8/8/2019 Module 1 Bank and Banking

http://slidepdf.com/reader/full/module-1-bank-and-banking 1/5

History of Banking in India

The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of 

Indian Banking System can be segregated into three distinct phases. They are as mentioned below:

y Early phase from 1786 to 1969 of Indian Banks

y Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

y New phase of Indian Banking System with the advent of Indian Financial & Banking

Sector Reforms after 1991.

In 1865 Allahabad Bank was established and first time exclusively by Indians

Bank and banking

 A bank is an institution, which deals in money. It accepts deposits from the public and creates credit with

a view to lend or invest.

Need and importance of banking or banks

y Mobilization of savings

y Financing industry

y Finance trade

y Development of capital market

y Financing agriculture

y Financing consumer activities

Permissible banking activities

 Activities of bank can be broadly divided into two categories

Principle or primary functions

y Receiving deposit

Demand deposit

Saving deposit

Fixed deposit

y Lending of funds

Loan

Overdraft

Investment of cash credit

Investment of funds on securities

Subsidiary or secondary functions

y Agency services

y General utility services

8/8/2019 Module 1 Bank and Banking

http://slidepdf.com/reader/full/module-1-bank-and-banking 2/5

Types of banks in India

y Commercial banks

y Investment or industrial banks

y Agricultural banks

y Exchange banks

y Savings banks

y Central banks

Role of RBI as a regulator 

Central bank is a special institution which regulates the entire banking structure and monetary stability. It

regulates the note issue. It functions in close co-operation with the government.

Role of RBI as a regulator (Functions)

y Issue of currency notes

y Banker to the government

y Bankers banky Custodian of gold and foreign exchange reserves

y Controller of credit

The Banker and customer 

Relationship between the bank and customer 

General feature of the relation

y Debtors and creditors relationship

y Bailee and Bailor relationship

y Trustee and beneficiary relationship

y Agent and principle relationship

Special feature of the relationship

y Appropriation of payment

y Banker¶s right of set-off 

y Banker¶s obligation to honor his customer¶s cheque

y Banker¶s duty to maintain secrecy of the customer¶s account

y Banker right to charge interest and commission

8/8/2019 Module 1 Bank and Banking

http://slidepdf.com/reader/full/module-1-bank-and-banking 3/5

Banks obligation to customers

y Obligation to honor his customer¶s cheques

y Obligation to maintain the secrecy of the customer¶s account

y

Interest rate related complaints

y Service Charges

y Loan Documents; Return of Securities

y Recovery of Bank Dues

y Credit cards

y ATM (Debit card)

y Cheque Drop Facility

y Cheque Collection

Types of accounts and customers

y Lunatics

y Drunkards

y Undischarged bankrupts

y Minors

y Married women

y Agentsy Executors and administrators

y Partnership

y Joint stock companies

y Local authorities

y Trust account

y Unincorporated bodies

y Joint accounts

Types of Bank accounts

  A) Time Deposits

y Fixed Deposits

y Recurring deposit

B) Demand deposits

y Saving deposits

y Current deposits

8/8/2019 Module 1 Bank and Banking

http://slidepdf.com/reader/full/module-1-bank-and-banking 4/5

 

Principle of bank lending¶s

y Liquidity

y Profitability

y Safety and securityy Purpose

y Social responsibility

y Industrial and geographical diversification

Methods for granting advances

y Cash credit

y Overdraft

y Bill discounting

y Issue of letter of credit

y Loans

Secured advances: form of securities

y Lien

y Pledge

y Mortgage

y Hypothecation

y Banks and technology

Various IT products and services

Core banking (WAN)

Electronic fund transfer  Telebanking

Mobile banking

   Anywhere banking 

International banking services

y NRI Banking

y Foreign Currency Loans

y Finance/Services to Exporters

y Finance/Services to Importers

y Remittances

y Forex & Treasury Servicesy Resident Foreign Currency (Domestic) Deposits

y Correspondent Banking Services

8/8/2019 Module 1 Bank and Banking

http://slidepdf.com/reader/full/module-1-bank-and-banking 5/5