A corporation empowered to deal with cash, domestic and foreign, and to receive the deposits of money and to loan those monies to third-parties.

There are evidence of the existence of banking system in 2000B.C. but the foundation of modern banking was laid in 17cenutry.

First bank was established isBank of Holland -1608Bank of Hambury (Germany) in 1619 Bank of England in 1694.

First modern bank-1688, Madras (Agency House) by Britishers

Bank of Hindustan- 1770, Calcutta

General bank of india-1786

Three Presidency banks- Bank of Calcutta (1806), Bank of

Bombay (1840), Bank of Madras(1843)

Other banks- Allahabad bank (1865), PNB (1894), BOI (1906),

Indian Bank (1907), BoB (1909), CBI (1911).

Indian Banking - Significant events-1

In 1921 the three Presidency banks were merged and the Imperial Bank of India was created.

During the period 1900 to 1925 many banks failed, and the Government appointed in 1929 a Central Banking Enquiry Committee to trace the reasons for the failure of banks.

The Reserve Bank of India Act was passed in 1934 and the RBI came into existence in 1935 and RBI was nationalised in 1949

In 1955 State Bank of India became the successor to the Imperial Bank of India ,under the State Bank of India Act,1955.

Indian Banking -Significant events-2

In 1959 State Bank of India (Subsidiary Banks) Act was passed to enable SBI to take over State Associated banks as SBI’s subsidiaries

In 1969 the Government of India nationalised 14 major commercial banks having deposits of Rs.50 crore or more

In 1975 Regional Rural Banks were established under RRB Act 1976.

In 1980 six more commercial banks were nationalised, with a deposit of Rs.200 crore or more

Financial Sector - Regulators

Regulators

Reserve Bank of India(RBI)

Securities ExchangeBoard of India

(SEBI)

Insurance Regulatoryand Development

Authority(IRDA)

BanksCapital Markets/

Mutual FundsInsurance Companies

LEGAL FRAMEWORK

RBI Act, 1934Banking Regulation Act, 1949State Bank of India (SBI) Act, 1955, SBI (Subsidiary Banks) Act, 1959 Banking Companies (Acquisition and

Transfer of Undertakings) Act 1970/1980.

Banking Regulation Act,1949 (BR Act)

BR Act allows RBI (Sec 22) to issue license for banks and govern banks in India. BR Act covers banking companies andcooperative banks, with certain modifications.

BR Act is not applicable toa) primary agricultural credit societiesb) land development banks

Banking Regulation Act,1949 (BR Act)

Banking Regulation Act,1949 (BR Act) gave wide powers to RBI as regards to establishment of new banks/mergers and amalgamation of banks, opening of new branches, etc

BR Act,1949 gave RBI powers to regulate, supervise and develop the banking system in India

Some Provisions of BR Act 1949u/s 10 A (2) – Constitution of the Board of Directors

-- u/s 10 (B) – Appointment of Chairman

-- u/s 36 (A) - Powers to remove managerial and other persons u/s 9 – Holding of immovable property u/s 19 (2) – Holding shares of any company u/s 36 AE –Power to acquire undertakings of banking Co u/s 38 – Winding up of a Banking Co. u/s 44 (1) – Voluntary winding up u/s 44 A – Voluntary amalgamation of banking co. u/s 45 – Compulsory amalgamation

Reserve Bank of India Act 1934 (RBI Act)

- RBI Act was enacted to constitute the Reserve Bank of India

- RBI Act deals with the constitution, powers and functions of RBI

- RBI Act deals with: incorporation, capital ,management and business of banks, central banking functions

- financial supervision of banks and financial institutions- management of forex/reserves control functions - bank rate, audit, accounts penalties' for violation

SRFAESI Act,2002- Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act (SRFAESI) was enacted in 2002

It empowers Banks/Financial Institutions to recover their non-performing assets without the intervention of the Court.

The provisions of this Act are applicable only for NPA loans with outstanding above Rs.1.00 lac.

NPA loan accounts where the amount is less than 20% of the principal and interest are not eligible to be dealt with under this Act.

SOME OTHER Acts Public Debt Act1944, govern Govt, debt market

Securities Contract(Regulation) Act 1956, Regulates Govt securities market.

Indian Coinage Act 1906 , governs currency and Coins in India

Foreign Exchange Management Act 1999, governs trade and foreign exchange Market

Payment and Settlement Systems Act 2007 Provides for regulation and supervision of

payment system in India

Companies Act 1956, governs bank as Companies

Banking Companies (Acquisition and Transfer of Undertakings) Act 1970/1980, Relates

to Nationalisation of Banks

Bankers Book Evidence Act

Banking Society Act

Negotiable Instrument Act1881 are some of the Acts governs Banking system in India

BANKING VISION 2020

- to evolve into a strong, sound and globally competitive

financial system

to provide integrated services to customers from all

segments

to leverage on technology and human resources,

adopting the best accounting and ethical practices and

fulfilling corporate and social responsibilities towards

all stakeholders.

TARGET(2020)

Ranking- 11th to 4th among 207 countries given in the

World Development Report in terms of (GDP).

FDI-to contribute 35% (21% now) in capital formation

International trade-below 1%(present) to 6%

Contribution of GDP- 15% (present) to 35%

Annual growth(GDP)- 8.5% to 9%

Urbanization- 30% to 40%

SME- Major player of the economy