Banking in India go back to the early half of the 18th century. › 3 Presidency Banks that were established in the

country namely the Bank of Hindustan, Bank of Madras and Bank of Bombay can also be referred to as some

of the oldest banking institutions in the country.

The journey of Indian Banking System can be segregated into three distinct phases.Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

Early phase from 1786 to 1969 of Indian Banks The General Bank of India was set up in the year 1786.

The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks

Early phase from 1786 to 1969 of Indian Banks Bank of Bengal (1809), Bank of Bombay (1840) Bank of Madras (1843) These three banks were amalgamated in 1920

Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.

Early phase from 1786 to 1969 of Indian Banks

Increase in number of banks. Allahabad Bank, Punjab National Bank Ltd.,

Bank of India, Central Bank of India, Bank of Baroda, Canada Bank, Indian Bank, and Bank of Mysore and son on were set up.

Reserve Bank of India came in 1935. To streamline the functioning and activities of

commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).

Government took major steps in this Indian Banking Sector .

Extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI

Nationalization of Banks. In July 19 ,1969 14 banks. A second dose of nationalization of 6 more

commercial banks followed in 1980.

Origin of the word ‘Bank’ Italian word ‘Banco’- which denotes an

accumulation of either stock or money. Another group of people who believes that

the word bank has derived from the word Bancus or Banque which denotes a Bench.

Dr.Herbert L in his law of banking he says:

Receives current deposits. Permits the depositors to draw cheques

against their deposits.

Meaning Bank is an Institution, which deals in

money. It accepts deposits from the public and creates credit with a view to lend.

Banks are those institutions which Borrow money from those who have surplus and lend money to those who need money and the difference b/w interest that they get from needy and give to those who have surplus is their income.

Base rate : It is a rate fixed by RBI with in this range banks should issue the loans.

Present base rate is Lending loan-10.25% Deposits - 8%

Bank Rate: it is a rate at which RBI will issue loans to commercial banks - 10.25 Increased  from - 8% which was continuing since 03/05/2013 

Interest rate: It is a rate at which commercial banks will provide loans to public.

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Mobilization of savings. Financing Industry. Financing trade. Development of capital market. Financing agriculture. Financing consumer activities. `

1. Central Bank2. Commercial banka) Private Sector bankb) Public Sector bankc) Foreign bank3. Development Bank and Industrial Bank4. Cooperative Bank a) Primary Credit societies b) District co-operative bank c) State co-operative Bank 5. Specialized bank6. Agricultural bank

Commercial Banking:

Commercial bank are those financial institutions which accept deposits from the public repayable on demand through cheques and ATM.

Functions of Commercial Banks:

1. Primary functions.

2. Secondary functions.

Functions of Commercial Banks:

1.Primary functions.

A. Accepting deposits:i) Current deposits

ii) Saving deposits.

iii) Fixed deposits.

B. Lending money:i) Over draft

ii) Cash Credit

iii) Loans and advances

iv) Discounting of bills of Exchange.

Functions of Commercial Banks:

1. Secondary Functions:

a) Agency services› Collection of cheques, drafts, bills and etc.,› Execution of Standing orders ex: Collection of dividends

and payment of premium.› Income tax services.› Acting as trustee.

Functions of Commercial Banks:

B. General Utility Services:› Accepting valuables and securities for safety custody.› Underwriting shares, debentures and government

securities. › Providing information relating to credit worthiness of their

customers.› Conducting exhibitions and scholarships for students.› Issuing travelers checks, letter of credit and etc

Role of Commercial Banks in Socio and Economic Development :1.Banks Promote capital formation.2.Optimum utilization of resources.3.Financing the priority sector.4.Banks promote balanced regional development.5.Expansion of credit.6.Development of Agriculture.7.Implementation of Monetary policies.8.Regional Development 9.Industrial Development

Credit creation is an Important function of

Commercial Bank.

How money circulation occurs in the country? The notes and coins issued by the National

Government The currency notes issued by the Central bank. Credit money or deposit money created by

banking system of the country.