banking systems in india[1]

8/6/2019 Banking Systems in India[1]

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BANKING SYSTEMS IN

INDIA

S.P.Mohanty

Assistant General Manager

Reserve Bank of India

Bhubaneswar


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Evolution of Banks in India

Financial system refers to: The system of

borrowing and lending of funds or the

demand for and the supply of funds of all

individuals, institutions, companies and ofthe Government.

Classification:

Industrial Finance

Agricultural Finance

Development Finance

Government Finance


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New finances

Finance to services sector

Housing financeConsumer finance

Other retail finances


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History of banking

Existed in India few centuries before Chriest-Lending moneys to traders/ placed funds with kingsfor financing wars-unsecured loans without anycharge creation.

Manus Sanhita-Rules & rates regarding deposits

and advances were laid down12th century-Hundis & Bills of exchange came intouse

Mogul Era-Indigenous bankers lent money andfinanced for domestic and international trade.

Money (metallic money) changing across theboarder

Indigenous bankers could not develop to anyconsiderable extent the system of obtaining depositsof money from the public and lending there from.


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History of banking contd

The Indian financial system & Banking system-contribution of British Government

1770-Bank of Hindustan by one British Agency

1809-Bank of Bengal-Govt. charter & Govt.

share holding.

1840-Bank of Bombay

1843-Bank of Madras

These three banks were known as Presidencybanks & also given power to issue bank notes

1862-Note issuing power were withdrawn


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Mushrooming of banks there after1913-1938- series of bank crises-locking of bankfunds in industries, financing speculative deals, notadhering to principles of sound banking

1934-35-Reserve Bank of India Act- 1934 enacted.

RBI started functioning since April 1, 19351949-Nationalisation of RBI, Banking RegulationsAct- 1949

1955- SBI-nationalisation

1959-Nationalisation of Associate banks

1965-BR Act provisions applicable to Co-op banks

1967-Govt. introduced Social control in bankingindustry


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July 19, 1969-Nationalisation of 14 majorbanks

1975-formation of RRBs

1980-Nationalisation of six more banks1991-92-Banking reforms as part of

financial reforms in India

1994-New private banks were allowed toset up

1998-second banking sector reforms


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Banking

Definition:Section 5(b) of BR Act 1949

defines banking as accepting for the

purpose of lending or investment,

deposits of money from the public,

repayable on demand or otherwise,

and withdrawable by cheque, draft,

order or otherwise.


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Banking structure in India

Reserve Bank of India

CommercialBanks

RRBs Co-op Banks

UCBs SCBs

CCB

PCS

Public Sector BanksPrivate Sector

Banks

Indian

Foreign

Old

New

SBI Group

Nationalised Banks

IDBI Ltd.

SBI

Associate Banks


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Different Acts relating to Banking

Reserve Bank of India Act-1934

Banking Regulations Act-1949

Negotiable Instruments Act-1881

State Bank of India Act-1955State Bank of India (Subsidiary banks) Act-1959

Banking Companies {Acquisition &

Transfer of Undertakings} Act, 1970Banking Companies {Acquisition &Transfer of Undertakings} Act, 1980

Regional Rural Banks Act, 1975


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BALANCE SHEET OF A COMMERCIAL BANK

Capital and Liabilities Assets

1.Capital 1. Cash

2.Reserve Fund & Other Accounts 2. Balances with Other Banks

3.Deposits & Other Accounts 3. Money at Call & Short Notice

4.Borrowings 4.Investments

5.Bills Payable 5.Advances

6.Profit & Loss 6.Premises-depreciation

7.Furniture & Fixtures-Depreciation

8.Other Assets

9.Non-banking assets acquired in

satisfaction of claims

10. Profit & Loss


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Banker-customer relationshp

Debtor-Creditor

Creditor-Debtor

Banker as a trustee-(safe keeping ordeposit certain money for specificpurpose)

Bailee-Bailor relationship (safe

custody)Agent-Principal relationship(remittance, collection of cheques,bills etc.)

Lessor-Lessee safe de osit locker


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Rights of a banker

Bankers lien-Its an implied pledge,

where a banker acquires the right to

sell the goods which came to his

possession in the ordinary course of

banking business as a banker, in

case the debt is not paid.

General lien

Particular or special lien.


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Bankers general lien not applicable

to..

1. Safe custody of articles

2. Items held in lockers

3. Documents/money deposited forspecific purpose

4. Securities/valuables left negligently

5. Immature debts6. Stolen goods


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Right of set off

It is the right to combine the two or moreaccounts of the same person in the samecapacity.

Important considerations

The same name & the same right

Proprietor & individual account can becombined.

Debts due but not future contingent debts

Debt must be certain/ absolute beforeexercising the right to set-off.

No agreement to the contrary

Bankers discretion


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Negotiable instruments-characters

Easily transferable

Can be transferred by mere delivery,

if it is a bearer instrument; byendorsement & delivery if it is an

order one.

Transferee does not get better title

than that of transferor.


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What is negotiation

Where a bill of exchange, promisory

note or cheque is transferred to any

person as to constitute that person

the holder thereof, the instrument is

said to be negotiated.

It is transfer by endorsement and

delivery if payable to order or bydelivery if payable to bearer.


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Characterstics of a cheque

Negotiability

Payability

TripartiteUnconditionality

Monetary nature

Certainty-amount & payeeCan be payable either to order or to

bearer


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Crossing of cheques

General Crossing-Payment through

another bank- through banking

channel

Special crossing-Payment through a

specific bank

Not negotiable crossing

Account payee crossing


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When &Who can cross a cheque?

Uncrossed cheque-can be crossed generally orspecially

Crossed generally- can be crossed specially

When crossed generally / specially-the holder mayadd the words not negotiable.

Crossed specially to a banker, he (the banker) canagain cross it specially to another banker, hisagent for collection.

The drawer has the right to cancel the crossing bywriting the words crossing cancelled pay cash


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QUESTIONS??


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Thank You