BANK AND BANKING A bank is a financial institution that serves as a financial intermediary. Functions of bank are known as banking.
Evolution of Banking in India Presidency Banks: Bank of Bengal in 1809,Bank of Bombay in 1840 & Bank of Madras in 1843 Imperial Bank of India -1921 Reserve Bank of India-1935 State bank of India-1955 Nationalisation of 14 Banks-1969 Second Dose of Nationalisation –1980 Narasimham Committee Reforms-1990s ICICI Merger- 2003
Indian Banking Sector:overviewEconomy grew by 8.5% in the last fiscal,central bank raised interest rates 7 times,increasing the repo rate by 1.75% ,the reverse repo rate by 2.25%,Indian foreign exchange reserve were US$314.6 BILLION as on july 8,2011
Significance of Banks Savings Mobilisation Public Finance Remittance of Funds Financing the Nation Well Developed Money Risk Free Investment market Corporate Services Development of Capital Social Banking Market
Composition of Indian Banking System Reserve Bank of India Commercial Banks Development Banks Regional Rural Banks Co-operative Banks NABARD Land Development Banks Exim Banks
Functions of commercial banks A. Primary Functions a) Accepting Deposits b) Advancing Loans B. Secondary Functions a) Agency Functions b) General utility Services
a) Accepting Deposits1) Fixed or Time Deposit Account2) Current or Demand Deposit Account3) Saving Deposit Account4) Home Safe Saving Account5) Recurring Deposit Account
b) Advancing Loans1) Cash credit2) Overdraft3) Demand Loans4) Short Term Loans
Besides many primary functions, these banks also perform many secondary functions..1. Agency functions: Banks act as an agent to their customers in different ways.2. General Utility Services: Banks also provide certain services of general utility.
AGENCY FUNCTIONSI. Collection and payment of various items: Bank collect cheques,rent,interest and also make payment of taxes, insurance premium.II. Purchase of sale and security: Banks are more knowledgeable with regard of stoke and share business, they provide security to their customers.III. Trustee and Executer: Banks also acts as trustees and executers of the property of their customers.
IV. Remitting of Money: Banks remit money at distance place though bank drafts.V. Purchase and sale of foreign exchange: Banks buy and sell foreign exchange, promoting international trade.VI. Letter of Reference: Banks give information about economic position of customers to domestic and foreign traders.VII. Underwriting: Banks Underwrite the sale of new shares.
GENERAL UTILITY SERVICESI. Locker facilities: Banks provide locker facilities to their customers.II. Traveler’s cheque and Letters of credit: Banks issue travelers cheque and letters of credit to avoid the risk of carrying cash.III. Business Information and Statistics: Banks give advice to customers on financial matters.IV. Help in Transportation of goods: Banks help big businessmen and industrialists in transportation of goods from production centre to consumption centers.
Difference b/w primary and secondaryfunctions:Primary Functions Secondary functions1.These are the main 1.These are the secondaryactivities of the bank. activities of the bank.2. These are the main 2. These are not mainsource of income of the source of income of thebank. bank.3.These are obligatory on 3.These are not obligatorythe part of bank on the part of bankperformance. performance.
Central Bank :It is an apex institution of the monetary and banking structure ofa country. A central bank has the authority to regulate andcontrol the banking business and monetary system of a country.Central bank of india is Reserve Bank of India. RBI was set up in1935 under the RBI act of 1934.It was nationalized in 1949.
Main functions of RBI are•Bank of issue•Financial advisor to the state( banker also)•Banker to bank•Custodian of foreign exchange reserves•Lender of the last resort•Bank of central clearance and transfer•Controller of credit
Controller of credit1.Quantitative Methods•Bank rate policy•Open market operation•Variable reserve ratio
2. Qualitative control• Margin requirement• Credit Rationing• Regulation of consumer credit• Direct action.
Banking InnovationsRetail BankingBank as authorized dealerCustomer serviceLead Bank schemeService area approachMicro financeConsortium approachCredit cardsLocal Area Banks