INDIAN BANKING SYSTEM

Introduction to Bank

The word of “Bank” is said to be of Germanic origin , cognate with the French word “Banque” and the. Italian word “Banca” , both meaning “bench”.

A bank is an institution that deals with money and credit . Banks are service organizations selling banking services.

History

1870 – Bank of Hindustan – First

Bank

Presidency Banks - Bank of Calcutta,

Bank of Bombay and

Bank of Madras

1921 - All 3 banks

amalgamated and became

Imperial Bank of India

1934 – RBI was

Constituted

1949 – RBI came under government

control

1955 – Imperial Bank became State bank of India

Cont….

Banking activitiesThe banking activities can be classified as :

• Accepting Deposits from public/others (Deposits)• Lending money to public (Loans) • Transferring money from one place to another

(Remittances) • Acting as trustees • Acting as intermediaries • Keeping valuables in safe custody • Collection Business • Government business

Banking Regulation act 1949

Banking in India is governed by BR Act,1949 and RBI

Act,1934

Banking in India is controlled/monitored by

RBI and Govt. of India

The controls for different banks are different

based on whether the bank/s is/are statutory corporation , a banking

company and a cooperative society

Cont…

BR Act covers banking companies

and co-operative banks, with certain

modifications.

BR Act is not applicable to

primary agricultural credit societies and land development

banks

BR Act allows RBI (Sec 22) to issue

license for banks .

Types Of Banks

Reserve Bank Of India

Central Bank• Reserve bank of India is a bank which is entrusted with the

functions of guiding and regulating the banking system of a country is known as its Central bank. Following are the functions of central banks.

• Bank of Issue• Bankers' Bank and Lender of the Last Resort• Controller of Credit• Custodian of Foreign Reserves

Scheduled Banks

These are the banks which are included in the second schedule of reserve bank of India and having a paid-up-capital and reserve together of Rs 5 lakhs and above. This scheduled banks can be further classified into two categories:-1. Commercial banks2. Co-operative banks

Commercial banks

Commercial banks are those banks which perform all

kinds of banking business and generally finance ,trade and commerce. Commercial

banks are basically into public sector bank, private sector bank and Foreign

banks.

Public sector banks are those banks which are owned and controlled by government . In India the nationalized banks and regional and rural banks

come under this category. Eg:- SBI and associates of

SBI , central bank of India etc.

Private sector banks are those banks which are

owned by private individuals or corporations and not by

the government or co-operative societies. Eg:- city

union bank, dhanalaxmi bank, Federal bank etc.

Foreign Banks

Foreign banks are those banks which

provide foreign exchange for import trade. These are the

banks which are incorporated in foreign

countries but have opened their branches

in India.

These banks are also known as exchange banks because they

make payments through purchase and sale of exchange bills

and convert home currency into foreign

currency and vice versa.

They discount foreign exchange bills which are for foreign trade.

Examples :- Citi bank , Royal bank of

Scotland , HSBC bank ,Federal bank etc.

Development banks

These banks came into existence in the

middle of 20th century .

These banks are most active in

capital financial markets all over the world and India too.

These banks are also known as financial

institutions because they are primarily

engaged in providing long term financial

assistance to the industrial units.

Examples:- IDBI , IFCI, ICICI, IRBI etc.

Co-operative Banks

A co-operative bank is an financial entity which belongs to local or professional community to meet their common, economic ,social and cultural needs.

Provide the members with a wide range of banking and financial services like loans, deposits and banking accounts.

In India co-operative banks are regulated with the RBI and governed by banking regulation act of 1949 and co-operative societies act of 1955.

Functions of co-operative banks

They provide short term and medium term

loans.

They provide crop loans to agriculture in

order to purchase seeds and fertilizers.

They also arrange finance for warehousing

, grading and marketing.

Co-operative banks in India

provide finance for

farming ,cattle, milk ,etc.

Types of Co-operative banks

State co-operative banks

Central co-operative banks

Rural co-operative banks

Thank you