Banking Structure India

8/3/2019 Banking Structure India

http://slidepdf.com/reader/full/banking-structure-india 1/34

Structure of banks



Central bank

Commercial banks:-

PrivateIndian

Foreign

Indian banks- old banks , new banks,

local area banks



Public-

1. SBI group – SBI and its subsidiaries

2. Other nationalized banks



COOPERATIVE BANKS

Agriculture sector

Three tier

State cooperative banks (SCBs)District central cooperative banks (DCCBs)

Primary Agricultural Credit societies(PACs)

Non- Agricultural Sector-Urban cooperative banks



DEVELOPMENT BANKS

Give loans for Agricultural purpose

And also for Non-agricultural purpose



THE DIFFERENCE:-

Functional specialisation-

Principle-

Regulated by-Financial help- by RBI,NABARD, central

government, state government.

-RBI provides contribution to initial capital.Borrowers:-



No tier versus three tier-

It becomes imp.cos’ no direct contact

between the 1 st and the 3 rd tier

Intra- sectoral funds are greater.e.g.

interbank deposits. Competition versus

cooperation.

CRR, SLR requirements

Scheduled versus non-scheduled banks exist

in both.

Supervision-single,versus dual.-acts that

govern them

RBI is lender of last resort and first resort.



Commercial banks:-

Private sector banks-old, new banks and local

area banks

Old – Vysya bank,

First FI after 1991 to get approval to function

as a bank is HDFC.

Also InduSind bank .



Other examples:-

UTI Bank

ICICI Bank

Ratnakar Bank Catholic Syrian Bank

Dhanalakshmi

Centurion Bank



Foreign banks-

RBI new rules, foreign banks can set up local

subsidiary., not necessarily acquire weak

banks.

Example:-BOA, Bank of Ceylone,

ANZ,HSBC,Duetsch Bank, ABN-AMRO



BANKS AWAITING:-

Credit Suisse Group

Royal Bank of Scotland

US-based GE capital



SBI , its subsidiaries

Other nationalised banks.



Cooperative structure:-

Nearly 28 SCBs at a state level



DCCBs

Middle tier in the cooperative banking

structure.

Examples:-Pilbhit ,Tehri,Haridwar DCCBs.



PACs

Acting at the local level



UCBs

UCBs cater to non-agricultural finance.

Examples are Kurla Nagrik Bank,

Abhyudaya Bank.Mainly working capital loans,term loans.

These days, UCBs are giving home loans.

Rs. 1 lakh to individuals, and Rs. 3 lakhsscheduled UCBs.

Can provide finances against the shares,

debentures.

RRB



RRBs:-Cater to agro sector,small and marginal farmers.

Banks choose 1 or 2 districts in a state which isrelatively unbanked area and sponser that RRB.

SBI has 30 RRBs in 13 states and its branches

constitute 16% of the total.

NABARD also sets up RRBs.

Can be established with paid up capital of 25 lakhs

of which 50 % comes through CG, 15% through

SG and the rest 35% through the sponsoring bank.CRR, SLR requirements are the minimum.(3%

and 25 % respectively)



Examples:-

Bijapur Gramin Bank

Surat baruch gramin bank

Faizabad Khetriya Gramin bank.



Problems of cooperative banks:-

Dual Supervision

Deposit base is small and thereforelikely to fall pray to large banks.



The difference….

RBI Commercial Banks



Functions of RBI:-NOTE ISSUE-

All denominations, and CG – coins, one rupeenotes are distributed on behalf of the government.

Issue department and the banking department areseparate , assets and liabilities are separate.

The assets of the issue department:-Gold

Foreign securities

Rupee coins

GOI securities .

It has to keep (since 1957)gold/ foreign securitiesof Rs.200 crs. Of which gold must be Rs. 115 crs.

This is called minimum reserve system.



FOR THIS PURPOSE..

Issue offices- 10 in major cities

Thousands of Currency chests/receptacles in which

stock of new notes and coins is stored.

To get people’s confidence, India has a public

monopoly of note issue.

Hongkong, HSBC is responsible for the note issue.



BANKER’S BANK:-

The scheduled banks can borrow from the ReserveBank of India on the basis of eligible securities or getfinancial accommodation in times of need orstringency.

Since commercial banks can always expect theReserve Bank of India to come to their help in times

of banking crisis the Reserve Bank becomes not onlythe banker's bank but also the lender of the last resort.

BANKER TO THE



BANKER TO THEGOVERNMENT:-

As a banker to the government, the Bank can make

“ways and means advances” to both the central

and state governments.

(ways and means advances :- temporary

advances made in order to bridge the temporary

gap between receipts and payments)

M t it 3 th



Maturity:-3 months

State governments- limits are fixed.

Three types:-

(a) normal or clean advances i.e., advances

without any collateral security;(b) secured advances, i.e., those which are secured

against the pledge of central government

securities; and

(c) special advances, i.e., those granted by the

Bank at its discretion.



Overdraft facility:- in excess of the credit (ways and means advances) limits granted by the RBI.

In other words, overdrafts are unauthorised ways

and means advances drawn by the state governmentson the RBI.

Persistently large overdrafts are drawn by the stategovernments which is not a very healthy sign.



FOREIGN EXCHANGE MANAGEMENTAND CONTROL:-

(a) to administer the Foreign Exchange Control;

(b) to choose the exchange rate system and fix or

manage the exchange rate between the rupee and other

currencies;(c) to manage exchange reserves; and

(d) to interact or negotiate with international financial

institutions such as the IMF, World Bank, and AsianDevelopment Bank.



Controller of credit:-

Qualitative (selective credit controls)

Quantitative :

1.CRR2.SLR

3.Bank Rate

Supervisory functions



Supervisory functions

The Reserve Bank Act, 1934,

The Banking Regulation Act, 1949

has given wide powers to RBI relating to :-

licensing and establishments,

branch expansion,

management and methods of working,

amalgamation,

reconstruction,

and liquidation.to carry out periodical inspections

to call for returns and necessary information fromthem.

Promotional functions



Promotional functions :- A unique function done in India.

The Reserve Bank has helped in thesetting up of the following:-

IFCI

SFC

UTI in 1964,

IDBI in 1964,

Agricultural Refinance Corporation of India,Industrial Reconstruction Corporation ofIndia(1972) provide long-term finance to

farmers.

THE BALANCE SHEET OF A



THE BALANCE SHEET OF ABANK:-

LIABILITIES:-

Paid up capital andreserves

Deposits-

fixed,savings,currentand others

Borrowings

Bills payable

Other liabilitiesPer contra items

Profits carried to nextyears account

ASSETS:-

Cash in hand and withbanks

Money at call andshort notice

Investments

Loans ,advances, billsdiscounted andpurchased

Other assets



A SCHEDULED BANK:-

Paid up capital and reserves totaling to

( Rs. 5 Lakhs,) Rs. 100 crs.

Must not be a single owner firm or apartnership and must be a joint stockcompany

Must convince RBI that it is conducting itsaffairs in the interest of the depositors.



So what?

Privileges:- concessional borrwingfacilities from RBI

Others are not entitled to borrowform RBI for normal bankingpurposes , and only in foraccomodation in abnormal

circumstances.

Obli ti



Obligations:-

Submit periodical returns to RBI

subject to SLR requirements

Banking Structure India

Documents

Transcript of Banking Structure India