Banking in India

1. Banking in India
BC5B09, Hours 5, Credits 5
Santhosh Thannikat
santhosh@naipunnya.ac.in

2. Banking In India
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• Vedas
• Texts of Manu and Kautilya
• East India Company – Bank of Hindustan 1770
• Presidency Banks – Calcutta, Bombay, Madras
• Imperial Bank – by amalgamating the three
• Allahabad Bank – 1865
• Alliance Bank 1875
• Oudh Commercial Bank 1880
• Punjab Bank 1894
• People Bank 1901
• Reserve Bank of India 1935 (nationalised in 1949)
• 648 Commercial Banks in 1947
• Banking Companies Act 1949

3. Types of Banks
• Scheduled Banks (Public Sector Banks)
– Nationalised Banks (19 July 1969)
– State Bank of India 1 July 1955 (Travancore, Patiala, Hyderabad, Mysore,
Bikner & Jaipur) Indore, Saurashtra merged.
– Regional rural Banks 1975
– Private Sector Banks
• Non Scheduled Banks – 4 nos
• Industrial Banks – IDBI, EXIM Bank..
• SIDBI
• Cooperative Banks
• Local Area Banks
• NABARD
• IRCI (Ind Reconstruction Corporation) – IRBI
• IIBI (Ind Invest. Bank of India)
• National Housing Bank
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4. Banks for Economic Development
• Stimulation of Savings
• Capital formation
• Agricultural Development
• Support entrepreneurs
• Small scale industries
– Monetization of debts
– Open new branches
• International trade
• Create more employment
• Influence economic activities
– Variation of interest rate
– Availability of credit
• Encouraging right kind of industries
• Balanced Development
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5. Functions of Bank
• Primary Functions
– Deposits
– Loans and Advances
– Credit Creation
– Cheques / Plastic Cards
– Fund Transfer (TT, DD, RTGS, Online
• Secondary Functions
– Agency Services
– General Utility Functions
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6. Types of Deposits
• Savings
• Fixed
• Current
• Recurring
• Home safe
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7. Types of Loans
• Loans
• Overdraft
• Cash Credit
• Discounting
• Money at Call / Short Notice
• Consumer Credit
• Miscellaneous Advances
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8. Banks as Agents
• Collection agents
• Collection of dividends
• Trustee / Executor
• Standing Order executor
• Sale / Purchase of Securities (D-Mat a/c)
• Remittances
• Deals foreign exchange
• Bullion Trade
• Agent for Government
• As administrator
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9. General Utility Services of Banks
• Safe custody of valuable
• Locker facility
• Letter of Credit
• Fund Transfer
• Information provider
• Referee / mediator
• Share underwriting
• Gift cheque issue
• Foreign exchange
• Travellers’ cheque
• Credit Cards
• Collection of Statistics
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10. Innovative Services
• ATMs / CDMs
• Credit Cards
• Tele Banking
• E Banking
• M Banking
• RTGS (Real Time Gross Settlement) System
• Bancassurance
• Electronic Clearing Services
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11. Central Bank (RBI)
• Monopoly of note issue
• Banker, Agent and Advisor to Government
• Custodian of Cash Reserve of Commercial
Banks
• Custodian of Forex reserve
• Lender of Last Resort
• Clearing House Function
• Credit Control
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12. Recent Trends
• Banking Regulation Act 1949
• Creation of SBI – 1955
• Nationalisation of Banks – Banking Law
Amendment Act – 1968
• Lead Bank Scheme
• Deposit Insurance
• Credit Guarantee
• Micro Finance
• Financial Inclusion
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