The document defines banking and explains why banks are needed. It discusses the history of banking in India and outlines the different types of banks in India, including public sector banks, private banks, foreign banks, regional rural banks, small finance banks, payment banks, and microfinance banks. It also summarizes the key banking reforms in India such as the Narasimham committee reports, the SARFAESI Act, bank mergers, and the role of the Reserve Bank of India in regulating the banking system.

1. BANKING AND FINANCIAL
INSTITUTIONS
Dr. Mallikarjun
Assistant Professor
Department of Management
Government First Grade College Humnabad
Ph: 9743244858
Email: mallikarjunbalit@gmail.com

3. DEFINITION:
 Banking is defined as the accepting, for the
purpose of lending or investment, of deposits
of money from the public, repayable on
demand or otherwise, and withdrawal by
cheque, draft, order or otherwise.
 Banking Regulation Act, 1949

5. WHY DO WE NEED BANKS?
 Accelerating the rate of capital formation
 Provision of finance and credit
 Facilitate in the implementation monetary
policy
 Financing consumer activities
 Financing employment generating activities
 Development of agriculture
 Promote industrial development

6. HISTORY OF BANKING
 Phase-I Early phase from 1786-1969 of
Indian Banks.
 Phase-II 1969 Nationalization of Indian
Banks and up to 1991 prior to Indian
Banking Sector Reforms.
 Phase-III New Phase of Indian Banking
System with the advent of Indian Financial
and Banking Sector Reforms after 1991.

8. NUMBER OF BANKS IN INDIA
0
5
10
15
20
25
30
35
40
45
50
PSB Private Banks Foreign Banks RRB's
12
21
46
56

9. BANK RATES
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
CRR SLR REPO REREPO
4%
18%
4%
3.35%

12. SMALL FINANCE BANKS
 Issuance of the licensing guidelines in 2014.
 The small finance bank shall be registered as a public
limited company under the Companies Act, 2013.
 Small finance banks are a type of niche banks in India.
Banks with a small finance bank license can provide
basic banking service of acceptance
of deposits and lending.
 Provision of savings vehicles primarily to unserved and
underserved sections of the population.
 Supply of credit to small business units; small and
marginal farmers; micro and small industries; and
other unorganised sector entities, through high
technology-low cost operations

14. PAYMENT BANKS 2015
 Recommendations of the Nachiket Mor
Committee.
 Offering banking and financial services to
the unbanked and under banked areas.
 Helping the migrant labour force, low-income
households, small entrepreneurs etc.
 They are registered under the Companies Act
2013.
 Payment banks can take deposits up to Rs.
2,00,000.
 It can issue debit cards.
 The deposits are invested in Govt. securities only.

16. MICRO UNITS DEVELOPMENT AND
REFINANCE AGENCY (MUDRA) BANK
 Founded: 8 April 2015
 Headquarters: Mumbai
 Parent organization: Small Industries
Development Bank of India SIDBI
 It provides loans at low rates to micro-
finance institutions and non-banking
financial institutions which then provide
credit to MSMEs.

18. MICROFINANCE BANKS IN INDIA
 Microfinance industry in India started in 1990s inspired
by the Grameen Model of Prof Mohammad Yunus in
Bangladesh.
 Provides small credit to the low-income individuals
or groups who otherwise would have no other access
to financial services.
 Emphasizes women participation for generating
sustainable livelihood.
 Provides financial and banking support to individuals
who work in varying trades like fishing, carpentry,
transportation, etc.
 Create an opportunity for self-employment for low-
income people

19. BANKING SECTOR REFORMS IN INDIA
Narasimham Committee – I (1991)
 Reduction in the SLR and CRR
 Phasing out Direct Credit Programme
 Interest Rate Determination
 Structural Reorganization of Banking Sector
 Removal of Dual Control
 Banking Autonomy

20. BANKING SECTOR REFORMS IN INDIA
Narasimham Committee – II (1998)
 Strengthening Banks in India
 Narrow Banking
 Capital Adequacy Ratio
 Bank Ownership
 Review of Banking laws
 Computerization

21. BANKING SECTOR REFORMS IN INDIA
 SARFAESI Act 2002
 The Securitisation and Reconstruction of
Financial Assets and Enforcement of Society
Interest Act
 This Act allows banks and financial institutions to
auction properties (Residential and
Commercial) when borrowers fail to repay their
loans.
 It enables banks to reduce their Non
Performing Assets (NPAs) by adopting
measures for recovery or reconstruction.

22. BANKING SECTOR REFORMS IN INDIA
 Mega Mergers
 2008 State Bank of Saurastra.
 2010 State Bank of Indore.
 2017 State Bank of India 5 Associates.
 2019 Vijaya Bank and Dena Bank Merged
with Bank of Baroda.
 2020 PSB Mergers - 10 PUBs Merged into 4
Banks.

27. BANKING SECTOR REFORMS IN INDIA
Privatisation of Banks
 Cut stake in top public sector banks to 51%
to 26% in 12-18 months: RBI to Government.
 Government is having to keep pumping in
money year after year to help them meet
regulatory capital as well as growth capital.
 This move to have a bare minimum presence
of public sector enterprises (PSEs).

29. BANKING SECTOR REFORMS IN INDIA
 NPA – Non Performing Assets
 A non performing asset (NPA) is a loan or
advance for which the principal or interest
payment remained overdue for a period of 90
days.
 1. Substandard assets: Assets which has
remained NPA for a period less than or equal to
12 months.
 2. Doubtful assets: An asset would be classified
as doubtful if it has remained in the substandard
category for a period of more 12 months.

30. BANKING SECTOR REFORMS IN INDIA
3. Loss assets: As per RBI, “Loss asset is
considered uncollectible and of such little value
that its continuance as a bankable asset is not
warranted, although there may be some salvage
or recovery value.”

32. BANKING SECTOR REFORMS IN INDIA
 Debt Recovery Tribunals Act. 1993
 Asset Reconstruction Companies to proliferate.
 Insolvency and Bankruptcy Code 2016
 Flexible Restructuring of Long Term Project Loans
to Infrastructure and Core Industries.
 Mission INDRADHANUSH
 SAMADHAN scheme introduced for asset
management and debt change structure.

34. RESERVE BANK OF INDIA
 The Reserve Bank of India is India's central bank
and regulatory body under the jurisdiction of
Ministry of Finance, Government of India.
 It is responsible for the issue and supply of the
Indian rupee and the regulation of the Indian
banking system.
 Reserve Bank of India Act, 1934 is the legislative
act under which the Reserve Bank of India was
formed.
 Governor Shaktikanta Das (26th)
 Headquarters Mumbai
 Founded 1 April 1935, Kolkata

35. FUNCTIONS OF RBI