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1. Course No. FIN-T4-4
Commercial Banking System
Prepared By:
Mr. Mohammed Jasir PV
Asst. Professor
Department of MBA
ICET, Mulavoor
Contact: 9605 693 266

2. 1st Module - Syllabus
Banking:-
Role of banks in business
Structure of commercial banking in India
Public sector and private sector banks - scheduled banks
Foreign banks new generation banks
Functions of commercial banks
Changing scenario in commercial Banking.

3. Bank
A bank is a financial institution licensed to
receive deposits and make loans.
Banks may also provide financial services,
such as wealth management, currency
exchange and safe deposit boxes.

4. The oxford dictionary defines bank as
“an organization offering financial
services, especially loans and safe
keeping of customers money”.
Bank - Definition

5.  Banking has been defined as “Accepting for
the purpose of lending & investment, of deposit
of money from the public, repayable on
demand order or otherwise and withdraw able
by cheque, draft or otherwise.”
Banking – Definition

6.  Simply its the business conducted or services offered by a
bank.
 In general terms, the business activity of accepting and
safeguarding money owned by other individuals and entities,
and then lending out this money in order to earn a profit.
Banking – Definition

7. Banking means transacting business with a
bank; depositing or withdrawing funds or
requesting a loan etc.
Bank is a lawful organization, which accepts
deposits that can be withdrawn on demand.
It also lends money to individuals and
business houses that need it.
Banking Meaning:-

8. History of Banking In India
 Before independence
 After independence
 Nationalization
 Liberalization

9. 1770 – Bank of Hindustan * First bank India ( HO in Kolkata )
1780 – New General Bank
These banks were not profitable
1806 – Bank of Kolkata, later changed the name to Bank of Bangal in 1809
1840 – Bank of Bombay
1843 – Bank of Madrass
1865 – Allahabad Bank (1st Commercial Bank by British)
1881 – Oudh Commercial Bank (1st Commercial Bank of India with limited liability)
1894 – Punjab National Bank (1st Commercial Bank fully operated by Indian)
History of Banking In India

10. 1905 Patrician of Bangal
1906 – Bank of India
1906 – Canara Bank
1907 – Indian Bank
1908 – Bank of Baroda
1911 – Central Bank Of India ( 1st Swadheshi Bank of India) Investment and
Operations are Indian
1914 – 1918 1st World War

11. 1919 – International Money Conference
Took Self Financial Institution decision to financial control
27/01/1921 – IMPERIAL BANK OF INDIA established in Mumbai
Bank of
Bangal
Bank of
Bombay
Bank of
Madrass

12.  Established via RBI Act, 1934
 Started operations in April 1,1935
 HO Kolkata, in 1937 shifted to Mumbai
 Recommended by Hilton Young Commission
 Started as a privately owned banks with no major govt ownership.
 RBI Nationalised on 01/01/1949
 Banking companies act, 1949 was changed to Banking Regulation act,
1949
 Banking Regulation act (Amendment), 1965 gave extensive powers to
RBI as Central Banking authority of India.
Reserve Bank of India

13.  01/07/1955 - Imperial Bank changed name to State Bank of India.
 Under the recommendation of Gorwala Commission
 For financial inclusion
 State Bank of India (SBI) is an Indian multinational, public sector banking
and financial services company.
 It is a government-owned corporation headquartered in Mumbai, Maharashtra
 Largest bank in India with a 23% market share in assets, besides a share of
one-fourth of the total loan and deposits market.
State Bank of India

14.  July 19 1969 – 14 major Banks were nationalised
 On April 15, 1980 another 6 banks were nationalised
 With nationalization of banks, the banking in India shifted from
“Class Banking” to “Mass Banking”
Nationalization of Banks

15. In the early 199s the Govt embarked on a policy of liberalization
and gave licenses to small number of private banks, which came to be
known as New Generation tech-savvy banks like Global Trust Bank, UTI
Bank (Now Axis Bank), ICICI Bank and HDFC Bank
LIBERALIZATION

17. Role Of Banks In
Business
1

18. ▪ It encourages savings habit amongst people and thereby
makes funds available for productive use.
▪ It acts as an intermediary between people having surplus
money and those requiring money for various business
activities.
▪ It facilitates business transactions through receipts and
payments by cheques instead of currency
▪ It provides loans and advances to businessmen for short
term and long-term purposes.
Role Of Banks In Business
Banks provide funds for business as well as personal needs of
individuals. They play a significant role in the economy of a
nation. Let us know about the role of banking.

19. Continued…
▪ It also facilitates import export transactions.
▪ It helps in national development by providing credit to farmers,
small-scale industries and self-employed people as well as to
large business houses which lead to balanced economic
development in the country.
▪ It helps in raising the standard of living of people in general by
providing loans for purchase of consumer durable goods,
houses, automobiles, etc.

20. Other Roles
▪ Issue of banknotes (promissory notes issued by a banker and
pay- able to bearer on demand)
▪ Processing of payments by way of telegraphic transfer, EFTPOS,
internet banking or other means
▪ Issuing bank drafts and bank cheques
▪ Accepting money on term deposit
▪ Lending money by way of overdraft, instalment loan or
otherwise

21. Continued…
▪ Providing documentary and standby letters of credit (trade fi-
nance), guarantees, performance bonds, securities
underwriting commitments and other forms of off-balance
sheet exposures
▪ Safekeeping of documents and other items in safe deposit
boxes
▪ Currency exchange
▪ Acting as a 'financial supermarket' for the sale, distribution or
brokerage, with or without advice, of insurance, unit trusts
and similar financial products.

23. Types Of Banks
2

24. SBI

25. Central Bank - RBI
▪ Central Bank A bank which is entrusted with the functions of guiding
and regulating the banking system of a country is known as its
Central bank.
▪ Such a bank does not deal with the general public.
▪ It acts essentially as Government’s banker, maintain deposit accounts
of all other banks and advances money to other banks, when needed.
▪ The Central Bank provides guidance to other banks whenever they
face any problem. It is therefore known as the banker’s bank.

26. Continued …
▪ The Central Bank maintains record of Government revenue and expenditure
under various heads.
▪ It also advises the Government on monetary and credit policies and decides
on the interest rates for bank deposits and bank loans.
▪ Foreign exchange rates are also determined by the central bank.
▪ Issue of currency notes, regulating their circulation in the country by
different methods.
▪ No other bank than the Central Bank can issue currency.

27. Central Bank
Central bank is a national bank institution. It plays a lot of roles
▪ Bank of issue
▪ The top subject of monetary policy
▪ The bank of banks
▪ Represents the state in monetary area
▪ Insures exchange reserves
▪ Influences exchange rate
▪ Keeps an eye on activities of commercial banks and
subsidiaries of foreign banks.

30. SCHEDULED BANKS
▪ Banks which have been included in the Second Schedule
of Reserve Bank of India Act, 1934. (Only those banks which satisfy
the criteria laid down vide section 42(6)(a) of the said Act.)
▪ Either in the form of Commercial Banks or Co-operative Banks
▪ RBI tightly regulating them and also enjoying some benefits from
RBI
▪ They are eligible for borrow fund from RBI
▪ They can participate in Clearing system

31. SCHEDULED BANKS
For this, they have to satisfy three conditions:
▪ It must have paid-up capital and reserves of an aggregate
value of at least Rs. 5 lakhs.
▪ It is carrying on the business of banking in India.
▪ It must be a corporation or cooperative society and not a
partnership or sole proprietorship firm

32. Non-Scheduled Banks.
▪ Banks not under this Schedule are called Non-Scheduled
Banks.
▪ They have to comply with certain provision of RBI
▪ They are not allowed to borrow fund from RBI except under
ubnormal condition

33. Scheduled Bank
Scheduled Bank
Commercial Bank Cooperative Bank

34. Commercial bank
A commercial bank is a financial institution
which performs the functions of
accepting deposits from the general
public and giving loans for investment
with the aim of earning profit.

35. Commercial Banks
Commercial Banks are banking institutions that accept deposits
and grant short-term loans and advances to their customers.
Commercial banks also give medium-term and long-term loan to
business enterprises.
Now-a-days some of the commercial banks are also providing
housing loan on a long-term basis to individuals.
There are also many other functions of commercial banks, which
are discussed later in this lesson.

36. Types of Commercial
Banks
Public
Sector
Private
Sector
Foreign
Sector
Regional
Rural Bank

37. PUBLIC SECTOR BANKS
▪ Government has a major holding.
▪ At least 51% ownership is vested with the government.
▪ The shares of these banks are listed on stock exchanges.
▪ These are banks where majority stake is held by the Government
of India or Reserve Bank of India.

38. ELIGIBILITY CRITERIA
▪ Should have earned profit during the last 2 years failing which
minimum external rating of
▪ long term instruments not below A-(minus) from accredited credit
rating agencies.
▪ Level of Net NPAs not exceeding 15%.
▪ CRAR as stipulated by RBI from time to time.
▪ Networth above Rs.250 crore.

39. There are a total of 21 PSBs in India.

40. There are a total of 23 PSBs in India.
19+SBI+IDBI and Mahila
1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10.Indian Bank
11.Indian Overseas Bank
12.IDBI Bank
13.Oriental Bank of
Commerce
14.Punjab and Sind
Bank
15.Punjab National Bank
16.State Bank of India
17.Syndicate Bank
18.UCO Bank
19.Union Bank of India
20.United Bank of India
21.Vijaya Bank
22.IDBI
23.Bharatiya Mahila
Bank

41. STATE BANK OF INDIA
▪ Government of India entered in commercial banking when it took
over Imperial Bank of India and converted into State Bank of India on
1 July 1955.
▪ It was first one to make public issue in 1993-94 after which the share
holding of RBI has come down to 68.93%.

42. State Bank Group- previous
▪ State Bank of Hyderabad
▪ State Bank of Patiala
▪ State Bank of Travancore
▪ State Bank of Bikaner & Jaipur
▪ State Bank of Maysore
▪ State Bank of Saurashtra
▪ State Bank of Indore

43. NATIONALIZED BANKS
In 1969, 14 banks with deposit base of Rs. 50 Crores or
more were nationalized. In 1980 6 more banks were
nationalized.
This step brought more than 90% of commercial banking in
the public sector.
The main function of nationalised bank is provide finance for
the housing projects, health facilities and increase the
chance to providinig the products and services to the
people of rural areas
▪ Andhra Bank
▪ Punjab National
Bank
▪ Indian Overseas
Bank
▪ IDBI
▪ Allahabad Bank
▪ Syndicate Bank
▪ UCO Bank
▪ Dena Bank

44. What is the difference between
Nationalized Bank and Public
Sector Bank?
▪ Nationalization is an act of taking an industry or assets into the public
ownership of a national government.
▪ Nationalization refers to private assets being transferred to the public
sector to be operated by or owned by the state.
▪ So there is no difference between a nationalized bank and a public
sector Bank.
▪ The opposite of nationalization is privatization.
▪ The Banks which were earlier in private sector were transferred to the
public Sector by the act of nationalization.

45. ii. Private Sector Bank
 Majority of stake are held by private individuals
 The banks, which came in operation after 1991, with the introduction of
economic reforms and financial sector reforms are called "new private-
sector banks“
 These banks are registered as companies with limited liability.

46. ELIGIBILITY CRITERIA
▪ Should have earned profit during the last 2 years failing which
minimum external rating of
▪ long term instruments not below A-(minus) from accredited credit
rating agencies.
▪ Level of Net NPAs not exceeding 3%.
▪ CRAR as stipulated by RBI from time to time.
▪ Networth above Rs.250 crore.

47. 20 Private Sectors Banks: -
1. Axis Bank
2. Bandhan Bank
3. Catholic Syrian
Bank
4. City Union Bank
5. DCB Bank
6. Dhanlaxmi Bank
7. Federal Bank
8. HDFC Bank
9. ICICI Bank
10.IndusInd Bank
11.IDFC Bank
12.Karnataka Bank
13.Karur Vysya Bank
14.Kotak Mahindra
Bank
15.Lakshmi Vilas Bank
16.Nainital Bank
17.RBL Bank
18.South Indian Bank
19.Tamilnad Mercantile
Bank Limited
20.Yes Bank

48. Private Sectors Banks

49. iii) Foreign Banks:
▪ These banks are registered and have their headquarters in a
foreign country operate their branches in our country.
▪ The number of foreign banks operating in our country has
increased since the financial sector reforms of 1991.

50. Some of the foreign banks operating in our country are Hong
Kong and Shanghai Banking Corporation (HSBC), Citibank,
American Express Bank, Standard & Chartered Bank,
Grindlay’s Bank, etc.

53. iv) REGIONAL RURAL BANKS
Regional Rural Banks (RRBs) are scheduled commercial banks
(Government banks) operating at regional level in different States of
India.
They have been created with a view to serve primarily the rural areas of
India with basic banking and financial services.

54. REGIONAL RURAL BANKS
▪ They were set up on the recommendation of Narasimham Committee
in 1975.
▪ The objective was to provide credit and other facilities to small and
marginal farmers, agricultural labours and artisans.
▪ RRBs are working in all states except GOA and Sikkim.
▪ They are governed by Regional Rural Bank act, 1976
▪ 50% capital is provided by central govt., 15% by state govt., 35% by
sponsoring public sector bank.

55. Features of RRB
▪ The area of RRB is limited to only a region, comprising of some
district of a state
▪ These banks grant loan only to the rural agriculture sector and small
artisans.
▪ The lending rates would be some what lower than the commercial
banks.
▪ These are intended to eliminate money lenders.
▪ These banks are to supplement the effort of cooperative banks.

56. List of Regional Rural banks
(50 +)
▪ Allahabad UP Gramin Bank,
▪ Andhra Pragathi Grameena
Bank
▪ Arunachal Pradesh Rural
Bank,
▪ Bangiya Gramin Vikash
Bank
▪ Baroda Gujarat Gramin
Bank,
▪ Baroda Rajasthan Ksethriya
Gramin Bank,
▪ Baroda UP Gramin Bank,
▪ Bihar Gramin Bank,
▪ Chhattisgarh Rajya Gramin
Bank,
▪ Gramin Bank Of Aryavart,
▪ Gujarat State Agriculture
and Rural Development
Bank Ltd.,
▪ Himachal Pradesh Gramin
Bank,
▪ Jammu And Kashmir
Grameen Bank,
▪ Jharkhand Gramin Bank,
▪ Karnataka Vikas Grameena
Bank
▪ Kashi Gomti Samyut Gramin
Bank,
▪ Kaveri Grameena Bank
▪ Kerala Gramin Bank
▪ Langpi Dehangi Rural Bank

57. Scheduled Bank
Scheduled Bank
Commercial Bank Cooperative Bank

58. Co-operative Banks
▪ People who come together to jointly serve their common interest often
form a co-operative society under the Co-operative Societies Act. When
a co-operative society engages itself in banking business it is called a
Co-operative Bank.
▪ The society has to obtain a licence from the Reserve Bank of India before
starting banking business.
▪ Any co-operative bank as a society is to function under the overall
supervision of the Registrar, Co-operative Societies of the State.

59. COOPERATIVE BANKS
▪ As regards banking business, the society must follow the
guidelines set and issued by the Reserve Bank of India.
▪ Cooperative banking is a small scale banking carried on a no
profit no loss basis for mutual cooperation and help.
▪ Engaged in financing rural and agricultural development.
▪ They are established under the Cooperative Credit Societies Act
of 1904.

60. Feature of cooperative banks
▪ Government sponsored, supported and subsidized financial agencies
in India.
▪ Work on the principle of cooperation, self help and mutual help.
▪ They function on “no profit no loss” basis.
▪ Perform limited banking functions.
▪ Some of them are scheduled banks but most are non- scheduled
banks.
▪ Cooperative banks are financial intermediaries only because a
significant amount of their borrowings is from the RBI, NABARD,
central and state government and cooperative apex institutions.

61. ▪ Should have earned net profit for preceding two years.
▪ Level of Net NPAs equal to or less than 6%.
▪ CRAR as stipulated by RBI from time to time.
▪ Net Owned Fund above Rs.50 crore

62. Types of Co-operative Banks
Types of Co-operative Banks
Primary Credit
Societies
Central Co-
operative Banks
State Co-
operative Banks

63. Primary Credit Societies
▪ Formed at village or town level.
▪ It refers to any cooperative society other than a primary agricultural credit
society.
▪ It is basically an association of members residing in a particular locality.
The members can be borrowers or non-borrowers.
▪ The funds of this society are derived from the share capital of the deposits
and also the loans from central cooperative banks.
▪ In the Primary Cooperative Credit Society, the borrowing powers of the
members as well as of the society are fixed.
▪ It generally gives small credit for farm inputs, fodder, fertilizers, pesticides
etc.

64. Continued
▪ According to the norms, the paid-up share capital and reserves should be
less than Rs 1 lakh.
▪ Such as society can do banking business without being required to take a
licence from the RBI.
▪ The Banking Laws (Amendment) Act, 2012 has permitted RBI to assume
additional regulatory powers over co-operative banks.
▪ It also gives the regulator the power to withdraw freedom given to primary co-
operative credit societies to operate as banks without a licence from RBI.
▪ The borrowing powers of the members as well as of the society are fixed. It
generally gives small credit for farm inputs, fodder, fertilizers, pesticides etc.

65. ▪ A bank that holds deposits, makes loans and provides other financial
services to cooperatives and member-owned organizations. Also
known as Banks for Cooperatives.
▪ Co-operative bank comes under the regulation of Reserve Bank of
India.

66. ▪ These are formed at the village or town level with borrower and non-
borrower members residing in one locality. The operations of each
society are restricted to a small area so that the members know
each other and are able to watch over the activities of all members
to prevent frauds.

67. District Cooperative Central Bank
▪ District Cooperative Central Bank, popularly known as DCC Bank is
a cooperative banking network established in India to serve
cooperatives and rural areas.
▪ It was established to provide banking to rural hinterland for agriculture
sector with the branches primarily established at rural and semi-urban
areas.
▪ These banks operate at the district level having some of the primary
credit societies belonging to the same district as their members. These
banks provide loans to their members (i.e., primary credit societies) and
function as a link between the primary credit societies and state co-
operative banks

68. State Co-operative Banks
▪ State Co-operative Banks: These are the apex (highest level) co-
operative banks in all the states of the country. They mobilize funds
and help in its proper channelization among various sectors.
▪ The money reaches the individual borrowers from the state co-
operative banks through the central co-operative banks and the
primary credit societies.

69. Special Banks
Special Bank
Development
Bank
Industrial Bank Investment Bank

70. Development Banks
▪ Business often requires medium and long-term capital for
purchase of machinery and equipment, for using latest
technology, or for expansion and modernization.
▪ Such financial assistance is provided by Development Banks. They
also undertake other development measures like subscribing to
the shares and debentures issued by companies, in case of under
subscription of the issue by the public.
▪ Industrial Finance Corporation of India (IFCI) and State Financial
Corporations (SFCs) are examples of development banks in India.

71. ▪ Direct assistance: helps the industrial sector by granting project loans,
underwriting of and direct subscription to the industrial securities (shares and
debentures), soft loans, and technical development funds.
▪ Coordinating functions: coordinates the functions of financial institutions such
as ICICI, IFCI, LIC and GIC, with respect to industrial development.
▪ Indirect assistance to small and medium enterprises by granting
loans. It also refinances industrial loans of the SFC's, SIDCs, commercial banks
and RRBs, along with the billing related to the sale of the indigenous machinery.
▪ Raising funds from the international money markets.

72. Specialized Banks
▪ There are some banks, which cater to the
requirements and provide overall support for
setting up business in specific areas of
activity.
▪ EXIM Bank, SIDBI and NABARD are examples
of such banks.
▪ They engage themselves in some specific
area or activity and thus, are called
specialized banks.

73. Export Import Bank of India
(EXIM Bank)
If you want to set up a business for exporting products abroad or
importing products from foreign countries for sale in our
country, EXIM bank can provide you the required support and
assistance.
The bank grants loans to exporters and importers and also
provides information about the international market.
It gives guidance about the opportunities for export or import, the
risks involved in it and the competition to be faced, etc.

74. Small Industries Development
Bank of India (SIDBI)
If you want to establish a small-scale business unit or industry,
loan on easy terms can be available through SIDBI.
It also finances modernization of small-scale industrial units, use
of new technology and market activities.
The aim and focus of SIDBI is to promote, finance and develop
small-scale industries

75. National Bank for Agricultural
and Rural Development
(NABARD)
It is a central or apex institution for financing agricultural and
rural sectors. If a person is engaged in agriculture or other
activities like handloom weaving, fishing, etc. NABARD can
provide credit, both short-term and long-term, through
regional rural banks.
It provides financial assistance, especially, to co-operative credit,
in the field of agriculture, small-scale industries, cottage and
village industries handicrafts and allied economic activities in
rural areas.

76. Functions of
Commercial Banks
3

77. Functions of
Commercial Banks
Functions of
Commercial Banks
Primary Functions
Secondary Functions

78. Primary functions
Primary Functions of
Commercial Banks
Accepting deposits
Granting loans and
advances

79. a) Accepting deposits
▪ The most important activity (mobilise deposits)
▪ Surplus income and savings find it convenient to deposit the
amounts with banks.
▪ Depending upon the nature of deposits, funds deposited with
bank also earn interest.
▪ Thus, deposits with the bank grow along with the interest
earned.
▪ If the rate of interest is higher, public are motivated to deposit
more funds with the bank.
▪ There is also safety of funds deposited with the bank.

80. Types of Deposit
Deposits
Fixed Time Deposit
Savings Deposit
Current Deposit
Recurring Deposit

81. b) Grant of loans and advances
▪ Another important function of a commercial bank
▪ Such loans and advances are given to members of the public and
to the business community.
▪ Higher rate of interest than allowed by banks on various deposit
accounts.
▪ The rate of interest varies according to the purpose and period of
loan and also the mode of repayment.

82. Loans
▪ A loan is granted for a specific time period.
▪ Generally commercial banks provide short-term loans. But term loans,
i.e., loans for more than a year may also be granted.
▪ The borrower may be given the entire amount in lump sum or in
installments.
▪ Loans are generally granted against the security of certain assets.
▪ A loan is normally repaid in installments. However, it may also be
repaid in lump sum.

83. Advances
▪ An advance is a credit facility provided by the bank to its customers.
▪ It differs from loan in the sense that loans may be granted for longer period,
but advances are normally granted for a short period of time.
▪ Further the purpose of granting advances is to meet the day-to-day
requirements of business.
▪ The rate of interest charged on advances varies from bank to bank.
▪ Interest is charged only on the amount withdrawn and not on the sanctioned
amount.

84. Types Bank Credit
Bank Credit
Bank Loan
Cash Credit
Bank Overdraft
Discounting of Bills

85. II. Secondary functions
▪ In addition to the primary functions banks perform a number of other functions,
which are called secondary functions.
▪ Issuing letters of credit, travelers cheque, etc.
▪ Undertaking safe custody of valuables, important document and securities by
providing safe deposit vaults or lockers.
▪ Providing customers with facilities of foreign exchange dealings.
▪ Transferring money from one account to another; and from one branch to
another branch of the bank through cheque, pay order, demand draft.

86. Continued…
▪ Standing guarantee on behalf of its customers, for making payment for
purchase of goods, machinery, vehicles etc.
▪ Collecting and supplying business information.
▪ Providing reports on the credit worthiness of customers.
▪ Providing consumer finance for individuals by way of loans on easy terms for
purchase of consumer durables like televisions, refrigerators, etc.
▪ Educational loans to students at reasonable rate of interest for higher
studies, especially for professional courses

87. Various Secondary Functions
Secondary Functions
Agency functions
General Utility Services
Credit Creation

88. i) Agency functions
Bankers act as an agent to the customers it means he performs certain
functions on behalf of the customers such services are called Agency
Services.
Example:
a) Bank pay electricity bill, water bill, Insurance Premium etc.
b) They guide the customer in Task Planning.
c) Bank provides safety locker facility.
d) Pay salaries of customer’s employees.

89. ii) General Utility Services
Bankers are the past of society. They offer: several services to general public
Example.
a) It provides cheap remittance (transfer) facilities.
b) The banks issue traveler cheque for safe travelling to its customers.
c) Banks accepts and collects foreign Bills of Exchanges.
d)Other than these services the bankers also provide ATM services, Internet
Banking, Electronic fund transfer (EFT), E-Banking to provide quick and
proper services to its customers.

90. iii. Credit Creation
▪ Creation of deposits is called Credit Creation.
▪ It is a unique function of Commercial Banks.
▪ When a bank advances loan to its customer if doesn’t lend cash but opens an
account in the borrowers name and credits the amount of loan to that account.
▪ Thus, whenever a bank grants loan, it creates an equal amount of bank deposits.
▪ In simple words we can define Credit creation as multiple expansions of deposits.
▪ Creation of such deposits will results an increase in the stock deposits. Creation of
such deposits will results an increase in the stock of money in an economy.

93. Trend In Banking
Trends in Banking
Computerization and developments in information technology brought in new trends in banking
business. One of the offshoots of this development is internet banking. This facility enables
customers to access their accounts and perform a variety of bank transactions from anywhere. This
saves time, cost and paper work for the banks as well as the clients. However internet banking has
inherent risks such as security risk, technology risk and financial frauds. Banks also face legal risk
since the jurisdiction in which the bank is operating could be different from its registered place of
operation.

94. Another development in the banking sector is the introduction of virtual banks that do not have any
physical presence and all banking operations are in electronic mode. The bank exists on a
virtual ground with the internet address as the only link with its customers. New products
have been introduced by the banks to cope with increasing competition and customer needs.
They can be categorized into investment based products and innovative services offered by
the banks. Investment products include offer of gold and silver coins, marketing of insurance
products and floating of mutual funds, and issue of different types of credit and debit cards.
Innovative services include establishing ATM facilities and providing ASBA (Applications
Supported by Blocked Accounts) facility to investors applying for initial public offerings of the
corporate sector.
Technological developments enable banks to offer electronic fund transfer facility to meet their
customer requirements. National electronic fund transfer facility has been created at Mumbai
to offer this service.

98. Changing scenario in commercial Banking
01 Electronic Banking
02 Online Banking
03 Mobile Banking
04 POS and ATM, CDM

99. THANKS!
Any questions?