This document provides an overview of the history and development of banking in India. It discusses the origins of banking from ancient texts, the establishment of early banks by the East India Company and others, and the creation of the Reserve Bank of India in 1935. It then describes the types of banks that exist in India including public sector banks, private sector banks, cooperative banks, and others. The document also outlines the key functions of banks such as taking deposits, providing loans, and performing agency services, as well as how banks can promote economic development.

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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