AN OVERVIEW OF THE BANKING SECTOR- GROWTH AND

STRUCTURE

PRESENTED BY: PRIYANKA JAIN

WHAT IS BANKING ?

Banking Regulation Act of India, 1949 defines Banking as “accepting, for the purpose of lending or of investment of deposits of money from the public, repayable on demand or otherwise or withdrawable by cheque, draft order or otherwise.” The Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949, govern the banking operations in India.

DEFINE A BANK :

In simple words, we can say that Bank is a financial institution that undertakes the banking activity i.e. it accepts deposits and then lends the same to earn certain profit.

Now bank offers various services: Issuance of debit and credit cards. Providing safe custody of valuable items. Lockers. ATM Services. Online transfer of funds across the world. 

WHICH ARE THE OLDEST BANKS IN INDIA?

  In 1839, some Indian merchants in Calcutta established

India's first bank known as "Union Bank", but it could not survive for long and failed in 1848 due to economic crisis of 1848-49.  Similarly, in 1863, "Bank of Upper India" was  formed but it failed in 1913. 

  In 1865, "Allahabad Bank" was established as a joint

stock bank.  This bank has survived till date and is now considered as the oldest surviving bank in India.  

  

STRUCTURE OF BANKS IN INDIA

RESERVE BANK OF INDIA (RBI) The RBI is the supreme monetary and banking authority

in the country and has the responsibility to control the banking system in the country. It keeps the reserves of all scheduled banks and hence is known as the “Reserve Bank”.

The Reserve Bank of India (RBI) is the central bank of India, and was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. Since its inception, it has been headquartered in Mumbai. Though originally privately owned, RBI has been fully owned by the Government of India since nationalization in 1949.

COMMERCIAL BANK:

Commercial banks are those financial institutions which accept deposits from public repayable on demand and lend them for short periods.

COOPERATIVE BANK:

Cooperative banks are governed by the cooperative societies act of 1904. Cooperative banks are private sector banks. Cooperative banks usually cater to the credit needs of agriculturists.

Cooperative banks offer a slightly higher rate of interest to their depositors than commercial banks.

DEVELOPMENT BANKS: A development bank may be defined as a financial

institution concerned with providing all types of financial assistance to business units in the form of loans, underwriting, investment and guarantee operations and promotional activities-economic development in general and industrial development in particular

A development bank is basically a term lending institution. It is a multipurpose financial institution with a broad development outlook.

The industrial finance corporation of India, the first development bank was established in 1948. Subsequently many other institutions were set-up. Ex. IDBI, IFCI, SIDBI etc.

FUNCTIONS OF DEVELOPMENT BANKS Fostering industrial growth Providing Long term assistant Balanced development Providing Promotional services Infrastructure building Entrepreneur Development Fulfilling Socio economic objectives

GROWTH OF INDIAN BANKING SECTOR:

INDIAN BANKING SECTOR CREDIT GROWTH HAS GROWN AT A HEALTHY PACE

• Total credit extended went up to US$ 1,089 billion by FY15

• Credit to non-food industries increased 9.75 per cent to US$   1,073.4 billion in FY15, from the previous financial year

• Demand has grown for both corporate and retail loans

MARKET SIZE:

The Indian banking system consists of 26 public sector banks, 25 private sector banks, 43 foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative banks, in addition to cooperative credit institutions. Public-sector banks control nearly 80 percent of the market, thereby leaving comparatively much smaller shares for its private peers.

As of November 11, 2015, 192.1 million accounts had been opened under Pradhan Mantri Jan Dhan Yojna (PMJDY) and 165.1 million RuPay debit cards were issued. These new accounts have mustered deposits worth Rs 26,819 crore (US$ 4 billion).

INVESTMENTS/DEVELOPMENTS: The Reserve Bank of India (RBI) has granted in-principle licenses

to 10 applicants to open small finance banks, which will help expanding access to financial services in rural and semi-urban areas.

IDFC Bank has become the latest new bank to start operations with 23 branches, including 15 branches in rural areas of Madhya Pradesh.

The RBI has given in-principle approval to 11 applicants to establish payment banks. These banks can accept deposits and remittances, but are not allowed to extend any loans.

The Bank of Tokyo-Mitsubishi (BTMU), a Japanese financial services group, aims to double its branch count in India to 10 over the next three years and also target a 10 per cent credit growth during FY16.State Bank of India has tied up with e-commerce portal Snap deal and payment gateway PayPal to finance MSME businesses. Etc.

GOVERNMENT INITIATIVES

The Government of India is looking to set up a special fund, as a part of National Investment and Infrastructure Fund (NIIF), to deal with stressed assets of banks.

The Reserve Bank of India (RBI), the Department of Industrial Policy & Promotion (DIPP) and the Finance Ministry are planning to raise the Foreign Direct Investment (FDI) limit in private banks sector to 100 per cent from 74 percent.

Government of India aims to extend insurance, pension and credit facilities to those excluded from these benefits under the Pradhan Mantri Jan Dhan Yojana (PMJDY)etc.

NON PERFORMING ASSETS: The gross non-performing asset (GNPA) ratio inching to

4.45 per cent as on March 15 this year, as compared to 4.1 per cent in March 2014, according to the latest data released by the Reserve Bank of India (RBI).

CONCLUSION:

The banking sector is growing continuously by laying greater emphasis on providing improved services to their clients and also upgrading their technology infrastructure, (mobile banking , internet banking , digitalization) in order to enhance the customer’s overall experience as well as give banks a competitive edge.