for period of
four year. four year.
RBI OfficeRBI OfficeHead office in MumbaiHead office in MumbaiHas Has 22 regional offices22 regional offices, ,
most of them in state capitalsmost of them in state capitals PreamblePreamble
The Preamble of the Reserve Bank of India describesThe Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:the basic functions of the Reserve Bank as:
"...to regulate the issue of Bank Notes and "...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetarykeeping of reserves with a view to securing monetary stability in India and generally to operate the currencystability in India and generally to operate the currency
and credit system of the country to its advantage." and credit system of the country to its advantage."
Main Function (Act 1934)Main Function (Act 1934)
Bank of Issue (under sec 22) Bank of Issue (under sec 22)
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RBI has sole right to issue one Rupees RBI has sole right to issue one Rupees Notes and small coins in country asNotes and small coins in country as
agent of government.agent of government. RBI has separate issue department toRBI has separate issue department to
issue currency note.issue currency note. RBI maintain minimum reserve in GoldRBI maintain minimum reserve in Gold
and Foreign Exchange reserve of whichand Foreign Exchange reserve of which almost 55% should be Gold. almost 55% should be Gold.
Main Function (Act 1934)Main Function (Act 1934)Banker to Government.Banker to Government.
RBI is banker ,agents and advisor of RBI is banker ,agents and advisor of central Government and all statecentral Government and all state
Government in India.Government in India. RBI helps the Government to float new RBI helps the Government to float new
loans and to Manage Public.loans and to Manage Public. RBI makes loans and advances to the RBI makes loans and advances to the
States local authorities. States local authorities. Main Function (Act 1934)Main Function (Act 1934)
Banker’s Bank & Lender of Last Report.Banker’s Bank & Lender of Last Report.
RBI maintains banking accounts of allRBI maintains banking accounts of all schedule bank.schedule bank.
Every schedule bank have to keep Every schedule bank have to keep cash reserve a fix percentage of theircash reserve a fix percentage of their
aggregate deposit liabilities.aggregate deposit liabilities. Bank always expect for help from RBI Bank always expect for help from RBI
in time of banking crisis.in time of banking crisis.Main Function (Act 1934)Main Function (Act 1934)
Controller of CreditController of Credit
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RBI holds the cash reserves of allRBI holds the cash reserves of all schedule banks.schedule banks.
It holds credit operation of bankIt holds credit operation of bank through quantities.through quantities.
RBI has power to ask bank or wholeRBI has power to ask bank or whole banking system not to lend particularbanking system not to lend particular
group. group. Every bank have to get license fromEvery bank have to get license from
RBI for banking operation .RBI alsoRBI for banking operation .RBI also cancel this license.cancel this license.
Every bank give weekly returnEvery bank give weekly return showing assets and liabilities inshowing assets and liabilities in
details details
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:-Conclusion:-
Thanks & Regards, From the Above we come to know that:
Banking Industry is the booming industry
Banks plays an important role in the corporate world
Banking is the need of time Bank has an vital role in business as
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Bank is one of the most important service sectors in the world
It has various characertistics of its own
Bank provides various employment apportunities in urban as well as in rural areas
Bank provides various services to the public such as :
ATM Facility Debit & Credit Cards ECS Facility Demat Account Net Banking
Bank has an key role in day to day business activities
In the Sense Bank plays a significant role in almost all the sectors in world
Date:
Place: Thane
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