1.banking introduction
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BANKING SYSTEM
History of Banking in India.
Nationalization of Banks in India.
Scheduled Commercial Banks in India.
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History of Banking in India
Without a sound and effective Banking System In
India. It can not have healthy economy. For thepast three decades Indias banking system has
Several outstanding achievements to its credits.
The most striking is its extensive reach. Indian
Banking System has reached even to the remotecorners of the country.
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Phase - I
General Bank of India setup in 1786.
Bank of Bengal (std by East India Co.) setup in 1809.
Bank of Bombay (std by East India Co.) setup in 1840.
Bank of Madras (std by East India Co.) setup in 1809.
These banks are known as presidency banks.
Amalgamated in 1920 and Imperial Bank of India was
established which started as private shareholders
banks, mostly European shareholders.
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Phase I (Continued)
In 1885 Allahabad Bank was established.
In 1894 Punjab National Bank Ltd was established
Exclusively by Indians.
Between 1906 1913 Bank of India, Central Bank of
India, Bank of Baroda, Cenara Bank, Indian Bank and
Bank of Mysore were setup. In 1935 reserve Bank of India came up.
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Phase I (Continued)
There were approx 1100 banks, Mostly small.
To streamline the functioning & activities of commercialBanks, the Government of India came up with Banking
Companies Act 1949 which was later changed to
Banking Regulation Act 1949.
RBI was vested with extensive powers for thesupervision of banking in India as the Central Bank
Authority.
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Phase II
Government took major steps in Indian Banking sector
reforms after Independence.
In 1955 Imperial Bank of India was nationalised.
SBI 1ST JUL 1955 was formed to act as a principal agent
of RBI.
Seven banks forming subsidiary of State Bank of India
was nationalised in 1960.
In 1961 Insurance cover extended to deposits.
On 19th July 1969 major process of nationalisation was
carried out. Due to the efforts of the then Prime Minister,
14 major Commercial Banks in the country were
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Phase II (Continued)
Second Phase of the nationalisation in 1980 seven
more banks were nationalised. 1971 Creation of Credit Guarantee Corporation.
1975 Creation of regional rural banks give public the
implicit faith and immense confidence about
sustainability of these institutions. The branches of public sector banks rose by 800%
DEeposit and advances took a huge jump by 11,000%.
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Phase III (Continued)
The Financial system in India has shown a great deal of
resilience. It is sheltered from any crisis triggered by anexternal macroeconomics shocks as other East Asian
Countries Suffered. This is due to a
Flexible exchange rate regime.
The foreign reserves are high. The capital account is not yet fully convertible.
Banks and their customers have a limited foreign
exposure.
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Scheduled Commercial BanksIn India
The Commercial banking structure in India consist of
Scheduled Commercial Banks in India. Unscheduled Commercial Banks in India.
Scheduled Commercial Banks in India constitute those
Banks which have been included in the second scheduleof RBI act 1934. Only hose banks which satisfy the
criteria laid down UIS 45 (6)(a) of the act are included in
the schedule.
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Scheduled Commercial BanksIn India (Continued)
Non scheduled Bank in India in India means banking
co. as defined in clause (c) of Section 5 of the B R Act1949. Which is not a scheduled bank.
List of Scheduled banks
(Public Sectors)
(Private Sectors) (Foreign Banks)
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Banks in India
Public Sector Banks Private Sector Banks
Co-operative Banks
Regional Banks
Foreign Banks
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Banking Services
Bank Accounts Plastic Money
Loans
Money Transfer
Visa Money Transfer
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Financial institution in India
Central Bank
Commercial Banks Credit Rating Agencies
Credit Reporting and Debt collection
Financial Authorities CBDT
CBEC
RBI
SEBI
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Financial institution in India(Continued)
Insurance Companies
GIC LIC
New India Assurance Co.
United India Assurance Co.
Merchant Banks
Mutual Funds
Venture Capitalists
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Financial institution in India(Continued)
Specialized Financial Institutions
ECGCEXIM
GIC
ICICI
IDBI
IFCI
UTI
IIBI
IDFC
NABARD
NSICNBFC
NEDFC
RTEC
SIDBI
SFCSIDC
TFCI
NHB
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Function of a Bank
Transaction Services
Intermediation
-Channalising the savings of surplus sectors to deficit sectors- Brokerage and asset transformation
Transformation Services
- Liability, asset and size transformation- Maturity Transformation
- Risk transformation Payment and settlement system
Real Time Gross Settlement (RTGS)
OtherFinancial Services
- Depository services-PMS-Non discretionary services viz. Advisory services, Transaction
support and Custodial services-
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Challenges and Trend in Banking
Technological revolution
Disintermediation and securitization
Service proliferation
Rising competition
Deregulation
Rising funding costs and shrinking spreads
Consolidation and geographic expansion
Globalization of banking
Increased risk of failure and the weakness of governmentdeposit insurance system
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FIs
Money market intuitions Capital market intuitions
Caters to the notions of the savers
Of high liquidity and safety along
with Profitability
Provides WC to trade and industry
In the form of loans and advances
Reservoir of short- term funds
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FIs
Money market intuitions Capital market institutions
Medium & long term financial trends
Investing Institutions Development Banks
Garner the savings of people provides Capitalenterprise and KNOW- HOW to
business Enterprises
By offering their own shares and To foster the Industrial
stocks provides Long term funds in Growth
the form of direct investment in
securities and underwriting capitalissues of business Enterprises
These include merchant banks
investment companies, Mutual
Funds & insurance companies
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Deregulation measures-Freeing up the direct controls over
ownership
Liberalizing interest rates and credit allocation
Deregulation of foreign exchange transaction controls
Freeing up the entry of new firms
Expanding and broadening the base of banking system,both
at national and international level Developed NBFIs,Securities markets and Money markets to
mobilize and allocate savings
In the post liberalization era banking and
finance sector is witnessing a completemetamorphosis-
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Narrow Banking V/S Universal Banking
Benefits of Narrow banking- 100% reserve banking
Locks bank assets in high-quality instruments thereby minimizing
liquidity and credit risk
Prohibited from supplying risky loans would collateralize deposits
with high quality assets
Payment-system access restricted payments would be fullysecured
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Universal Banking
One-stop financial supermarket offering broad
range of services It denotes combination of banking, insurance
and investment activities
ICICIs decision to turn itself into a universal
bank ushered a new era in the bankingscenario.
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CONTD-
Volume of on-line business transactions is
increasing at exponential rate
Internet revolutions-most dramatic impact on
financial services and banking industry.Banks with
large physical branch network will gradually lose
their competitive edge.
Traditional businesses forced to innovate and re-
think the way they conduct business