Finance is the life blood of trade, commerce and industry. Now-a-days, banking sector acts as the backbone of modern business. Development of any country mainly depends upon the banking system.The term bank is either derived from old italian word banca or from a French word banque both mean a bench or money exchange table. in olden days, European money lenders or money changers used to display (show) coins of different countries in big heaps (quantity) on benches or tables for the purpose of lending or exchanging.a bank is a financial institution which deals with deposits and advances and other related services. it receives money from those who want to save in the form of deposits and it lends money to those who need it.

Definition of a bank

Oxford dictionary defines a bank as "an establishment for custody of money, which it pays out on customer's order."

Characteristics / features of a bank

1. Dealing in money

Bank is a financial institution which deals with other people's money i.e. money given by depositors.

2. Individual / firm / company

a bank may be a person, firm or a company. a banking company means a company which is in the business of banking.

3. Acceptance of deposit

a bank accepts money from the people in the form of deposits which are usually repayable on demand or after the expiry of a fixed period. it gives safety to the deposits of its customers. It also acts as a custodian of funds of its customers.

4. Giving advances

A bank lends out money in the form of loans to those who require it for different purposes.

5. Payment and withdrawal

A bank provides easy payment and withdrawal facility to its customers in the form of cheques and drafts; it also brings bank money in circulation. This money is in the form of cheques, drafts, etc.

6. Agency and utility services

A bank provides various banking facilities to its customers. they include general utility services and agency services.

7. Profit and service orientation

A bank is a profit seeking institution having service oriented approach.

8. Ever increasing functions

Banking is an evolutionary concept. there is continuous expansion and diversification as regards the functions, services and activities of a bank.

9. Connecting link

A bank acts as a connecting link between borrowers and lenders of money. Banks collect money from those who have surplus money and give the same to those who are in need of money.

10. Banking business

A bank's main activity should be to do business of banking which should not be subsidiary to any other business.

11. Name identity

A bank should always add the word "bank" to its name to enable people to know that it is a bank and that it is dealing in money.

Bankingthe purpose of banking is to provide a stable platform on which to perform financial transactions. banking stimulates the growth of business by generating confidence and predictability in a currency, and that growth in turn increases the demand for banking services. commercial banks provide payment services, such as checking and credit card accounts, for customers. they earn money by lending customer deposits in various ways, including installment loans, such as mortgages and lines of credit. investment banks enable business expansion by providing the liquidity that companies need to start or grow.

Organizational Structure and Role of Banks in IndiaBanking Regulation Act of India, 1949 defines Banking as “accepting, for the purpose of lending or of investment of deposits of money from the public, repayable on demand or otherwise or withdrawable by cheque, draft order or otherwise.” The Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949, govern the banking operations in India.

Organizational Structure of Banks in India:

In India banks are classified in various categories according to differ rent criteria. The following figure indicate the banking structure:

1. The Reserve Bank of India (RBI): The RBI is the supreme monetary and banking authority in the country and has the responsibility to control the banking system in the country. It keeps the reserves of all scheduled banks and hence is known as the “Reserve Bank”.2. Public Sector Banks: State Bank of India and its Associates Nationalized Banks Regional Rural Banks Sponsored by Public Sector Banks3. Private Sector Banks: Old Generation Private Banks

Foreign New Generation Private Banks Banks in India

4. Co-operative Sector Banks: State Co-operative Banks Central Co-operative Banks Primary Agricultural Credit Societies

Land Development Banks State Land Development Banks5. Development Banks: Development Banks mostly provide long term finance for setting up industries. They also provide short-term finance (for export and import activities) Industrial Finance Co-operation of India (IFCI) Industrial Development of India (IDBI) Industrial Investment Bank of India (IIBI) Small Industries Development Bank of India (SIDBI) National Bank for Agriculture and Rural Development (NABARD) Export-Import Bank of IndiaRole of Banks:Banks play a positive role in economic development of a country as repositories of community’s savings and as purveyors of credit. Indian Banking has aided the economic development during the last fifty years in an effective way. The banking sector has shown a remarkable responsiveness to the needs of planned economy. It has brought about a considerable progress in its efforts at deposit mobilization and has taken a number of measures in the recent past for accelerating the rate of growth of deposits. As recourse to this, the commercial banks opened branches in urban, semi-urban and rural areas and have introduced a number of attractive schemes to foster economic development.

The activities of commercial banking have growth in multi-directional ways as well as multi-dimensional manner. Banks have been playing a catalytic role in area development, backward area development, extended assistance to rural development all along helping agriculture, industry, international trade in a significant manner. In a way, commercial banks have emerged as key financial agencies for rapid economic development.

By pooling the savings together, banks can make available funds to specialized institutions which finance different sectors of the economy, needing capital for various purposes, risks and durations. By contributing to government securities, bonds and debentures of term-lending institutions in the fields of agriculture, industries and now housing, banks are also providing these institutions with an access to the common pool of savings mobilized by them, to that extent relieving

them of the responsibility of directly approaching the saver. This intermediation role of banks is particularly important in the early stages of economic development and financial specification. A country like India, with different regions at different stages of development, presents an interesting spectrum of the evolving role of banks, in the matter of inter-mediation and beyond.

Mobilization of resources forms an integral part of the development process in India. In this process of mobilization, banks are at a great advantage, chiefly because of their network of branches in the country. And banks have to place considerable reliance on the mobilization of deposits from the public to finance development programmes. Further, deposit mobalization by banks in India acquired greater significance in their new role in economic development.

Commercial banks provide short-term and medium-term financial assistance. The short-term credit facilities are granted for working capital requirements. The medium-term loans are for the acquisition of land, construction of factory premises and purchase of machinery and equipment. These loans are generally granted for periods ranging from five to seven years. They also establish letters of credit on behalf of their clients favouring suppliers of raw materials/machinery (both Indian and foreign) which extend the banker’s assurance for payment and thus help their delivery. Certain transaction, particularly those in contracts of sale of Government Departments, may require guarantees being issued in lieu of security earnest money deposits for release of advance money, supply of raw materials for processing, full payment of bills on the assurance of the performance etc. Commercial banks issue such guarantees also.

Reserve Bank of IndiaFrom Wikipedia, the free encyclopedia

Reserve Bank of Indiaभारतीय रिरज़र्व बैंक

Headquarters Shahid Bhagat Singh MargMumbai, Maharashtra

CoordinatesCoordinates: 18.932679°N 72.836933°E

Established 1 April 1935; 81 years ago

Governor Raghuram Rajan

Currency Indian Rupee (₹)

Reserves US$363.00 billion[1] [2]

Bank rate 7.00% [3]

Interest on reserves 4.00%(market determined)[4]

Website https://rbi.org.in/

Public finance

Policies [show]

Fiscal policy [show]

Monetary policy [show]

Trade policy [show]

Revenue

Spending

[show]

Optimum[show]

Reform[show]

v

t

e

The old RBI Building in Mumbai

The Reserve Bank of India (RBI, Hindi:भारतीय रिरज़र्व बैंक) is India's central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on 1 April 1935 during the British Rule in accordance with the provisions of theReserve Bank of India Act, 1934.[5] The original share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders.[6] Following India's independence on 15 August 1947, the RBI was nationalised on 1 January 1949.

The RBI plays an important part in the Development Strategy of the Government of India. It is a member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member Central Board of Directors: theGovernor, 4 Deputy Governors, 2 Finance Ministry representatives, 10 government-nominated directors to represent important elements from India's economy, and 4 directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi. Each of these local boards consists of 5 members who represent regional interests, and the interests of co-operative and indigenous banks.

The bank is also active in promoting financial inclusion policy and is a leading member of the Alliance for Financial Inclusion (AFI).

History[edit]

1935–1950[edit]

Reserve Bank of India-10 Rupees (1938), first year of banknote issue.

The Reserve Bank of India was founded on 1 April 1935 to respond to economic troubles after the First World War.[7] The Reserve Bank of India was conceptualized based on the guidelines presented by Dr. Ambedkar to the "Royal Commission on Indian Currency & Finance” in 1925; Commission members found Dr B. R. Ambedkar’s book "The Problem of the Rupee- Its origin and Its Solution” an invaluable reference tool and the Central Legislative Assembly eventually passed these guidelines as the RBI Act 1934.[8] The bank was set up based on the recommendations of the 1926 Royal Commission on Indian Currency and Finance, also known as the Hilton–Young Commission.[9] The original choice for the seal of RBI was The East India Company Double Mohur, with the sketch of the Lion and Palm Tree. However it was decided to replace the lion with the tiger, the national animal of India. The Preamble of the RBI describes its basic functions to regulate the issue of bank notes, keep reserves to secure monetary stability in India, and generally to operate the currency and credit system in the best interests of the country.[10] The Central Office of the RBI was established in Calcutta (now Kolkata), but was moved to Bombay (now Mumbai) in 1937. The RBI also acted as Burma's central bank, except during the years of the Japanese occupation of Burma (1942–45), until April 1947, even though Burma seceded from the Indian Union in 1937. After the Partition of India in 1947, the bank served as the central bank for Pakistan until June 1948 when the State Bank of Pakistan commenced operations. Though set up as a shareholders’ bank, the RBI has been fully owned by the Government of India since its nationalization in 1949.[11]

1950–1960[edit]

In the 1950s, the Indian government, under its first Prime Minister Jawaharlal Nehru, developed a centrally planned economic policy that focused on the agricultural sector. The administration nationalized commercial banks[12] and established, based on the Banking Companies Act of 1949 (later called the Banking Regulation Act), a central bank regulation as part of the RBI. Furthermore, the central bank was ordered to support economic plan with loans. [13]

1960–1969[edit]

As a result of bank crashes, the RBI was requested to establish and monitor a deposit insurance system. It should restore the trust in the national bank system and was initialized on 7 December 1961. The Indian government found funds to promote the economy and used the slogan "Developing Banking". The government of India restructured the national bank market and nationalized a lot of institutes. As a result, the RBI had to play the central part of control and support of this public banking sector.

1969–1985[edit]

In 1969, the Indira Gandhi-headed government nationalized 14 major commercial banks. Upon Gandhi's return to power in 1980, a further six banks were nationalized. [9] The regulation of the economy and especially the financial sector was reinforced by the Government of India in the 1970s and 1980s.[14] The central bank became the central player and increased its policies for a lot of tasks like interests, reserve ratio and visible deposits.[15] These measures aimed at better economic development and had a huge effect on the company policy of the institutes. The banks lent money in selected sectors, like agri-business and small trade companies.[16]

The branch was forced to establish two new offices in the country for every newly established office in a town.[17] The oil crises in 1973 resulted in increasing inflation, and the RBI restricted monetary policy to reduce the effects.[18]klk

1985–1991[edit]

A lot of committees analysed the Indian economy between 1985 and 1991. Their results had an effect on the RBI. The Board for Industrial and Financial Reconstruction, theIndira Gandhi Institute of Development Research and the Security & Exchange Board of India investigated the national economy as a whole, and the security and exchange board proposed better methods for more effective markets and the protection of investor interests. The Indian financial market was a leading example for so-called "financial repression" (Mackinnon and Shaw). [19] The Discount and Finance House of India began its operations on the monetary market in April 1988; the National Housing Bank, founded in July 1988, was forced to invest in the property market and a new financial law improved the versatility of direct deposit by more security measures and liberalisation.[20]

1991–2000[edit]

The national economy came down in July 1991 and the Indian rupee was devalued. [21] The currency lost 18% relative to the US dollar, and the Narsimham Committee advised restructuring the financial sector by a temporal reduced reserve ratio as well as the statutory liquidity ratio. New guidelines were published in 1993 to establish a private banking sector. This turning point should reinforce the market and was often called neo-liberal.[22] The central bank deregulated bank interests and some sectors of the financial market like the trust and property markets.[23] This first phase was a success and the central government forced a diversity liberalisation to diversify owner structures in 1998.[24]

The National Stock Exchange of India took the trade on in June 1994 and the RBI allowed nationalized banks in July to interact with the capital market to reinforce their capital base. The central bank founded a subsidiary company—the Bharatiya Reserve Bank Note Mudran Private Limited—on 3 February 1995 to produce banknotes.[25]

Since 2000[edit]

The Foreign Exchange Management Act from 1999 came into force in June 2000. It should improve the item in 2004–2005 (National Electronic Fund Transfer).[26] The Security Printing & Minting Corporation of India Ltd., a merger of nine institutions, was founded in 2006 and produces banknotes and coins.[27]

The national economy's growth rate came down to 5.8% in the last quarter of 2008–2009 [28] and the central bank promotes the economic development.[29]

Structure of RBI[edit]

RBI runs a monetary museum in Mumbai

The Central Board of Directors is the main committee of the Central Bank. The Government of India appoints the directors for a 4-year term. The Board consists of a Governor, and not more than 4 Deputy Governors, 4 [30] Directors to represent the regional boards, 2 from the Ministry of Finance and 10 other directors from various fields. RBI wants to create a post of Chief Operating Officer (COO) and re-allocate work between the five of them(4 Deputy Governor and COO). [31][32]

The bank is headed by the Governor and the post is currently held by economist Raghuram Rajan. There are 4 Deputy Governors H R Khan,Dr Urjit Patel, R Gandhi and S S Mundra. Two of the four Deputy Governors are traditionally from RBI ranks, and are selected from the Bank's Executive Directors. One is nominated from among the Chairpersons of public sector banks and the other is an economist. An Indian Administrative Service officer can also be appointed as Deputy Governor of RBI and later as the Governor of RBI as with the case of Y. Venugopal Reddy. Other persons forming part of the central board of directors of the RBI are Dr. Nachiket Mor, Y C Deveshwar, Prof Damodar Acharya, Ajay Tyagi and Anjuly Duggal.

Branches and support bodies[edit]

RBI Headquarters in Mumbai

The Reserve Bank of India has four zonal offices at Chennai, Delhi, Kolkata and Mumbai.[33] It has 19 regional offices and 10 sub-offices. Regional offices are located in Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur,Jammu, Kanpur, Kochi, Kolkata, Lucknow, Mumbai, Nagpur, Patna and Thiruvananthapuram. It also has 9 sub-offices located in Agartala,Dehradun, Gangtok, Panaji, Raipur, Ranchi, Shillong, Shimla and Srinagar. Recently the RBI has opened two more sub-offices at Aizawaland Imphal.[34]

The Reserve Bank of India has four regional representations: North in New Delhi, South in Chennai, East in Kolkata and West in Mumbai. The representations are formed by five members, appointed for four years by the central government and serve—beside the advice of the Central Board of Directors—as a forum for regional banks and to deal with delegated tasks from the central board.[35]

The bank has also two training colleges for its officers, viz. Reserve Bank Staff College, Chennai and College of Agricultural Banking,Pune. There are three autonomous institutions run by RBI namely National Institute of Bank Management (NIBM), Indira Gandhi Institute of Development Research (IGIDR), Institute for Development and Research in Banking Technology (IDRBT).[36] There are also four Zonal Training Centres at Mumbai, Chennai, Kolkata and New Delhi.

The Board of Financial Supervision (BFS), formed in November 1994, serves as a CCBD committee to control the financial institutions. It has four members, appointed for two years, and takes measures to strength the role of statutory auditors in the financial sector, external monitoring and internal controlling systems. The Tarapore committee was set up by the Reserve Bank of India under the chairmanship of former RBI deputy governor S.S.Tarapore to "lay the road map" to capital account convertibility. The five-member committee recommended a three-year time frame for complete convertibility by 1999–2000. On 1 July 2007, in an attempt to

enhance the quality of customer service and strengthen the grievance redressal mechanism, the Reserve Bank of India created a new customer service department.

Main functions[edit]

Main article: Reserve Bank Of India: Working and Functions

Reserve Bank of India regional office, Delhi entrance with the Yakshini sculpture depicting "Prosperity

through agriculture".[37]

The RBI Regional Office in Delhi.

The regional office of RBI (in sandstone)in front of GPO(in white) atDalhousie Square, Kolkata.

Financial Supervision[edit]

The Reserve in November 1994 as a committee of the Central Board of Directors of the Reserve Bank of India. Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies.

The Board is constituted by co-opting four Directors from the Central Board as members for a term of two years and is chaired by the Governor. The Deputy Governors of the Reserve Bank are ex-officio members. One Deputy Governor, usually, the Deputy Governor in charge of banking regulation and supervision, is nominated as the Vice-Chairman of the Board. The Board is required to meet normally once every month. It considers inspection reports and other supervisory issues placed before it by the supervisory departments.

BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory audit and internal audit functions in banks and financial institutions. The audit sub-committee includes Deputy Governor as the chairman and two Directors of the Central Board as members. The BFS oversees the functioning of Department of Banking Supervision (DBS), Department of Non-Banking Supervision (DNBS) and Financial Institutions Division (FID) and gives directions on the regulatory and supervisory issues..

Regulator and supervisor of the financial system[edit]

The institution is also the regulator and supervisor of the financial system and prescribes broad parameters of banking operations within which the country's banking and financial system functions. Its objectives are to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for effective addressing of complaints by bank customers. The RBI controls the monetary supply, monitors economic indicators like the gross domestic product and has to decide the design of the rupee banknotes as well as coins.[38]

Managerial of exchange control[edit]

The central bank manages to reach different goals of the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India

Issue of currency[edit]

The bank issues and exchanges currency notes and coins and destroys the same when they are not fit for circulation. The objectives are to issue bank notes and giving public adequate supply of the same, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development, because both objectives are diverse in themselves. For printing of notes, the Security Printing and Minting Corporation of India Limited (SPMCIL), a wholly owned company of the Government of India, has

set up printing presses at Nashik, Maharashtra and Dewas, Madhya Pradesh. The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), a wholly owned subsidiary of the Reserve Bank, also has set up printing presses at Mysuru in Karnataka and Salboni in West Bengal. In all, there are four printing presses.[39] And for minting of notes, SPMCIL has four mints at Mumbai, Noida (UP), Kolkata and Hyderabad for coin production.[39]

Banker's bank[edit]

Nagpur branch holds most of India's gold deposits

RBI also works as a central bank where commercial banks are account holders and can deposit money.RBI maintains banking accounts of all scheduled banks.[40] Commercial banks create credit. It is the duty of the RBI to control the credit through the CRR, bank rate and open market operations. As banker's bank, the RBI facilitates the clearing of cheques between the commercial banks and helps inter-bank transfer of funds. It can grant financial accommodation to schedule banks. It acts as the lender of the last resort by providing emergency advances to the banks. It supervises the functioning of the commercial banks and take action against it if need arises.

Detection of fake currency[edit]

In order to curb the fake currency menace, RBI has launched a website to raise awareness among masses about fake notes in the market.www.paisaboltahai.rbi.org.in provides information about identifying fake currency.[41]

On 22 January 2014; RBI gave a press release stating that after 31 March 2014, it will completely withdraw from circulation all banknotes issued prior to 2005. From 1 April 2014, the public will be required to approach banks for exchanging these notes. Banks will provide exchange facility for these notes until further communication. The Reserve Bank has also clarified that the notes issued before 2005 will continue to be legal tender. This would mean that banks are required to exchange the notes for their customers as well as for non-customers. From 1 July 2014, however, to exchange more than 10 pieces of `500 and `1000 notes, non-customers will have to furnish proof of identity and residence to the bank branch in which she/he wants to exchange the notes.

This move from the Reserve Bank is expected to unearth black money held in cash. As the new currency notes have added security features, they would help in curbing the menace of fake currency.[42]

Developmental role[edit]

The central bank has to perform a wide range of promotional functions to support national objectives and industries.[13] The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of these problems are results of the dominant part of the public sector. [43]

Related functions[edit]

The RBI is also a banker to the government and performs merchant banking function for the central and the state governments. It also acts as their banker. The National Housing Bank (NHB) was established in 1988 to promote private real estate acquisition.[44] The institution maintains banking accounts of all scheduled banks, too. RBI on 7 August 2012 said that Indian banking system is resilient enough to face the stress caused by the drought like situation because of poor monsoon this year.[45]

Policy rates and reserve ratios[edit]

Policy Rates, Reserve Ratios, Lending and Deposit Rates as of 05 April 2016

Bank Rate 7.00%

Repo Rate 6.50%

Reverse Repo Rate 6.00%

Cash Reserve Ratio (CRR) 4%

Statutory Liquidity Ratio (SLR) 21.25%

Base Rate 9.70%–10.00%

Savings Deposit Rate 4%

Term Deposit Rate 7.25%–8.00%

Bank rate[edit]

RBI lends to the commercial banks through its discount window to help the banks meet depositors' demands and reserve requirements for long term. The interest rate the RBI charges the banks for this purpose is called bank rate or repo rate. If the RBI wants to increase the liquidity and money supply in the market, it will decrease the bank rate and if RBI wants to reduce the liquidity and money supply in the system, it will increase the bank rate. The bank rate has lost its significance as a monetary policy tool as the central bank signals stance through changes in repo, the rate at which banks borrow short-term funds from RBI. The bank rate, which

is the standard rate at which the RBI buys or re-discount bills of exchange or other commercial paper, is presently used in the country.

Reserve requirement cash reserve ratio (CRR)[edit]

Every commercial bank has to keep certain minimum cash reserves with Reserve Bank of India. Consequent upon amendment to sub-Section 42(1), the Reserve Bank, having regard to the needs of securing the monetary stability in the country, RBI can prescribe Cash Reserve Ratio (CRR) for scheduled banks without any floor rate or ceiling rate. Before the enactment of this amendment, in terms of Section 42(1) of the RBI Act, the Reserve Bank could prescribe CRR for scheduled banks between 3% and 15% of total of their demand and time liabilities. RBI uses this tool to increase or decrease the reserve requirement depending on whether it wants to effect a decrease or an increase in the money supply. An increase in Cash Reserve Ratio (CRR) will make it mandatory on the part of the banks to hold a large proportion of their deposits in the form of deposits with the RBI. This will reduce the size of their deposits and they will lend less. This will in turn decrease the money supply.

Statutory liquidity ratio (SLR)[edit]

Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash and approved securities. Higher liquidity ratio forces commercial banks to maintain a larger proportion of their resources in liquid form and thus reduces their capacity to grant loans and advances, thus it is an anti-inflationary impact. A higher liquidity ratio diverts the bank funds from loans and advances to investment in government and approved securities. In well-developed economies, central banks use open market operations—buying and selling of eligible securities by central bank in the money market—to influence the volume of cash reserves with commercial banks and thus influence the volume of loans and advances they can make to the commercial and industrial sectors. In the open money market, government securities are traded at market-related rates of interest. The RBI is resorting more to open market operations in the more recent years. Generally RBI uses

1. Minimum margins for lending against specific securities.

2. Ceiling on the amounts of credit for certain purposes.

3. Discriminatory rate of interest charged on certain types of advances.

Direct credit controls in India are of three types:

1. Part of the interest rate structure, i.e., on small savings and provident funds, are administratively set.

2. Banks are mandatory required to keep 21.50% of their deposits in the form of government securities.

3. Banks are required to lend to the priority sectors to the extent of 40% of their advances.

Overview of Banking Institutions in India

Scheduled and Non-Scheduled Banks

In India the central banking authority is the Reserve Bank of India. It is also referred to as the “Apex Bank”. It functions under an act called The Reserve Bank of India Act’1934. All the banks and other financial institutions operating in India come under the monitoring and control of RBI. RBI controls the banking sector in India through an act called “the banking Regulations Act’ 1949. In the past, when there were very few banks, RBI used to include all the scheduled banks in its schedule. Now a day, when the number of banks has gone up substantially, RBI has to change the schedule every now and then, hence irrespective of whether a bank finds its name in the schedule to the RBI Act or not, its “schedule status” can be found out from its banking licence. A Bank that is not a scheduled bank is referred to as “Non scheduled” bank even in its banking licence. The difference lies in the type of banking activities that a bank can carry out in India. In the case of a scheduled bank, it is licensed by the RBI to carry on extensive banking operations including foreign exchange operations, whereas, a non-scheduled bank can carry out only limited operations. There are a number of factors considered by RBI to declare a bank as a “scheduled Bank”, like the amount of share capital, type of banking activities that the bank is permitted to carry out etc. An example of difference between a scheduled and non-scheduled bank is dealing in “Foreign Exchange”. Commercial and cooperative banks Commercial banks are by far the most widespread banking institutions in India. They provide major products and services in India .A commercial bank is run on commercial lines, for profits of the organization. A co-operative bank on the other hand is run for the benefit of a group of members of the co-operative body. A co-operative bank distributes only a very small portion of its profit as dividend, retaining a major portion of it in business. All the nationalized banks in India and almost all the private sector banks are commercial scheduled banks. There are a large number of private sector co-operative banks and most of them are non-scheduled banks. In the public sector also, within a state, starting from the State capital, there are State Co-operative banks and District Central Co-operative Banks at the District level. Under the District Central Co-operative Bank, there are Co-operative Societies. At present, In India, the banks can be bifurcated into following categories. (a)                                Public sector banks (b)                                Private sector banks (c)                                  Co-operative banks                (i)            State level                (ii)           District level                (iii)          Urban Co-operative Banks                (iv)          State Co-operative agriculture and rural development banks                (v)           Primary Co-operative agriculture and rural development banks (d)           Regional Rural banks (e)           Foreign banks Besides, the Reserve Bank of India (hereinafter referred to as RBI) acts as the central bank of the country. RBI is responsible for development and supervision of the constituents of the Indian financial system (which comprises banks and non-banking financial institutions) as well as for determining, in conjunction with the central government, the monetary and credit policies. They are also controlled by RBI. Retail banking vs wholesale banking Whole sale banking typically involves a small number of very large customers such as big corporations and governments, whereas retail banking consists of a large number of small customers who consume personal banking and small business services. Wholesale banking is largely inter-bank; banks use the inter-bank markets to borrow from or lend to other banks/large customers, to participate in large bond issues and to engage in syndicated lending. Retail banking is largely intra-bank; the bank itself makes many small loans. Most of the Indian public sector banks practice retail banking; they are slowly practicing the concept of “wholesale banking”. On the other hand, most of the well-stablished foreign banks in India and the recent private sector banks practice wholesale banking alongside retail banking. As a result of this difference, the composition of income for a public sector bank is different. While a major

portion of the income for large public sector banks is from lending operations, in the case of any private sector bank in India, the amount of non-operating income (other than interest income) is substantially higher. The composition of other income is–commission on bills/guarantees/letters of credit, counseling fees, syndication fees, credit report fees, loan processing fees, correspondent bank charges etc. Global banking Global Banking activities are an extension of various activities listed above into the international market. Global banking primarily consists of trade in international banking services and establishment of branches and subsidiaries in foreign countries. Special kinds of bank branches Most Banks in India separate out the following activities are special branches in areas are designated to mainly deal in these activities. This is done to reap benefits of specialisation as these activities are quite complex and hence letting only few employees in specialising them can save a lot of resources.

(a) Foreign exchange Branches

(b) NPA recovery branches

(c) Service branches dealing in Clearing house operations/Corporate banking and Industrial finance branches

(d)Personal banking branches

(e) Housing finance branch

(f) SSI branches

(g) Agricultural finance branches.

Commercial bankFrom Wikipedia, the free encyclopedia

A Commercial bank is a type of financial institution that provides services such as accepting deposits, making business loans, and offering basic investment products.

"Commercial bank" can also refer to a bank, or a division of a large bank, which more specifically deals with deposit and loan services provided to corporations or large/middle-sized business - as opposed to individual members of the public/small business -Retail banking, or Merchant banks.

Role[edit]

The general role of commercial banks is to provide financial services to general public and business, ensuring economic and social stability and sustainable growth of the economy.

In this respect, "credit creation" is the most significant function of commercial banks. While sanctioning a loan to a customer, they do not provide cash to the borrower. Instead, they open a deposit account from which the borrower can withdraw. In other words, while sanctioning a loan, they automatically create deposits, known as a "credit creation from commercial banks".

Primary functions[edit]

Commercial banks accept various types of deposits from public especially from its clients, including saving account deposits, recurring account deposits, and fixed deposits. These deposits are returned whenever the customer demands it or after a certain time period

Commercial banks provide loans and advances of various forms, including an overdraft facility, cash credit, bill discounting, money at call etc. They also give demand andterm loans to all types of clients against proper security.

Regulations[edit]

In most countries central banks are responsible for the oversight of the commercial banking system of their respective countries. They will impose a number of conditions on the banks that they regulate such as keeping bank reserves and to maintain minimum capital requirements.

Bank reserves[edit]

Bank reserves or "central bank reserves" are banks' holdings of deposits in accounts with their central bank (for instance the European Central Bank or the Federal Reserve, in the latter case including federal funds), plus currency that is physically held in the bank's vault ("vault cash"). Some central banks set minimum reserve requirements, which require banks to hold deposits at the central bank equivalent to at least a specified percentage of their liabilities such as customer deposits. Even when there are no reserve requirements, banks often opt to hold some reserves —called desired reserves— against unexpected events such as unusually large net withdrawals by customers or bank runs.

Services by product[edit]

Commercial banks generally provide a number of services to its clients, these can be split into core banking services such as deposits and loans and other services which are related to payment systems and other financial services.

Core products and services[edit]

Accepting money on various types of Deposit accounts

Lending money in the form of Cash: by overdraft, instalment loan etc.

Lending money in Documentary form: Letters of Credit, Guarantees, Performance bonds, securities, underwriting commitments and other forms of off-balance sheet exposure.

Inter- Financial Institutions relationship

Cash management

Treasury management

Private Equity  financing

Issuing Bank drafts and Bank cheques

Processing payments via telegraphic transfer, EFTPOS, internet banking, or other payment methods.

Other functions[edit]

Along with core products and services, commercial banks perform several secondary functions. The secondary functions of commercial banks can be divided into agency functions and utility functions.

Agency functions include:

To collect and clear cheques, dividends and interest warrant.

To make payments of rent, insurance premium, etc.

To deal in foreign exchange transactions.

To purchase and sell securities.

To act as trustee, attorney, correspondent and executor.

To accept tax proceeds and tax returns.

Utility functions include:

To provide safety locker facility to customers.

To provide money transfer facility.

To issue traveller's cheque.

To act as referees.

To accept various bills for payment: phone bills, gas bills, water bills, etc.

To provide merchant banking facility.

To provide various cards: credit cards, debit cards, smart cards, etc.

Loan types[edit]

All the loans in the Commercial banking, irrespective of the particular type of bank product, are subject to be "secured" or "unsecured".

Secured loans[edit]

A secured loan is a loan in which the borrower pledges some asset (e.g., a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally lent to the borrower, for example, foreclosed a portion of the bundle of rights to specified property. If the sale of the collateral does not raise enough money to pay off the debt, the creditor can often obtain a deficiency judgment against the borrower for the remaining amount. The opposite of secured debt/loan is unsecured debt, which is not connected to any specific piece of property and instead the creditor may only satisfy the debt against the borrower rather than the borrower's collateral and the borrower.

Unsecured loan[edit]

Unsecured loans are monetary loans that are not secured against the borrower's assets (no collateral is involved). There are small business unsecured loans such as credit cards and credit lines to large corporate credit lines. These may be available from financial institutions under many different guises or marketing packages such as:

Bank overdrafts

Corporate bonds

Credit card  debt

Credit facilities or lines of credit

Regional Rural BankFrom Wikipedia, the free encyclopedia

Regional Rural Banks (also RRBs) are local level banking organizations operating in different States of India. They have been created with a view to serve primarily the rural areas of India with basic banking and financial services. However, RRBs may have branches set up for urban operations and their area of operation may include urban areas too.

The area of operation of RRBs is limited to the area as notified by Government of India covering one or more districts in the State. RRBs also perform a variety of different functions. RRBs perform various functions in following heads • Providing banking facilities to rural and semi-urban areas. Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc. • Providing Para-Banking facilities like locker facilities, debit and credit cards

History[edit]

Regional Rural Banks were established under the provisions of an Ordinance passed on September 1975 and the RRB Act. 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. These were set up on the recommendations of The Narasimham Working Group[1] during the tenure of Indira Gandhi's government with a view to include rural areas into economic mainstream since that time about 70% of the Indian Population was of Rural Orientation. The development process of RRBs started on 2 October 1975 with the forming of the first RRB, the Prathama Bank. Also on 2 October 1976 five regional rural banks were set up with a total authorised capital of Rs. 100 crore ($10 Million) which later augmented to 500 crore ($50 Million). The Regional Rural Bank were owned by the Central Government, the State Government and the Sponsor Bank(There were five commercial banks, Punjab National Bank, State Bank of India, Syndicate Bank, United Bank of India and United Commercial Bank, which sponsored the regional rural banks) who held shares in the ratios as follows Central Government-60%, State Government- 20% and Sponsor Banks- 20%.. Earlier, Reserve Bank of India had laid down ceilings on the rate of interest to be charged by these RRBs.

Recapitalization of Regional Rural Banks[edit]

Subsequent to review of the financial status of RRBs by the Union Finance Minister in August, 2009, it was felt that a large number of RRBs had a low Capital to Risk weighted Assets Ratio (CRAR). A committee was therefore constituted in September, 2009 under the Chairmanship of K C Chakrabarty, Deputy Governor, RBI to analyse the financials of the RRBs and to suggest measures including re-capitalisation to bring the CRAR of RRBs to at least 9% in a sustainable manner by 2012. The Committee submitted its report in May, 2010. The following points were recommended by the committee:

RRBs to have CRAR of at least 7% as of 31 March 2011 and at least 9% from 31 March 2012 onwards. recapitalisation requirement of Rs. 2,200.00 crore for 40 of the 82 RRBs. This amount is to be released in’ two installments in 2010-11 and 2011-12. .

The remaining 42 RRBs will not require any capital and will be able to maintain CRAR of at least 9% ifs on 31 st March 2012 and thereafter on their own.

A fund of Rs. 100 crore to be set up for training and capacity building of the RRB staff.

The Government of India recently approved the recapitalization of Regional Rural Banks (RRBs) to improve their Capital to Risk Weighted Assets Ratio CRAR) in the following manner:

Share of Central Government i.e. Rs.1, 100 crore will be released as per provisions made by the Department of Expenditure in 2010-11 and 2011-12. However, release of Government of India share will be contingent on proportionate release of State Government and Sponsor Bank share.

A capacity building fund with a corpus of Rs.100 crore to be set up by Central Government with NABARD for training and capacity building of the RRB staff in the institution of NABARD and other reputed institutions. The functioning of the Fund will be periodically reviewed by the Central Government. An Action Plan will be prepared by NABARD in this regard and sent to Government for approval.

Additional amount of Rs. 700 crore as contingency fund to meet the requirement of the weak RRBs, particularly those in the North Eastern. and Eastern Region, the necessary provision will be made in the Budget as and when the need arises.

Organizational Structure[edit]

The Organizational Structure for RRB's varies from branch to branch and depends upon the nature and size of business done by the branch. The Head Office of an RRB normally had three to seven departments.

The following is the decision making hierarchy of officials in a Regional Rural Bank.

Board of Directors

Chairman & Managing Director

General Manager

Chief Manager/Regional Managers

Senior Manager

Manager

Officer / Assist

Amalgamation[edit]

Currently, RRB's are going through a process of amalgamation and consolidation. 25 RRBs have been amalgamated in January 2013 into 10 RRBs. This counts 67 RRBs till the first week of June 2013. This counts 56 as of March 2015. On 31 March 2006, there were 133 RRBs (post-merger) covering 525 districts with a network of 14,494 branches. All RRBs were originally conceived as low cost institutions having a rural ethos, local feel and pro poor focus. However, within a very short time, most banks were making losses. The original assumptions as to the low cost nature of these institutions were belied. This may be again amalgamated in near future. At present there are 56 RRBs in India.

Legal Existence and Protection[edit]

RRB's are recognized by the law and they have legal significance.The Regional Rural Banks Act, 1976 Act No. 21 Of 1976 [9 February 1976.] reads

"For the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural laborers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto"

Cooperative bankingFrom Wikipedia, the free encyclopedia

"Cooperative bank" redirects here. For banks by this name, see Co-operative Bank.

A statue of cooperative pioneer Robert Owenstands in front of

the Manchester head office of the UK's Co-operative Bank.

Part of a series on financial services

Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world.

Cooperative banking, as discussed here, includes retail banking carried out by credit unions, mutual savings banks, building societiesand cooperatives, as well as commercial banking services provided by mutual organizations (such as cooperative federations) to cooperative businesses.

Institutions[edit]

Credit unions[edit]

Main article: Credit union

Credit unions have the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members.[1] Its members are usually required to share a common bond, such as locality, employer, religion or profession, and credit unions are usually funded entirely by member deposits, and avoid outside borrowing. They are typically (though not exclusively) the smaller form of cooperative banking institution. In some countries they are restricted to providing only unsecured personal loans, whereas in others, they can provide business loans to farmers, and mortgages.

Cooperative banks[edit]

Larger institutions are often called cooperative banks. Some are tightly integrated federations of credit unions, though those member credit unions may not subscribe to all nine of the strict principles of the World Council of Credit Unions (WOCCU).

Like credit unions, cooperative banks are owned by their customers and follow the cooperative principle of one person, one vote. Unlike credit unions, however, cooperative banks are often regulated under both banking and cooperative legislation. They provide services such as savings and loans to non-members as well as to members, and some participate in the wholesale markets for bonds, money and even equities.[2] Many cooperative banks are traded on public stock markets, with the result that they are partly owned by non-members. Member control is diluted by these outside stakes, so they may be regarded as semi-cooperative.

Cooperative banking systems are also usually more integrated than credit union systems. Local branches of cooperative banks select their own boards of directors and manage their own operations, but most strategic decisions require approval from a central office. Credit unions usually retain strategic decision-making at a local level, though they share back-office functions, such as access to the global payments system, by federating.

Some cooperative banks are criticized for diluting their cooperative principles. Principles 2-4 of the "Statement on the Co-operative Identity" can be interpreted to require that members must control both the governance systems and capital of their cooperatives. A cooperative bank that raises capital on public stock markets creates a second class of shareholders who compete with the members for control. In some circumstances, the members may lose control. This effectively means that the bank ceases to be a cooperative. Accepting deposits from non-members may also lead to a dilution of member control.

Development Banks

BIBLIOGRAPHY

The label “development bank” attaches to a group of national financial institutions, in developing countries, that vary widely in size, source of funds, and scope of activity. Essentially, a development bank is a vehicle for mobilizing and channeling medium- and long-term capital into the productive sector of the economy; most are also a source of entrepreneurship and technical assistance. Some development banks create and finance public enterprises or plan or carry out national development programs, but these are the exception; typically, the term “development bank” describes an institution created to encourage the growth of the private sector. Although limitations of funds and of qualified personnel have led countries in an early stage of development to entrust to their development banks responsibilities in several fields—agriculture, industry, housing, mining—emphasis on a

single field is more usual. Among these specialist institutions the greater and the growing number are concerned with industry, and it is these that best illustrate the possible range of a development bank’s operations.

Among industrial financing institutions may be found not only public banks but a number of banks that are privately owned, wholly or predominantly. Banks that extend agricultural credit or are actively engaged in promotional work, however, are normally government owned. These activities are relatively risky, expensive, not immediately revenue producing, and hold little appeal for private investors. In countries with a low level of domestic savings and limited access to external sources of finance, any private participation in a development bank is likely to be no more than token, at least initially. Sometimes even in countries with a relatively high savings ratio, when government policy has called for support of the private industrial sector, the government will choose to create a public development bank as a vehicle for its assistance. In any event, a benevolent government interest is essential to a development bank’s success, and most banks function in the context of a national development plan.

The antecedents of the modern development bank can be traced back some hundred years to industrial financing institutions in Europe and the United States (Diamond 1957, pp. 19–37; Institut d’Etudes Bancaires et Financieres 1964, pp. 49–66). Since the 1950s the number of development banks has increased rapidly, as developing countries have sought mechanisms to accelerate their economic growth and especially to stimulate industrialization. Tallies vary, depending on definition; moreover, they are soon outdated, as new banks come into operation; in 1964 there were well over one hundred, to be found in all parts of the less-developed world. The International Bank for Reconstruction and Development and its affiliates, the International Finance Corporation and the International Development Association, have encouraged the creation of private development banks in appropriate circumstances, extending both technical assistance in their establishment and operation (including recruitment of management and training of staff) and financial support (amounting to about $300 million by mid-1964) through loans or participation in share capital. Assistance has also been provided by the Inter-American Development Bank and through the aid programs of industrialized countries. The United States by mid-1964 had committed about $1,000 million to various types of development banks. The United Kingdom and France have a long history of extensive assistance to such institutions, the former concerned with banks in Commonwealth countries, the latter with those in former French Africa. Germany and Japan have entered the field more recently. The development bank has served as a means of

retailing funds—often foreign exchange—to enterprises too small to be financed directly by these public sources.

Development banks are intended to fill a gap primarily, though not exclusively, financial. Commercial banks, traditionally, have not made available investment capital; they generally provide short-term money only, frequently at a high rate of interest, and tend to favor existing enterprises and the larger borrowers. Savers in the typical developing country prefer investments promising a quick return to those offering only the prospect of gradual growth; they would rather invest in commercial ventures or real estate or send funds abroad than participate in untried industrial enterprises. The financial institutions and capital market mechanisms that in more developed countries serve to transfer savings are absent, embryonic, or inefficient. Often the business community shows little inclination to look for new fields of activity or even to act when promising opportunities are called to its attention. Finally, the organizational and technical competence to launch and sustain a new enterprise is frequently lacking or in short supply.

A development bank appropriately capitalized, well managed and staffed, and free to reach investment decisions objectively on business and economic grounds can help to overcome these various difficulties. It can supply investment capital—loan or equity or some intermediate form—from its own resources and can recruit capital from other sources, domestic and foreign. It can encourage and facilitate direct investment in industrial securities and help to develop a capital market. It can spark industrial initiative, sponsor urgently needed new ventures, and provide advice at all stages of a project, from planning to operation.

Each bank is, or should be, designed with a particular country’s needs and environment in view. In consequence, there is no model for a development bank, and no single description adequately fits them all.

Capitalization. Private development banks are organized as corporations, some with several hundred million dollars of initial capital, some with far less. The capitalization of any particular bank necessarily reflects a judgment concerning the amount that it appears feasible to raise from available sources. A second relevant consideration is the desirability of launching the bank with resources large enough to assure an impact on the economy and, assuming the bank is soundly run, earnings sufficient to cover operating costs, reserve and tax requirements and, before too long, payment of a modest dividend. Usually, institutional shareholders—commercial banks, insurance companies, investment houses—predominate.

Many institutions in the industrialized countries have invested in development banks, primarily to obtain a window on events in a country to which they have some special tie or in the expectation that the bank will ultimately prove beneficial to their own interests. Foreign shareholders serve as a channel for the managerial skills and modern technology so scarce in developing countries and also help the bank to resist any undue local political pressure.

It has proved harder to attract individual shareholders, at least in the early stages of a bank’s operations; they tend to have a greater concern for the probability of an adequate return on their investment. A successful development bank can be expected to earn moderate returns in time; none is likely to be highly profitable. Individual investors have, however, been attracted by the inducement of special government assistance in a bank’s initial capitalization. The most effective device has been a long-term loan, interest-free or at low interest, subordinate to share capital in the event of the bank’s liquidation. Earnings on the no-cost or low-cost funds enhance the return on equity; the subordination to equity provides shareholders with a cushion against losses. Some governments have permitted a development bank to manage public funds for a fee and without risk, or have extended special rediscount or borrowing privileges, granted preferential tax treatment for dividends, or guaranteed a minimum dividend. Development-bank loan capital has come primarily from public sources at home or abroad; a few banks have borrowed in the local capital market with a government guarantee.

Operation and policies. Normally, a development bank tries not to compete with other sources of funds, particularly the commercial banks. This is one reason why most development banks do not accept deposits and, in fixing their loan charges, take into account not only their own cost of capital but also the going rate of interest. Compared with commercial banks, the development bank gives greater weight in its investment decisions to growth potential and quality of management and places less emphasis on security and credit standing. As a development agency, the development bank is mindful of the needs and preferences of applicants and the potential benefit of a proposed investment to the economy. At the same time, if it is a shareholder-owned institution, it cannot ignore the source and cost of its own capital and the composition of its investment portfolio and must therefore take profitability into consideration (Boskey 1959, pp. 49–55).

Although development banks finance the modernization or expansion of established enterprises as well as the establishment of new enterprises, their characteristic willingness to take risks and to combine development and banking criteria in investment decisions makes them particularly useful to the latter; new enterprises cannot readily borrow in the market and have limited earnings to reinvest. Equity financing is frequently most appropriate for such

enterprises: unlike a loan, it imposes no interest or repayment burden. But the bank is not always welcomed as a co-owner. Family-held enterprises are sometimes reluctant to admit outsiders to ownership; this may be particularly true where the bank is a government institution. Moreover, the banks take their own investment portfolios into account in determining the nature of their financing; they generally limit equity holdings to the equivalent of their own share capital plus reserves.

A development bank does not usually extend either very small or very large loans. Appraisal, administration, and follow-up of small loans is costly and time consuming; the loans themselves are risky. Unless the bank is a public institution with no pressure to pay dividends or has special funds for assistance to small enterprises, it normally excludes such enterprises from its clientele by setting a minimum on the size of individual investments. For different reasons—to diversify its portfolio and avoid allocating an unreasonably large proportion of resources to a single project— the bank usually sets a ceiling on the amount of financing to any one client. Thus, development banks usually do not cater to very large projects either, except as partners or participants with other investors (such as the International Finance Corporation). Normally, a bank will supply no more than half of an applicant’s financial requirements; this mobilizes capital in support of the bank’s contribution and spreads the impact of its financing.

There are a number of ways open to a development bank to assist the growth of a capital market and to encourage the practice of industrial investment. When enterprises financed by the bank have “seasoned” and begun to show a profit, the bank may sell their securities from its portfolio. This adds to the supply of marketable securities in circulation and broadens industrial ownership and the base for future sales; in addition, it releases the bank’s resources for new investments. The bank may underwrite new securities, normally only those issued by enterprises it has itself financed. It may offer participations in its investments and issue its own obligations. Each of these activities in effect invites investors to rely on the bank’s appraisals and investment decisions. Consequently, the extent to which a development bank can be successful in these areas depends upon the extent to which it has been able to establish a reputation for sound business judgment. Finally, the bank may be an educator and innovator, introducing or making more familiar financial instruments and techniques employed in the capital markets of industrialized countries.

Role in stimulating investment. The development bank’s promotional role—the stimulation of new industrial investment—is an important one. At the same time, since promotion is likely to be expensive and unlikely to produce immediate returns, private banks can afford

only limited activity of this character unless they have special resources for the purpose. The possibilities are varied. Through its own staff or contacts available to it, the bank can help to translate an idea into a bankable project and a project into an operating enterprise. The bank’s analysis, in the regular course of business, of proposals submitted to it may lead to suggestions for modifications in the financial, economic, technical, or managerial aspects, rendering the proposal more economic and technically sounder. The bank may find experienced industrial partners for new and complex undertakings. It will try to bring investment opportunities and private capital together. It may conduct a survey of a geographic region or an economic sector to find promising projects. It may actively sponsor, and establish in cooperation with other sources of capital and technology, new enterprises to meet specific needs of the economy. Once the bank has financed an enterprise, it provides continuing guidance to its clients on matters of operation and policy. By encouraging the adoption of good financial and managerial practices, it can help to create and maintain a sound industrial sector.

Although the development bank is a useful and versatile instrument of economic development, it is only one of many; it cannot by itself overcome the host of problems that developing countries encounter on the road to industrialization. Moreover, certain conditions are a prerequisite to the success of any development bank. Before a bank is created the needs it is to meet should be identified, to facilitate formation of an appropriate organization and financial design. For a private institution to be profitable, there must be within the country enough of the basic ingredients of industrialization to assure a continuing flow of a fair volume of business. There should be at the outset experienced management and a competent and sufficiently numerous staff; often this will mean some foreign personnel initially, a circumstance which developing countries, especially those newly independent, sometimes find hard to accept. Finally, realization of a development bank’s potential requires government policies—fiscal, monetary, commercial—that support and facilitate the bank’s activities and that, in particular, create a climate congenial to private enterprise. Experience indicates that it is a waste of scarce development resources, both of funds and personnel, to create a development bank where these conditions cannot be, or are not, met.

Participate in Wiki Loves Earth India 2016 Photo contestUpload Photos of Natural Heritage sites of India to help Wikipedia & win fantastic

Prizes Check out the rules here

State Bank of IndiaFrom Wikipedia, the free encyclopedia

For the Japanese financial services group, see SBI Holdings.

State Bank of India

Type Public

Traded as NSE: SBIN

BSE: 500112

LSE: SBID

BSE SENSEX Constituent

CNX Nifty Constituent

Industry Banking, financial services

Founded 2 June 1806, Bank of Calcutta

27 January 1921, Imperial Bank of India

1 July 1955, State Bank of India

2 June 1956,[1] nationalization

Headquarters Mumbai, Maharashtra, India

Area served Worldwide

Key people Smt. Arundhati Bhattacharya

(Chairperson)

Products Consumer banking, corporate banking, finance and

insurance, investment banking, mortgage

loans,private banking, private

equity, savings, securities,asset

management, wealth management, credit cards,

Revenue ₹257,289 crore(US$38 billion) (2015)[2][3]

Profit ₹17,517 crore(US$2.6 billion) (2015)

Total assets ₹2,700,110 crore(US$400 billion) (2015)

Total equity ₹203,417 crore(US$30 billion) (2015)[2][3]

Owner Government of India

Members 286 million users with 450 million accounts (2016)[4]

[citation needed]

Number of employees

222,033 (2014)

Slogan The Banker to Every Indian

Website www.sbi.co.in

State Bank of India (SBI) are an Indian multinational, public sector banking and financial services company. It is a government-owned corporation with its headquarters in Mumbai, Maharashtra. As of 2014-15, it had assets of INR 20,480 billion (USD 310 billion) and more than 14,000 branches, including 191 foreign offices spread across 36 countries, making it the largest banking and financial services company in India by assets.[5][6][7]

State Bank of India is one of the Big Four banks of India, along with ICICI Bank, Bank of Baroda and Punjab National Bank.[8]

The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding, in 1806, of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two "presidency banks" in British

India, Bank of Calcutta and Bank of Bombay, to form the Imperial Bank of India, which in turn became the State Bank of India in 1956.[9] Government of India owned the Imperial Bank of India in 1955, with Reserve Bank of India (India's Central Bank) taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India.

State Bank of India is a banking behemoth and has 20% market share in deposits and loans among Indian commercial banks.[10]

Contents  [hide] 

1 History 2 Operations

o 2.1 Domestic presence o 2.2 International presence o 2.3 Associate banks o 2.4 Non-banking subsidiaries o 2.5 Other SBI service points

3 Logo and slogan 4 Listings and shareholding 5 Employees 6 Recent awards and recognitions 7 Major competitors 8 See also 9 References 10 External links

History[edit]

Seal of Imperial Bank of India.

The roots of the State Bank of India lie in the first decade of the 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were [ asjoint stock companies and were the result of royal charters. These three banks received the exclusive right to issue paper currency till 1861 when, with the Paper Currency Act, the right was taken over by the Government of India. The Presidency banks amalgamated on 27 January 1921, and the re-organised banking entity took as its name Imperial Bank of India. The Imperial Bank of India remained a joint stock company but without Government participation.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 1 July 1955, the imperial Bank of India became the State Bank of India. In 2008, the Government of India acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This made SBI subsidiaries of eight that had belonged toprincely states prior to their nationalization and operatonal take-over between September 1959 and October 1960, which made eight state banks associates of SBI. This acquisition was in tune with the first Five Year Plan, which prioritised the development of rural India. The government integrated these banks into the State Bank of India system to expand its rural outreach. In 1963 SBI merged State Bank of Jaipur (est. 1943) and State Bank of Bikaner (est.1944).

SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911), which SBI acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of Lahore (est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao Scindia. The bank had been the Dukan Pichadi, a small moneylender, owned by the Maharaja. The new bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.

There has been a proposal to merge all the associate banks into SBI to create a "mega bank" and streamline the group's operations.[11]

The first step towards unification occurred on 13 August 2008 when State Bank of Saurashtra merged with SBI, reducing the number of associate state banks from seven to six. Then on 19 June 2009 the SBI board approved the absorption of State Bank of Indore. SBI holds 98.3% in State Bank of Indore. (Individuals who held the shares prior to its takeover by the government hold the balance of 1.7%.)[12]

The acquisition of State Bank of Indore added 470 branches to SBI's existing network of branches. Also, following the acquisition, SBI's total assets will inch very close to the  10 trillion ₹mark (10 billion long scale). The total assets of SBI and the State Bank of Indore stood at  9,981,190 million as of March 2009. The process of merging of State Bank of Indore was ₹completed by April 2010, and the SBI Indore branches started functioning as SBI branches on 26 August 2010.[13]

On 7 October 2013, Arundhati Bhattacharya became the first woman to be appointed Chairperson of the bank.[14]

Operations[edit]

SBI provides a range of banking products through its network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal Offices that are located at important cities throughout India.

Domestic presence[edit]

SBI has 18,354 branches in India.[2] In the financial year 2012-13, its revenue was INR 200,560 Crores (US$36.9 billion), out of which domestic operations contributed to 95.35% of revenue. Similarly, domestic operations contributed to 88.37% of total profits for the same financial year. [2]

Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by Government in August 2014, SBI held 11,300 camps and opened over 30 lakhs accounts by September, which included 21.16 lakh accounts in rural areas and 8.8 lakh accounts in urban areas. [15]

International presence[edit]

The Israeli branch of the State Bank of India located in Ramat Gan.

As of 2014-15, the bank had 191 overseas offices spread over 36 countries having the largest presence in foreign markets among Indian banks.[7] It has branches in Singapore, Moscow, Colombo, Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg, London, Los Angeles, Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas and Bahrain, and representative offices in Myanmar, Bhutan and Cape Town.

SBI has 7 retail banking branches in Singapore.

The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in the Toronto area and three in the Vancouver area.

SBI operates several foreign subsidiaries or affiliates.

In 1990, it established an offshore bank: State Bank of India (Mauritius). SBI (Mauritius) has 15 branches in major cities/towns of the country including Rodrigues.

State Bank of India Branch at Jaffna,Sri Lanka

SBI Sri Lanka now has three branches located in Colombo, Kandy and Jaffna. The Jaffna branch was opened on 9 September 2013. SBI Sri Lanka, the oldest bank in Sri Lanka, celebrated its 150th year in Sri Lanka on 1 July 2014.

State Bank of India (S.B.I.) Branch at Tsim Sha Tsui, Hong Kong

In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten branches – nine branches in the state of California and one in Washington, D.C. The 10th branch

was opened in Fremont, California on 28 March 2011. The other eight branches in California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield.

In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria.

In Nepal, SBI owns 49% of SBI Nepal (State Bank in Nepal) share with Nepal Government owing the rest and SBI NEPAL has branches throughout the country in each and every city as banking has become the major part of daily life for Nepalese people.

In Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest.

In Indonesia, it owns 76% of PT Bank Indo Monex.

The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.[16]

In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8 million in October 2005.[17]

In January 2016, SBI opened its first branch in Seoul, South Korea following the continuous and significant increase in trade due to theComprehensive Economic Partnership Agreement signed between New Delhi and Seoul in 2009.

Associate banks[edit]

Main Branch of SBI in Mumbai.

SBI now has one associate bank, down from the eight that it originally acquired in 1959. All use the State Bank of India logo, which is a blue circle, and all use the "State Bank of" name, followed by the regional headquarters' name:

State Bank of Patiala  (founded 1917) State Bank of Mysore  (founded 1913) State Bank of Bikaner & Jaipur  (founded 1963) State Bank of Hyderabad  (founded 1941) State Bank of Travancore  (founded 1945) Bharatiya Mahila Bank  (founded 2013)

The banks which are merged are:

State Bank of Saurashtra  (merged 2008) State Bank of Indore  (merged 2010)

The negotiations for merging of 5 associate banks State Bank of Bikaner and Jaipur , State Bank of Hyderabad , State Bank of Mysore , State Bank of Patiala and State Bank of Travancore and Bharatiya Mahila Bank by acquire their businesses including assets and liabilities with SBI started in 2016.[18][19] The merger of these six subsidiaries was approved by Union Cabinet on 15 June 2016.[20] The State Bank of India and all its associate banks are identified by the same blue keyhole logo. The State Bank of Indiawordmark usually has one standard typeface, but also utilises other typefaces.

State Bank of India Mumbai LHO.

Non-banking subsidiaries[edit]

Apart from its five associate banks, SBI also has the following non-banking subsidiaries:

SBI Capital Markets  Ltd SBI Funds Management Pvt Ltd SBI Factors & Commercial Services Pvt Ltd SBI Cards  & Payments Services Pvt. Ltd. (SBICPSL) SBI DFHI Ltd SBI Life Insurance Company Limited SBI General Insurance

In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the remaining capital), to form a joint venture life insurance company named SBI Life Insurance company Ltd. In 2004, SBI DFHI (Discount and Finance House of India) was founded with its headquarters in Mumbai.

Other SBI service points[edit]

As of 31 December 2015,SBI has 48,462 ATMs & SBI group (including associate banks) has 57,324 ATMs.

Logo and slogan[edit]

The logo of the State Bank of India is a blue circle with a small cut in the bottom that depicts perfection and the small man the common man - being the center of the bank's business.The solid circle-with-a-keyhole symbol, resembling a lock-and-key depicting the purpose of the Bank: that SBI, the custodian, would safe-keep the customer’s money.The Bank adopted the new motif on October 1, 1971. The logo came from National Institute of Design(NID), Ahmedabad in 1971 and it was inspired by Kankaria lake,[21] [22]

Slogans: "PURE BANKING, NOTHING ELSE", "WITH YOU - ALL THE WAY", "A BANK OF THE COMMON MAN", "THE BANKER TO EVERY INDIAN", "THE NATION BANKS ON US"

Listings and shareholding[edit]

As on 31 March 2014, Government of India held around 58.59% equity shares in SBI. Life Insurance Corporation of India is the largest non-promoter shareholder in the company with 14.99% shareholding.

Shareholders Shareholding[23]

Promoters: Government of India 58.60%

Banks & Insurance Companies 16.79%

FIIs/GDRs/OCBs/NRIs 12.04%

Mutual Funds & UTI 03.78%

Private Corporate Bodies 02.87%

Others 5.92%

Total 100.0%

The equity shares of SBI are listed on the Bombay Stock Exchange,[24] where it is a constituent of the BSE SENSEX index,[25] and the National Stock Exchange of India,[26] where it is a constituent of the CNX Nifty.[27]

Its Global Depository Receipts (GDRs) are listed on the London Stock Exchange.[28]

Employees[edit]

SBI is one of the largest employers in the country having 222,033 employees as on 31 March 2014, out of which there were 45,132 female employees (20%) and 2,610 (1%) employees with disabilities. On the same date, SBI had 42,744 Schedule Caste (19%) and 17,243 Schedule Tribe (8%) employees. The percentage of Officers, Assistants and Sub-staff was 36%, 46% and 18% respectively on the same date Hiring drive: 1,776 Assistants and 1,394 Officers joined the Bank in FY 2013-14, for expansion of the branch network and to mitigate staff shortage, particularly at rural and semi-urban branches. Staff productivity: As per its Annual Report for FY 2013-14, each employee contributed net profit of INR 4.85 lakhs.

Recent awards and recognitions[edit]

SBI was ranked as the top bank in India based on tier 1 capital by The Banker magazine in a 2014 ranking.[29]

SBI was ranked 298th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012.[3]

SBI was named the 29th most reputed company in the world according to Forbes 2009 rankings[30]

SBI was 50th Most Trusted brand in India as per the Brand Trust Report 2013,[31] an annual study conducted by Trust Research Advisory, a brand analytics company and subsequently, in the Brand Trust Report 2014, SBI finished as India's 19th Most Trusted Brand in India.[32][33]

Major competitors[edit]

Some of the major competitors for SBI in the banking sector are large private sector banks ICICI Bank, HDFC Bank, Axis Bank, IndusInd Bank, small regional banks and other public sector banks Canara Bank, Bank of India and Union Bank of India. However, in terms of average market share, SBI is by far the largest player in the market.[34]

See also[edit]

List of largest banks

References[edit]

1. Jump up ̂  http://rbidocs.rbi.org.in/rdocs/content/PDFs/90028.pdf2. ^ Jump up to: a  b c d "Annual Report 2012-13" (PDF). SBI. 23 May 2013. Retrieved 10 October 2013.3. ^ Jump up to: a  b c "Fortune 'Global 500' 2013:State Bank of India". CNN. Retrieved 10

October2013.4. Jump up ̂  http://www.dnaindia.com/money/report-sbi-lays-foundation-for-csr-actions-launches-e-

wallet-21158775. Jump up ̂  As India's Banks Wait In Fear Of The Rupee Hitting 70 To The Dollar, Here's A List Of

The Best 10 Indian Banks By Revenue. Ibtimes.com (2013-09-04). Retrieved on 2013-12-06.6. Jump up ̂  History of the Evolution of SBI volumes 1, 2 and 3 and Banking Beyond Boundaries

(Penguin, 2011)7. ^ Jump up to: a  b "SBI Annual Report 2014-15" (PDF). State Bank of India. Retrieved 14

January2016.8. Jump up ̂  "The Largest Banks in India". www.relbanks.com. Retrieved 2015-11-11.9. Jump up ̂  Banking Theory Law N Practice. Tata McGraw-Hill Education. p. 8. Retrieved4

November 2014. |first1= missing |last1= in Authors list (help)10. Jump up ̂  "SBI accounts for one-fifth of country's loans". Livemint.com. 25 January 2009.

Retrieved 20 August 2010.11. Jump up ̂  "Indian Banks' Association". Iba.org.in. 23 April 2005. Retrieved 21 December 2010.12. Jump up ̂  Business Standard (21 June 2010). "Approvals for State Bank of Indore merger by

July: SBI".13. Jump up ̂  Economic Times (26 August 2010). "State Bank of Indore branches to become SBI

units from Aug 26   : SBI" . The Times Of India.14. Jump up ̂  "Arundhati Bhattacharya, first woman to head SBI".15. Jump up ̂  "SBI takes lead in opening bank accounts under Jan Dhan Yojana". The Economic

Times. 11 Sep 2014. Retrieved 2014-09-30.16. Jump up ̂  "State Bank of India to set up branch in China's Tianjin". Forbes. 21 November 2007.

Retrieved 16 July 2010.[dead link]

17. Jump up ̂  "State Bank of India Acquired 76% Shareholding in Giro Commercial Bank In 2005". Accessmylibrary.com. 8 October 2005. Retrieved 21 December 2010.

18. Jump up ̂  http://www.thehindu.com/business/five-associate-banks-to-merge-with-sbi/article8612665.ece

19. Jump up ̂  http://www.livemint.com/Industry/50cZxIsB9vMOJKae2UGl0M/SBI-units-discussed-consolidation-with-parent-bank-unions.html

20. Jump up ̂  "SBI merges with 5 associates: New entity set to enter world’s top 50 banks list". Mumbai: Financial Express. 16 June 2016. Retrieved 16 June 2016.

21. Jump up ̂  http://deshgujarat.com/2014/02/19/sbi-logo-was-inspired-by-kankaria-lake/22. Jump up ̂  http://www.thehindubusinessline.com/money-and-banking/from-banyan-tree-to-

keyhole-nid-designed-the-new-iconic-logo-for-sbi/article8741957.ece?homepage=true23. Jump up ̂  "Shareholding Pattern as on 30 June 2013". MoneyControl.com. Retrieved 10

October2013.24. Jump up ̂  "State Bank of India". BSEindia.com. Retrieved 11 October 2013.25. Jump up ̂  "Scripwise Weightages in S&P BSE SENSEX". BSE India. Retrieved 11 October 2013.26. Jump up ̂  "State Bank of India". NSE India. Retrieved 11 October 2013.27. Jump up ̂  "Download List of CNX Nifty stocks (.csv)". NSE India. Retrieved 11 October 2013.28. Jump up ̂  "SBID State Bank of India GDR (Each Rep 2 SHS INR10)". London Stock Exchange.

11 Oct 1996. Retrieved 11 October 2013.

29. Jump up ̂  "The top five banks in India". thebanker.com. 10 April 2014. Retrieved 11 April 2014.30. Jump up ̂  Kneale, Klaus (6 May 2009). "World's Most Reputable Companies: The

Rankings".Forbes. Retrieved 20 August 2010.31. Jump up ̂  "Brand Mahatma lags behind Sachin, Aamir: Study". India Today. 28 January 2011.

Retrieved 10 October 2013.32. Jump up ̂  "The Economic Times".33. Jump up ̂  "Brand Trust Report 2014".34. Jump up ̂  "Competitors of SBI in India - Equitymaster".

External links[edit]

Wikimedia Commons has

media related to State Bank

of India.

Official website News about State Bank of India at The Times of India Business data for State Bank of India: Google Finance Hoover's

State Bank of India  at Reuters State Bank of India  at Bombay Stock Exchange State Bank of India  at National Stock Exchange of India

[show]

v

t

e

Central public sector companies of India

[show]

v

t

e

Banking in India

[show]

v

t

e

BSE SENSEX companies of India

[show]

v

t

e

CNX Nifty companies of India

[show]

v

t

e

State Bank of Asia

Categories: 

Government-owned banks of India Companies based in Mumbai Economy of Mumbai State Bank of India Companies established in 1955 Banks of India Companies nationalised by the Government of India BSE SENSEX CNX Nifty Government-owned companies of India Multinational companies headquartered in India

Navigation menu Not logged in

Talk

Contributions

Create account

Log in

Article Talk Read Edit View history

Main page Contents

Go

Featured content Current events Random article Donate to Wikipedia Wikipedia store

Interaction

Help About Wikipedia Community portal Recent changes Contact page

Tools

What links here Related changes Upload file Special pages Permanent link Page information Wikidata item Cite this page

Print/export

Create a book Download as PDF Printable version

In other projects

Wikimedia Commons Languages

বাংলা

Bân-lâm-gú Deutsch Español فارسی Français हि�न्दी Bahasa Indonesia עברית ಕನ್ನಡ മലയാളം मराठी Nederlands नेपाली 日本語 Simple English Suomi தமிழ் తెలుగు

中文 Edit links

This page was last modified on 21 June 2016, at 15:30.

Text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. By using this

site, you agree to the Terms of Use and Privacy Policy. Wikipedia® is a registered trademark of the Wikimedia

Foundation, Inc., a non-profit organization.

Privacy policy

About Wikipedia

Disclaimers

Contact Wikipedia

Developers

Cookie statement

Mobile view