The document discusses the classification and evolution of banking in India. It notes that banking can be classified based on functioning into commercial banks, cooperative banks, development banks and the Reserve Bank of India. It also discusses classification of banks based on ownership into nationalized banks, private banks, foreign banks and cooperative banks. The evolution of banking in India occurred in distinct phases from the pre-1948 evolutionary phase to the post-1990 reformative phase.

1. BANKING

2. BANKING
 FIVE DIFFERENT MARKETS
 1) MONEY MARKET
 2) STOCK MARKET
 3) FOREX MARKET
 4) COMMODITY MARKET
 5) REAL ESTATE MARKET

3. BANKING
SYLLABUS
 FUNCTIONS OF THE BANK
 VARIOUS KINDS OF DEPOSITS
 VARIOUS KINDS OF ADVANCES
 CRR, SLR, LENDABLE RESOURCES
 BILL CULTURE/ BILL FINANCE
(CHORE COMMITTEE)
 TANDON COMMITTEE

4. BANKING
SYLLABUS
 FINANCIAL SECTOR REFORMS
 INCOME RECOGNITION
 ASSET CLASSIFICATION
 PROVISIONING NORMS
 CAPITAL ADEQUACY

5. BANKING
SYLLABUS
 BASEL COMMITTEE NORMS
 ENTRY OF FOREIGN BANKS /
PRIVATE BANKS, ETC.
 INTERNATIONAL BANKING
 FUNCTIONS OF RESERVE BANK OF
INDIA

6. BANKING
 BANKING IS DIFFERENT FROM
MONEY-LENDING BUT THE TWO
TERMS CARRY SAME SIGNIFICANCE
TO THE LAYMAN.

7. BANKING
 THE WORD “BANK” IS SAID TO BE
OF GERMANIC ORIGIN, COGNATE
WITH THE FRENCH WORD
“BANQUE” AND ITALIAN WORD “
BANCA”
 BOTH THESE WORDS MEAN
“BENCH”
 THE JEWISH MONEY-CHANGERS
USED TO DO THEIR BUSINESS
SITTING ON A BENCH IN MARKET.

8. BANKING
 SIMILARLY THE WORD “BANKRUPT”
IS BELIEVED TO HAVE BEEN
ORIGINATED FROM FRENCH WORD
“BANQUE-ROUTE” AND ITALIAN
WORD “BANCA-ROTTA” MEANING
“BROKEN BENCH”.
 MONEY CHANGER USED TO BREAK
HIS BENCH WHEN HE FAILED.

9. BANKING
 BANKING EXISTED IN INDIA IN ONE
FORM OR THE OTHER FROM TIMES
IMMEMORIAL.
 AMONG EARLIEST BANKS
ESTABLISHED WERE, BANK OF
BENGAL, BANK OF BOMBAY, BANK
OF MADRAS KNOWN AS
“PRESIDENCY BANKS”.

10. BANKING
 ALL THESE BANKS WERE
AMALGAMATED TO FORM IMPERIAL
BANK OF INDIA WHICH WAS
SUBSEQUENTLY CONVERTED INTO
STATE BANK OF INDIA.

11. BANKING
 IN EARLY PHASE INDIGENOUS
BANKERS, NIDHIS AND
MONEYLENDERS ACTED AS
BANKERS.
 THEY WORKED ON ESTABLISHED
NORMS AND TABOOS OF THE
COMMUNITY.

12. BANKING
 IN THE INITIAL STAGES BANKING
COMPANIES WERE REGISTERED
UNDER THE COMPANIES ACT.
 HOWEVER WITH GROWTH OF JOINT
STOCK BANKING IN FIRST
QUARTER OF 19TH CENTURY, IT
BECAME NECESSARY TO CODIFY
RULES AND REGULATIONS.

13. BANKING
 THUS EMERGED THE BANKING
REGULATION ACT IN 1949.
 BANKING LEGISLATION ACT AIMS AT
 PROTECTING INTEREST OF DEPOSITORS
 ENSURING CONTROL OVER CREDIT
 STREAMLINING PROCEDURES
 EVOLVING UNIFORM BANKING PRACTICES
 DEVELOPING BANKING ON SOUND LINES.

14. BANKING
 SECTION 5 C OF THIS ACT DEFINES
A BANKING COMPANYAS “A
COMPANY WHICH CARRIES ON THE
BUSINESS OF BANKING.”

15. BANKING
 SECTION 5 B DEFINES BUSINESS
OF BANKING AS “ ACCEPTING, FOR
THE PURPOSE OF LENDING OR
INVESTMENT, DEPOSITS OF MONEY
FROM THE PUBLIC, REPAYABLE ON
DEMAND OR OTHERWISE AND
WITHDRAWABLE BY CHEQUES,
DRAFTS OR OTHERWISE.”

16. BANKING
 MAIN PROVISIONS OF ACT
 1) BUILT IN SAFEGUARDS
 2) POWERS AND COSEQUENTIAL
FUNCTIONS AND RESPONSIBILITIES
OF RBI.

17. BANKING
 BUILT IN SAFEGUARDS RELATE TO
 1) ORGANISATION
 2) MANAGEMENT
 3) OPERATIONS
OF A BANKING COMPANY.

18. BANKING
ORGANISATIONAL
SAFEGUARDS
 1) PERMITTED BUSINESS
 2) HOLDING IMMOVABLE PROPERTY
 3) FORMATION OF SUBSIDIARY
COMPANIES
 4) USE OF WORD ‘BANK’, ‘BANKING
COMPANY’, ‘BANKER’ AND
‘BANKING’

19. BANKING
ORGANISATIONAL
SAFEGUARDS
 5) PAID UP CAPITAL AND RESERVES
 6) CHANGE OF NAME

20. BANKING
OPERATIONAL SAFEGUARDS
 1) MAINTENANCE OF CASH
RESERVES AND ASSETS
 2) GRANT OF UNSECURED LOANS
AND ADVANCES
 3) OPENING OF NEW BRANCHES

21. BANKING
MANAGERIAL SAFEGUARDS
 1) PREPARE ANNUAL ACCOUNTS IN
THE FORMS PRESCRIBED UNDER
THE ACT
 2) THE ACCOUNTS ARE TO BE
AUDITED BY A QUALIFIED AUDITOR.
 3) PUBLISH AND SEND COPIES TO
RBI
 4) DISPLAY AT IT’S OFFICES.

22. BANKING
FUNCTIONS
 1) PRIMARY FUNCTIONS
 2) AGENCY FUNCTIONS
 3) GENERAL UTILITY FUNCTIONS

23. BANKING
PRIMARY FUNCTIONS
 ACCEPTANCE OF DEPOSITS
 LENDING MONEY
 BORROWING MONEY
 MAKING INVESTMENTS

24. BANKING
AGENCY FUNCTIONS
 COLLECTION AND PAYMENT OF
CHEQUES
 COLLECTION AND PAYMENT OF
BILLS
 REMITTANCE OF FUNDS
 COLLECTION OF GOVERNMENT
TAXES

25. BANKING
AGENCY FUNCTIONS
 UNDERTAKING ADMINISTRATION OF
ESTATES AS EXECUTORS AND
TRUSTEES.

26. BANKING
GENERAL UTILITY FUNCTIONS
 ISSUING OF GUARANTEES
 ISUING OF LETTERS OF CREDIT
 DEALING IN FOREIGN EXCHANGE
 DEALING IN BULLION
 SAFE DEPOSIT VAULT
 SAFE CUSTODY OF ARTICLES

27. BANKING
GENERAL UTILITY FUNCTIONS
 MERCHANT BANKING
 ACQUIRING, HOLDING AND
DEALING WITH PROPERTIES AS
SECURITY FOR ADVANCES.
 ISSUING AND ENCASHING GIFT
CHEQUES
 ISSUING CREDIT / DEBIT CARDS

28. BANKER-CUSTOMER
RELATIONSHIP
 1) DEBTOR AND CREDITOR
 2) BAILER-BAILEE
 3) PRINCIPAL-AGENT
 4) TRUSTEE-BENEFICIARY

29. BANKER-CUSTOMER
RELATIONSHIP
 DEBTOR AND CREDITOR – IN CASE
OF DEPOSIT ACCOUNT BANKER IS
A DEBTOR AND CUSTOMER IS A
CREDITOR

30. BANKER-CUSTOMER
RELATIONSHIP
 BAILER-BAILEE – IN CASE A SEALED
BOX IS DEPOSITED WITH THE BANK
FOR SAFE CUSTODY, THE
CUSTOMER IS A BAILER AND THE
BANK IS A BAILEE.

31. BANKER-CUSTOMER
RELATIONSHIP
 PRINCIPAL-AGENT – IN CASE OF
COLLECTION AND PAYMENT OF
CUSTOMER’S CHEQUES / BILLS,
THE CUSTOMER IS A PRINCIPAL
AND THE BANK IS AN AGENT.

32. BANKER-CUSTOMER
RELATIONSHIP
 TRUSTEE-BENEFICIARY – IF A BANK
IS ASKED TO MANAGE THE
PROPERTY OF A TRUST, THE BANK
IS A TRUSTEE AND THE TRUST IS
THE BENEFICIARY.

33. DEFINITION OF CUSTOMER
 NO STATUTORY DEFINITION IS
AVAILABLE. WE HAVE TO DEPEND
ON JUDICIAL PRONOUNCEMENTS.
 WORD CUSTOMER DERIVES FROM
‘CUSTOM’ MEANING HABIT OF
RESORTING TO SAME PLACE OR
PERSON TO DO BUSINESS.

34. DEFINITION OF CUSTOMER
 ONE WHO MAINTAINS SOME SORT
OF DEPOSIT ACCOUNT
 STATE OF ACCOUNT IS IMMATERIAL
 BY FREQUENTLY PURCHASING
DRAFTS OR CASHING CHEQUES
ONE DOES NOT BECOME A
CUSTOMER

35. DEFINITION OF CUSTOMER
 A CUSTOMER OF ONE BRANCH IS
NOT A CUSTOMER OF ANOTHER
BRANCH OF THE SAME BANK.
 BANKER- CUSTOMER
RELATIONSHIP EXISTS BETWEEN
TWO BANKS, IF ONE HAS AN
ACCOUNT WITH THE OTHER

36. CONTRACTUAL
RELATIONSHIP
 THE BANKER IS ENTITLED TO USE
MONEY WITHOUT BEING CALLED
UPON TO ACCOUNT FOR SUCH
USE.
 LIABILITY TO RETURN THE AMOUNT
 THE BANKER CAN NOT CLOSE
CUSTOMER’S ACCOUNT WITHOUT
GIVING HIM NOTICE.

37. CONTRACTUAL
RELATIONSHIP
 BANKER IS OBLIGED TO KEEP
TRANSACTIONS OF CUTOMER
SECRET, EXCEPT UNDER SPECIAL
CIRCUMSTANCES
 BANKER ENJOYS A RIGHT OF LIEN.
IT IS A LIMITED PLDEGE EXCEPT IN
CASE OF ARTICLES RECEIVED FOR
SAFE CUSTODY

38. CONTRACTUAL
RELATIONSHIP
 BANKER’S RIGHT OF SET OFF
 BANKER HAS A RIGHT FOR
APPROPRIATION OF ACCOUNTS
 BANKER IS ENTITLED TO INTEREST
ON LOANS AND COMMISSION FOR
OTHER SERVICES.

39. CONTRACTUAL
RELATIONSHIP
 TERMINATION OF RELATIONSHIP
 i) VOLUNTARY
 ii) BY PROCESS OF LAW
1) DEATH OF CUSTOMER
2) BANKRUPTCY
3) INSANITY OF CUSTOMER
4) GARNISHEE ORDER

40. EXERCISE
TRUE OR FALSE
 1) THE BANKER IS A PRIVILEDGED
DEBTOR IN AS MUCH AS HE NEED
NOT REPAY HIS DEPOSITORS
UNLESS A DEMAND IS MADE ON
HIM.
 2) BANKER IS AN AGENT WHEN HE
ARRANGES SALE OF SHARES ON
BEHALF OF HIS CUSTOMER

41. EXERCISE
TRUE OR FALSE
 3) THE BALANCE IN THE ACCOUNT
OF THE WIFE CAN BE DISCLOSED
TO THE HUSBAND, BUT NOT VICE
VERSA
 4) BANKER CAN EXERCISE RIGHT
OF SET OFF WITHOUT NOTICE TO
THE CUSTOMER

42. EXERCISE
TRUE OR FALSE
 5) RIGHT OF SET OFF CAN BE
EXERCISED IN RESPECT OF BILLS
DISCOUNTED BUT NOT YET DUE.
 6) IF BANKER FINDS THE ACCOUNT
OF THE CUSTOMER UNDESIRABLE
OR UNREMUNERABLE, HE CAN
CLOSE THE ACCOUNT AND REMIT
THE BALANCE BY A CHEQUE.

43. EXERCISE
TRUE OR FALSE
 7) THE BANK HAS GRANTED
OVERDRAFT FACILITY; THE
ACCOUNT IS IN CREDIT BALANCE.
THE BANKER IS A CREDITOR OF
THE CUSTOMER
 8) THE BANKER IS A BAILEE WHEN
HE PAYS SUBSCRIPTION ON
BEHALF OF CUSTOMER

44. BANKING REGULATION ACT
 GOVERNMENT OF INDIA PASSED A
COMPREHENSIVE BANKING
REGULATION ACT IN 1949 FOR
SAFEGUARDING THE BUSINESS OF
BANKING COMPANIES.

45. BANKING
CLASSIFICATION OF BANKS
 CLASSIFICATION OF BANKS CAN BE
DONE IN MANY WAYS.
 BASED ON FUNCTIONING
 COMMERCIAL BANKS
 CO-OPERATIVE BANKS
 DEVELOPMENT BANKS
 RESERVE BANK OF INDIA

46. BANKING
CLASSIFICATION OF BANKS
 COMMERCIAL BANKS
 SCHEDULED BANKS
 NON-SCHEDULED BANKS

47. BANKING
CLASSIFICATION OF BANKS
 SCHEDULED BANKS
 ONE WHICH IS REGISTERED IN THE
SCHEDULE OF RBI.
 COME UNDER PURVIEW OF VARIOUS
CREDIT CONTROL MEASURES OF RBI.
 REQUIRED TO MAINTAIN CERTAIN
MINIMUM BALANCE WITH RBI.
 ENTITLED TO BORROW FROM RBI.

48. BANKING
CLASSIFICATION OF BANKS
 SCHEDULED BANKS
 INDIAN SCHEDULED BANKS
 FOREIGN SCHEDULED BANKS
 SCHEDULED BANKS

PUBLIC SECTOR COMMERCIAL BANKS

PRIVATE SECTOR COMMERCIAL BANKS

49. BANKING
CLASSIFICATION OF BANKS
 PUBLIC SECTOR COMMERCIAL
BANKS
 STATE BANK OF INDIA AND ITS
SUBSIDIARIES; 20 NATIONALISED
BANKS;

50. BANKING
CLASSIFICATION OF BANKS
 PRIVATE SECTOR COMMERCIAL
BANKS
 OTHER INDIAN SCHEDULED BANKS
THAT DO NOT FALL IN THE ABOVE
GROUP

51. BANKING
CLASSIFICATION OF BANKS
 NON-SCHEDULED BANKS
 THOSE WHICH ARE NOT INCLUDED IN
SCHEDULE OF RBI
 THEY ARE NOT ENTITLED TO
BORROWINGS AND REDISCOUTING
FACILITIES FROM RBI

52. BANKING
CLASSIFICATION OF BANKS
 BASED ON OWNERSHIP
 NATIONALISED BANKS
 PRIVATE BANKS
 FOREIGN BANKS
 CO-OPERATIVE BANKS

53. BANKING
EVOLUTION & GROWTH
 DISTINCT PHASES IN BANKING
SYSTEM
 PRIOR TO 1948 - EVOLUTIONARY
PHASE
 1949-1968 - FOUNDATION PHASE
 1969- 1984 - EXPANSION PHASE
 1985- 1990 - CONSOLIDATION
PHASE
 SINCE 1990 - REFORMATORY
PHASE

54. BANKING
EVOLUTION & GROWTH
 EVOLUTION PHASE
 REGULATIONS WERE BEING INTRODUCED
 ROLE CONFINED TO ATTEND TO CREDIT
NEEDS OF SELECTED AND LIMITED
SEGMENTS OF ECONOMY
 OPERATIONS WERE INFLUENCED BY
COMMERCIAL PRINCIPLE AND NOT BY
DEVELOPMENT FACTOR.
 FAILURE OF BANKS WAS COMMON.

55. BANKING
EVOLUTION & GROWTH
 FOUNDATION PHASE
 EMPHASIS ON LAYING FOUNDATION FOR
SOUND BANKING SYSTEM
 AS A CONSEQUENCE BANKING REGULATION
ACT WAS PASSED
 TRANSFORMATION OF IMPERIAL BANK OF
INDIA INTO STATE BANK OF INDIA
 STRONG STRESS ON CLASS BANKING BASED
ON SECURITY THAN ON PURPOSE

56. BANKING
EVOLUTION & GROWTH
 EXPANSION PHASE
 NATIONALISATION BANKS
 14 IN 1969

6 IN 1980
 EXPANSION AT PATHBREAKING PACE
 APPRX 50000 BRANCHES WERE SET UP
 INEFFICIENCY AND LACK OF CONTROL
 QUALITY BECAME A CASUALTY

57. BANKING
EVOLUTION & GROWTH
 DIRECTED LENDING
 INTEGRATED RURAL DEVELOPMENT
PROGRAMME
 VARIOUS SCHEMES ANNOUNCED BY
GOVT.
 BIRTH OF REGIONAL RURAL BANKS IN
1975 AND NABARD IN 1982
 TRANSFORMATION FROM CLASS
BANKING TO MASS BANKING.

58. BANKING
EVOLUTION & GROWTH
 CONSOLIDATION PHASE
 EXTENSION OF EARLIER PHASE
 IMPROVING HOUSEKEEPING,
CUSTOMER SERVICE, CREDIT
MANAGEMENT, STAFF PRODUCTIVITY
AND PROFITABILITY.
 BANKS ENDED UP IN CONSOLIDATING
LOSSES RATHER THAN THE GAINS.

59. BANKING
EVOLUTION & GROWTH
 REFORMATORY PHASE
 UNPRECEDENTED ECONOMIC CRISIS
ENGULFED THE ECONOMY
 INDIA ALMOST DEFAULTED ON ITS
INTERNATIONAL COMMITMENTS
 INTERNATIONAL CREDIT RATING
DOWNGRADED
 BREAKDOWN OF FISCAL DISCIPLINE

60. BANKING
EVOLUTION & GROWTH
 REFORMATORY PHASE (CONTD)
 HENCE TO REDRESS THE
IMBALANCES VARIOUS MACRO
ECONOMIC STRUCTURAL
REFORMATORY MEASURES WERE
UNDERTAKEN BY GOVERNMENT IN
THE FIELD OF TAX SYSTEM,
INDUSTRIAL POLICY, FINANCIAL
SECTOR AND FOREIGN TRADE.

61. BANKING
 IN VIEW OF THIS BANK
TRANSACTIONS ARE BROADLY
CLASSIFIED IN FOLLOWING 3 WAYS
 1) CASH TRANSACTIONS
 2) TRANSFER TRANSACTIONS
 3) CLEARING TRANSACTIONS

62. BANKING
 MOST VULNERABLE AND RISKY
AREA
 THEFT
 FORGED NOTES
 SOILED NOTES
 SHORT RECEIPT
 EXCESS PAYMENT

63. BANKING
 CASH TRANSACTIONS ARE
BALANCED ON DAILY BASIS AS
UNDER:
CLOSING CASH = OPENING CASH +
CASH RECEIPTS DURING THE DAY –
CASH PAYMENTS MADE DURING THE
DAY

64. BANKING
 TO PREVENT FRAUDS, THE
PARCTICE OF MAINTAINING A
SCROLL OF ALL CASH RECEIPTS IS
FOLLOWED BY THE BANK.
 AN OFFICIAL (NOT ATTACHED TO
CASH DEPARTMENT) WILL KEEP A
RECORD OF ALL CASH RECEIPTS

65. BANKING
 AT THE END OF THE DAY THIS WILL
BE TALLIED WITH CASH
DEPARTMENT
 THIS ENSURES THAT ALL THE CASH
TENDERED BY THE CUSTOMERS IS
ACCOUNTED FOR.

66. BANKING
 AS AN ABUNDANT PRECAUTION (FOR
HIGH VALUE TRANSACTIONS), SAME
TRANSACTION IS PASSED THROUGH
SECOND OFFICIAL.
 ARMED GUARDS ARE PLACED
 BURGLAR ALARMS ARE PLACED.
 THE BUTTONS ARE KEPT IN STRATEGIC
PLACES IN BRANCH PREMISES.
 DIRECTLY CONNECTED TO NEAREST POLICE
STATION

67. BANKING
 CASH RECEIVED FROM
CUSTOMERS IS IDLE MONEY FOR
THE BANK.
 AFTER KEEPING SUFFICIENT CASH
FOR DAY TO DAY OPERATIONS,
THE BRANCHES DEPOSIT THE
EXCESS CASH WITH THE NEAREST
CURRECY CHEST
 THERE BY THEY EARN INTEREST.

68. BANKING
 IF THE AMOUNT OR FUNDS ARE
TRANSFERRED FROM ONE
ACCOUNT TO ANOTHER ACCOUNT
IN THE SAME BRANCH OR
ANOTHER BRANCH OF THE SAME
BANK.
 TRANSFER SCROLL IS MAINTAINED
 DEBIT TRANSFER AND CREDIT
TRANSFER MUST TALLY.

69. BANKING
 WHEN A CUSTOMER DEPOSITS A
CHEQUE IN HIS ACCOUNT WHICH IS
DRAWN ON ANOTHER BANK, THEN
IT NEEDS TO BE CLEARED BEFORE
CREDITING THE AMOUNT TO THE
ACCOUNT OF THE CUSTOMER.
 INWARD CLEARING AND OUTWARD
CLEARING