meaning definition and functions of banking

Workshop on Modern Banking

B.V.Raghunandan,

Faculty of Commerce,

SVS College, Bantwal.

Kavery College,

Virajpet

08-03-2013

Meaning of BankingInvestorWords.com defines bank as,

“an organisation, which does most or all of the following: receives demand deposits and time deposits, pays interest on them, and honours instruments drawn on them, discounts notes, makes loans, and invests in securities; collects cheques, drafts and notes; certifies depositors’ cheques; and issues drafts”

Chapter I:Introduction

Functions &

Characteristics

1)Accepting Deposits

2)Lending or Investment

3)Nature of Repayment

4)Mode of Withdrawal

5)Joint Stock Company

6)License from RBI

Significance of Banks

Savings Mobilisation

Remittance of Funds

Development of Bill Market

Well Developed Money market

Development of Capital Market

Public Finance

Financing the Nation

Risk Free Investment

Corporate Services

Social Banking

Evolution of Banking in India

Presidency Banks: Bank of Bengal in 1809,Bank of Bombay in 1840 & Bank of Madras in 1843Imperial Bank of India -1921Reserve Bank of India-1935State bank of India-1955

Nationalisation of 14 Banks-1969Second Dose of Nationalisation –1980Narasimham Committee Reforms-1990sICICI Merger- 2003

Composition of Indian Banking SystemReserve Bank of India

Commercial Banks

Development Banks

Regional Rural Banks

Co-operative Banks

NABARD

Land Development Banks

Exim Bank

Reserve Bank of IndiaEstablished in 1935

Central Board of Directors with 20 members

1local Board for each of the four regions

Traditional central banking functions

Regulatory functions

Promotional functions

Commercial BanksPublic Sector Banks: 1+7+14+6=28

Private Sector Banks: Indian,foreign & New Generation Banks

Scheduled & Non-Scheduled banks

Development BanksIFCI Ltd in 1948

ICICI Ltd in 1955

18 SFCs

Industrial Investment Bank of India (IRCI in 1971 and reincorporated in 1997

IDBI in 1964

Regional Rural Banks

Product of 20 point programme of the govt.(1975)

Scheduled Banks & Non-Scheduled Banks

Treated as cooperative societies

Sponsored by a public sector bank

196 RRBs covering 451 districts spread over 23 states having 14,552 branches

Area Restriction

Functions of RRBs

Accepting Deposits

Lending & Investment: CRR 3%-small & marginal farmers, SHG, AgriCo-ops, small entrepreneurs, small traders and small industries

MicroFinance

Authorised Dealers in Foreign Exchange

Co-operative BanksThree Tier Structure

Different Economic Groups

Most of the Functions of Commercial Banks

NABARD

Set-up in 1982Took over ARCRefinanceInspection of RRBsRouting Branch Expansion applications of RRBsAsscn with World Bank & others

Linking SHGs and NGOs

Kisan Credit Card Scheme in collab with RBI,Comm. Banks, Coop Banks

Micro-Finance Initiative

Land Development BanksLong-term finance to agriculture

Co-operative institutions

Mortgage is created on the land

50% of the market value of the land given as loan

Severe criticisms

EXIM BankProviding Loans & Advances

Export Facilitation

Non-Funded Activities

Financing Capital Equipments

Promoting Joint Ventures

Merchant Banking

Marketing Facilitation

Factoring and Farfaiting Services

Part Financing Consultants

Providing Venture Capital

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