2. indian banking system

7/31/2019 2. Indian Banking System

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During the British rule, the agency houses carried on the bankingbusiness.

The Hindustan Bank was the first bank to be established in 1779 andlater the General Bank of India was established in 1786.In the first half of the 19 th century the East India Company establishedthree banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 andthe Bank of Madras in 1843, which were known as Presidency Banks.

These three banks were amalgamated in 1920 and a new bank, theImperial Bank of India was established on 27 th January 1921. With the passing of the State Bank of India Act in 1955 the undertakingof the Imperial Bank of India was taken over by the newly constitutedState Bank of India.

The Reserve Bank, which acts as the Central Bank was created in 1935 by passing of The Reserve Bank of India Act 1934.The Swadeshi movement gave a fillip to established around this time. By 1913, there were 41 Indian Banks in the field namely, The Punjab NationalBank Ltd., Bank of India Ltd., Canara Bank Ltd., Indian Bank Ltd., the

Bank of Baroda Ltd., the Central Bank of India Ltd. etc.

Indian Banking System


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Indian Banking Structure : At present the banking system can be classified into followingcategories : Public Sector Banks

State Bank of India and its 7 associate banks called the State BankGroup.

Twenty nationalized banks (now 19)Regional Rural Banks sponsored by public sector banks

Private Sector BanksOld Generation Private banksNew Generation Private banks

. Foreign banks in India

Foreign Banks have been operating in the country for many years in thepast. Main among them are :Standard Chartered BankNational & Grindlays BankHSBC

CITI Bank


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Indian Banking Structure contd. : Co-operative Sector Banks

Central co-operative BanksState co-operative banksPrimary Agricultural Credit SocietiesLand Development Banks

Urban co-operative Banks Development Banks

SIDBINABARD

EXIM BankNational Housing Bank


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Narasimhan Committee Report :

In August 1991, Govt. of India appointed a committee to review theFinancial System under the chairmanship of M. Narasimham, FormerGovernor of RBI

The Committee made various recommendations for Financial Sectorreforms.

The important recommendations relate to the following areas :Deregulation of Interests RatesStipulation of minimum Capital Adequacy Ratio at 8% by March

1996Uniform Accounting practices in regard to income recognition, asset

classification & provisioning for bad / doubtful debts.Imparting transparency to Banks Balance Sheets & making full

disclosures.


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Challenges and Trends in BankingDuring the last decade, five powerful forces have created the

foundation for a dynamic new environment for banks. They are as follows : Deregulation : The removal of government controls from anindustry or sector, to allow for a free and efficient

marketplace. Financial innovation : Financial innovation is thesystematic process of change in instruments, institutions, andoperating policies that determine the structure of thefinancial system. Rising Competition Rising Funding Cost and Shrinking Spreads Increased Risk of Failure & Risk Management Practices


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Challenges and Trends in Banking (contd.) Globalization : Globalization is the gradual evolution of markets and institutions such that geographical boundariesdo not restrict financial transactions. Technological Revolution Electronic Banking Consolidation - Merger & Acquisition

2. indian banking system

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