India Banking Industry

Click here to load reader

  • date post

  • Category


  • view

  • download


Embed Size (px)

Transcript of India Banking Industry

  • 8/11/2019 India Banking Industry



  • 8/11/2019 India Banking Industry







    1 Introduction: Banks 1

    2 History of Banking 2

    3 Origin and History of Banking 3

    4 Reserve Bank of India 4

    5 Functions of RBI 5

    6 Structure of Banking Industry 7

    7 Structure of Banking 8

    8 Types of Banks 9

    9 Retail Banking 23

    10 Corporate Banking 30

    11 Case Study : State Bank of India 36

    12 Bibliography 49

  • 8/11/2019 India Banking Industry


    Page | 1


    What is bank?

    An organization, usually a corporation, chartered by a state or federal government,

    which does most or all of the following: receives demand deposits and time deposits,

    honors instruments drawn on them, andpaysinterest on them;discountsnotes,makes

    loans,andinvests in securities; collects checks, drafts, and notes; certifies depositor's

    checks; and issues drafts and cashier's checks.

    Origin of word bank

    The word bank is derived from the Italian word banco signifying a bench,which

    was erected in the market-place, where it was customary to exchange money.the

    Lombard jews were the first to practice this exchange business, the first bench having

    been established in Italy A.D.808.the Lombard were a German people of suevic

    origin, though not humorous, played. a distinguished part in the early history of


    such as gold, in the form of easy to carry compressed plates. Temples and Palaces The

    first banks were probably the religious temples of ancient world and were probably

    established in third millennium B.C. Banks probably predated the invention of money.

    Deposits initially consisted of grain & later other goods including cattle, agricultural

    implements and eventually precious metals were the safest palaces to store gold as

    they were constantly attended and well built.

    As sacred places, temples presented an extra determent to would be thieves. There

    are extent records of loans from the 18th century B.C. in Babylon that were made

    temple priests/monks to merchants.

    The oldest bank still in existence is monte dei paschi di siena, head quarters in siena,

    Italy which has been operating continuously since 1472.
  • 8/11/2019 India Banking Industry


    Page | 2

    Ch.2 History of Banking in the World

    Banking in the modern sense of the word can be traced back to medieval and early

    Renaissance Italy, to the rich cities in the north like Florence , Venice and Geona. The

    Bardy & Peruzzi families dominated banking in the 14th century Florence,

    establishing branches in many other parts of Europe. Perhaps the most famous Italian

    bank was the Medici bank, set up in Geovanni Medici in 1397. The earliest state

    known deposit bank, Banko di san Giorgio (Bank of St. george)was founded in 1407

    at Geona, Italy.

    Banks can be traced back to ancient times even before money when temples were

    used to store commodities. During the Third century A.D., banks in Persia and other

    territories in the Persian. Sassanid Empire issued letter of credit known as akks.

    Muslim traders are known to have used the cheque or akk system since the time of

    Harun al-Rashid (9th century) of the Abbasid Cali Phate.

    In the 9th century t, a muslim businessman could cash an early form of the cheques

    in China dracon on sources in Baghdad. A tradition that was significantly

    strengthened in the 13th & 14th century, during the Mangol empire. Fragments found

    in Cairo Geniza indicate that the 12th century cheques remarkably similar to our own

    were in use, only smaller to save costs on the paper. They contain a sum to be paid

    and then the order may so and so pay the bearer such and such an amount. The date

    and the name of the issue are also apparent.

  • 8/11/2019 India Banking Industry


    Page | 3

    Ch.3 Origin and History of Banking In India

    Banking in India originated in the 18th century, the 1st bank were the general bank of

    India which started in 1786, and The Bank of Hinduastan, both of which are now

    defuct. The oldest bank in existence in India is The State Bank of India, which was

    originated in The Bank of Calcutta in June 1806, which almost immediately became

    the bank of Bengal. This was one of the Three presidency banks, the other two being

    The Bank of Bombay and The Bank of Madras, all three of which were established

    under charters from the British East India Co. For many years the presidency banks

    aeted as quasi-central banks, as did their successors. The three banks merged in 1921

    to form Imperial Bank of India which upon Indias independance become the State

    Bank of India.

    The Reserve Bank which is the Central Bank was created in 1935 by passing Reserve

    Bank of India Act 1934. In the wake of the Swadeshi Movement, a number of banks

    with Indian management were established in the country namely, Punjab National

    Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bank of Baroda

    Ltd, the Central Bank of India Ltd. On July 19, 1969, 14 major banks of the country

    were nationalized and in 15th April 1980 six more commercial private sector bankswere also taken over by the government.

    The banking in India is highly fragmented with 30 banking units contributing to

    almost 50% of deposits and 60% of advances. Indian nationalized banks (banks

    owned by the government) continue to be the major lenders in the economy due to

    their sheer size and penetrative networks which assures them high deposit

    mobilization. The Indian banking can be broadly categorized into nationalized,

    private banks and specialized banking institutions.

  • 8/11/2019 India Banking Industry


    Page | 4

    Ch.4 Central Bank RBI

    The origin of Reserve Bank can be traced to 1926 when the royal commission of

    Indian currency and finance- also known as the Hilton young commission-

    recommended the credition of central bank to separate the control of currency and

    credit from the government and to augment the banking facility throughout the

    country. RBI, act of 1934 established the Reserve bank as the banker to to the central

    government and set in motion a sense of action aulminating in the start of operations

    in 1935. Since then the Reserve Banks role and functions have undergone numerous

    changes as the nature of the Indian economy has changed. Todays RBI bears some

    resemblance to the original institution, although our mission has expanded, broadened

    and increasingly globalised economy.


    The Preamble of the Reserve Bank of India describes the basic functions of the

    Reserve Bank as:

    " regulate the issue of Bank Notes and keeping of reserves with a view to securing

    monetary stability in India and generally to operate the currency and credit system of

    the country to its advantage."

  • 8/11/2019 India Banking Industry


    Page | 5


    As the central bank of the country, the Reserve Bank of India performs both

    the traditional functions of a central bank and a variety of developmental and

    promotional functions,. The Reserve Bank of India Act, 1934, confers upon it powers

    to act as note-issuing authority. Bankers bank and bankers to the Government.

    Reserve Bank as Note-issuing Authority

    As required by Section 38 of the Reserve Bank of India Act, Government puts into

    circulation one-rupee coins and notes through Reserve Bank only. The Reserve Bank

    has the sole right to issue bank notes in India. The notes issued by Reserve Bank of

    India are unlimited legal tender. The issue of notes and the general banking business

    of the Bank are undertaken by two separate department of the Bank. The issue

    department is responsible for the issue of new notes. The business of banking is

    undertaken by the Banking Department which holds stock of currency with itself.

    The assets of the issue Department against which bank notes are issued consist of the

    following, namely:

    (a)Gold coins and bullion,

    (b)Foreign securities,

    (c)Rupee coins,

    (d)Government of India rupee securities, and

    (e)The bills of exchanges and promissory notes payable in India, which are eligible

    for purchase by the bank.

  • 8/11/2019 India Banking Industry


    Page | 6

    Currency Chest

    The Reserve Bank has made adequate administrative arrangements for undertaking

    the functions of distribution of currency notes and coins. The issue department has

    opened its offices in 10 leading cities for this purpose. Currency chest are receptacles

    (i.e., boxes and containers) in which stock of new or reissuable notes are stored along

    with rupee coins

    Reserve Bank as Banker to Government

    The Reserve Bank of Indi