The document provides an overview of the Indian banking system. It discusses pre-independence and post-independence banking in India, including the nationalization of banks in 1969 and 1980. It covers the recommendations of the Narasimham Committees in 1991 and 1998 which focused on reforms. The types of banks in India are described including public sector banks, private sector banks, foreign banks, and regional rural banks. Key statistics regarding the assets and branches of different banks are also presented.

1. Indian Banking System
Presented By-
Abhinandan Singh
14810003
MBA 2ND Year

2. Post Independence Banking
Pre Independence Banking
Narasimham Committee 1
Nationalization
Narasimham Committee 2
Contents
Indian Banking System
Credit Information System
Payment Banks
Small Banks
01

3. Pre Independence Banking
Presidency Banks
New Features
Bank of Hindustan1770
1786 General Bank of India
1843
1806 Bank of Calcutta
1840 Bank of Bombay
Bank of Madras
• Limited Liability and Joint stock banks
• Issue of notes
• Deposit Banking
• Board of Directors 02

4. Pre Independence Banking
Presidency Banks
Business of Presidency Banks
• Discounting of bills of exchange or other negotiable private securities.
• Loans up to Rs. 1 lakh with a max payment period of 3 months. Interest
rates could not be higher than 12%.
• Loans against opium, indigo, cotton, tea, sugar, jute and silk were also
granted.
• Lending against shares of Banks, mortgage of houses, land or other property
was forbidden.
1861 Paper Currency Act was passed.
• Circulation was of the new currency was assigned to presidency banks.
03

5. Pre Independence Banking
Presidency Banks
1876
• Rapid branch expansion. By 1876, Bank of Bengal had 18 branches and
Bank of Bombay and Madras had 15 each.
Presidency Bank Act
• Brought Banks under common law.
• Creation of reserve treasuries at Calcutta, Bombay and Madras.
• Checked the growth of branches.
1869 -1920
1869 HSBC in Bengal.
1881 Oudh Bank of India, set up in Faizabad.
1895 Punjab National Bank ,set up in Lahore.(First bank to be purely managed by
Indians). 04

6. Pre Independence Banking
Presidency Banks
1934 Reserve bank of India act passed
• 1906 Bank of India(Bombay),Corporation Bank , Canara Bank(Mangalore).
• 1907 Indian Bank (Chennai).
• 1911 Central Bank of India (First bank to be completely owned by Indians).
• 94 Banks failed between 1913 and 1918 due to World War .
• Share capital of Rs. 5 crores. The share capital was divided into shares of
Rs.100.
• Privately owned except nominal amount of Rs. 2,20,000 .
1921 • Presidency banks with 70 branches are merged to form Imperial Bank of
India.
05

7. Post Independence Banking
1949
1955
1959
Reserve Bank was nationalized.
State Bank of India Act was passed in May 1955 and State Bank of India was
constituted on 1 July 1955.
State Bank of India(Subsidiary banks) Act was passed on 10 September.
Nationalization
The Government of India issued an ordinance ('Banking Companies
Acquisition and Transfer of Undertakings Ordinance, 1969') and the 14
largest commercial banks with effect from the midnight on 19 July
1969.These banks contained 85% of the bank deposits in the country.
06

8. Nationalization
Reasons
• Social Welfare
• Controlling Private Monopolies
• Expansion of Banking
• Reducing Regional Imbalance
• Priority Sector Lending
Source: RBI.org.in 07

9. Nationalization
Banks Nationalized
19 July 1969
1. Allahabad Bank
2. Bank of Baroda
3. Bank of India
4. Bank of Maharashtra
5. Canara Bank
6. Central Bank of India
7. Dena Bank
8. Indian Bank
9. Indian Overseas Bank
10. Punjab National Bank
11. Syndicate Bank
12. Union Bank
13. United Bank of India
14. UCO Bank
15 April 1980
1. Andhra Bank
2. Corporation Bank
3. New Bank Of India
4. Oriental Bank of Commerce
5. Punjab & Sindh Bank
6. Vijaya Bank
6 banks with deposits above Rs. 200 crores were nationalized.1980
08
14 banks with deposits above Rs. 50 crores were nationalized.1969

10. Narasimham Committee 1
Banks were under looses due to1991
09
1. Declining interest income
2. Increasing cost of operations
Reasons for declining interest income:
1. High proportion of deposits impounded for CRR and SLR, earning relatively low
interest rates.
2. System of directed lending .
3. Political interference leading to huge NPAs .
Narasimhan Committee (Committee on the Financial System – CFS) was appointed
by Manmohan Singh on 14 August 1991.

11. Narasimham Committee 1
Narasimham Committee Observations
10
• Directed Credit Program.
• Interest Rate Structure.
Recommendations
• Reduction in the SLR and CRR.
• Phasing out Directed Credit Program.
• Structural Reorganizations of the Banking sector.
 Three to four big banks including SBI should be developed as international banks.

12. Narasimham Committee 1
11
 Eight to Ten Banks having nationwide presence should concentrate on the national
and universal banking services.
 Local banks should concentrate on region specific banking.
 RRBs (Regional Rural Banks should focus on agriculture and rural financing.
 No more nationalization.
 Private and foreign banks should be allowed liberal entry in to India.
• Establishment of the ARF Tribunal.
• Removal of Dual control.
• Banking Autonomy.

13. Narasimham Committee 1
12
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09 SBI
PNB
CBI
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
July 2015
SBI
PNB
ICICI
HDFC
AXIS
GNPA as percentage of advances
Source: Quarterly report(Moneycontrol.com)Source: Statistical Tables Relating to Banks in India (1996-2010,RBI)

14. Narasimham Committee 1
13
SLR and CRR over last two decades
Source:RBI
0
10
20
30
40
1990 1995 2000 2005 2010 2015
SLR
0
5
10
15
1990
1995
2000
2005
2010
2015
CRR

15. Narasimham Committee 2
14
Recommendations
• Strengthening banks in India in the context of the CRAR
• Narrow Banking
• Bank ownership and recruitment practice
• Review of banking laws
• Creation of asset reconstruction funds or asset Reconstruction companies
• Asset Quality

16. Indian Banking System
15
Source:RBI,2014(Except Indian Nationalized and Private Banks). Source:2nd Schedule, Banking Regulation Act 1949( Nationalized and Private Banks)

17. Commercial Bank
16
• A commercial bank is a financial institution that is authorized by law to accept
demand and time deposits which can be withdrawn by cheque,draft or otherwise
and uses it to loan and invest with aim of earning profit.
Its Function can be divided in to two parts.
• To Accept Deposits (Current,Fixed and Saving).
• To Give Loan and Advances (Cash Credit, Demand Loans and Short Term Loans).
• Investment (Govt. securities and other approved securities).
Primary

18. Commercial Bank
17
• Agency functions
a. Transfer of funds
b. Collection of dividends, interest on shares and debentures is made on behalf of
its customers.
c. Payment of various items
d. Purchase and sale of shares and securities
e. Act as Trustee and Executor of Property of its customers on advice of its
customers
f. Letter of References
• Performing general utility services
a) Traveller’s cheques
b) Locker facility
c) Underwriting securities issued by government, public or private bodies
d) Purchase and sale of foreign exchange currency
Secondary

19. Commercial Banks
18
Scheduled Banks
A scheduled bank is a bank which is listed in the 2nd Schedule of the Reserve Bank of
India Act, 1934.
• All scheduled banks must maintain a reserve capital of Rs.5 lakhs in
the Reserve Bank of India.
For Co-operative bank to be scheduled
 Deposits not less than Rs. 750 crore on a continuous basis for 1 year.
 Capital adequacy ratio of 12%, and continuous net profit for the previous
three years.
 NPA should be less than 5%.
• Eligible for loans from the Reserve Bank of India at bank rate.
• Membership to clearing houses.
Benefits

20. Commercial Banks
19
Scheduled Banks
Public Sector Banks
Public Sector Banks are the banks in which majority stake (i.e. more than 50%) is held by a
government.
• It includes SBI + 5 Associates + 19 Nationalized Banks + IDBI + Bhartiya Mahila Bank
• IDBI attained the status of a limited company viz(IDBI Ltd.), through
Industrial Development Bank (Transfer of Undertaking and Repeal) Act,
2003.
• The Reserve Bank of India, in 2004 incorporated IDBI as a scheduled bank
under the RBI Act, 1934.
• The commercial banking arm, IDBI Bank, was merged into IDBI in 2005
• State Bank of India is the largest bank both in terms of market capitalization and
assets followed by Bank of Baroda and Punjab National Bank.

21. Commercial Banks
20
Scheduled Banks
Public Sector Banks
1969
1. Allahabad Bank
2. Bank of Baroda
3. Bank of India
4. Bank of Maharashtra
5. Canara Bank
6. Central Bank of India
7. Dena Bank
1980
1. Andhra Bank
2. Corporation Bank
3. New Bank Of India
4. Oriental Bank of Commerce
5. Punjab & Sindh Bank
6. Vijaya Bank
State Bank of India
1. State Bank of Bikaner & Jaipur
2. State Bank of Hyderabad
3. State Bank of Mysore
4. State Bank of Patiala
5. State Bank of Travancore
SBI and Associate Banks
Nationalized Banks
8. Indian Bank
9. Indian Overseas Bank
10. Punjab National Bank
11. Syndicate Bank
12. Union Bank
13. United Bank of India
14. UCO Bank
2004
• IDBI Bank
2013
• Bhartiya Mahila Bank

22. 21
• Majority of share capital is held by private individuals and corporate.
• Catholic Syrian Bank
• City Union Bank
• Dhanlaxmi Bank
• Federal Bank
• Jammu & Kashmir Bank
• Karnataka Bank
• Karur Vysya Bank
• Lakshmi Vilas Bank
• Nainital Bank
• South Indian Bank
• Tamilnadu Mercantile Bank
• RBL Bank
• Axis Bank
• Bandhan Bank
• DCB Bank
• HDFC Bank
• ICICI Bank
• IDFC
• IndusInd Bank
• Kotak Mahindra Bank
• Yes Bank
Old Private Sector Banks New Private Sector Banks
Commercial Banks
Scheduled Banks
Private Sector Banks
Indian Banks

23. Commercial Banks
22
Scheduled Banks
Private Sector Banks
Foreign Banks
Banks that have their registered and head offices in a foreign country but operate
their branches in India.
Minimum capital
requirement
INR 5 billion
Minimum CRAR 10%
Priority sector lending
targets
40% (For banks with 20 or more branches, those with with less
than 20 have five year transition period )
Raising of funds in
India
Permitted to raise non-equity INR resources, may list in three years
Branch licensing At par treatment with domestic banks with some ‘restricted’
sensitive areas
Requirements and Regulations for Foreign Banks

24. Commercial Banks
23
Scheduled Banks
Private Sector Banks
Foreign Banks
Requirements and Regulations for Foreign Banks
Mergers and acquisitions Foreign banks WOS may be permitted based on permission.
Board of directors Minimum 50% Indian resident directors and minimum one third
independent directors, minimum two-third non-executive
directors.
Unbanked and rural
branches
25% branches in unbanked, rural areas

25. Commercial Banks
24
Scheduled Banks
Private Sector Banks
Foreign Banks
• 43 Foreign Banks from 26 countries operating as Branches,46 countries from 22
countries operating as representative offices.
An external commercial
borrowing (ECB) is an
instrument used in India
to facilitate the access to
foreign money by Indian
corporations and PSUs.
• Focus on trade finance, external commercial borrowing, wholesale lending,
investment banking and treasury activities.
Contribution of investment and fee income to revenues compared to domestic banks.
Source :Database on the Indian Economy,RBI.

26. Commercial Banks
25
Scheduled Banks
Private Sector Banks
Foreign Banks
Foreign bank branches by population center
Source :Bank Branch Statestics,Database on the Indian Economy,RBI.

27. Commercial Banks
26
Scheduled Banks
Private Sector Banks
Foreign Banks
Foreign banks’ share of banking asset and deposits
Source :Database on the Indian Economy,a profile of banks 2012-13,RBI.
Foreign Banks Public Sector
Banks
Private Sector
Bank
Number of Banks 43 26 20
Number of Branches 327 75779 16001
Share of Deposits 4% 77% 19%
Share of Assets 6% 74% 20%
• 11% of the total profit of Commercial Banks.

28. Commercial Banks
27
Scheduled Banks
Comparison of Assets as Percentage of Total Asset of Scheduled Commercial
Banks(Excluding RRBs)
Source :Statistical Tables Relating To Banks In India,RBI(2014-2000).
2000 2005 2010 2014
SBI & Associates 30.29% 26.62% 23.43% 21.14%
Nationalised Banks 49.95% 48.69% 50.25% 51.53%
Public Sector Banks 80.24% 75.31% 73.68% 72.68%
Private Sector Banks 12.30% 18.17% 19.09% 20.60%
Foreign Banks 7.46% 6.52% 7.22% 6.72%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
Percentageoftotalasset

29. Commercial Banks
28
Scheduled Banks
Asset of Banks as Percentage of Total Assets of Scheduled Commercial Banks (Excluding RRBs)
1.322% 1.202% 1.194%
5.423%
4.483%
3.495%
6.015%
5.228% 5.020%
16.347%
0.000%
1.000%
2.000%
3.000%
4.000%
5.000%
6.000%
7.000%
8.000%
9.000%
10.000%
11.000%
12.000%
13.000%
14.000%
15.000%
16.000%
17.000%
18.000%
19.000%
20.000%
Citi Bank HongKong & Shanghai Bank Standard Chartered
ICIC Bank HDFC Bank Axis Bank
BOB BOI PnB
SBI
Source :Bank Branch Statestics,Database on the Indian Economy,RBI.

30. Commercial Banks
29
Scheduled Banks
Public Sector Banks
Regional Rural Banks
• Established under the provisions of Ordinance passed on 26 September 1975 and the
RRB Act.
• To develop the rural economy and to create a supplementary channel to the
cooperative credit structure and enlarge institutional credit for the rural and
agriculture sector.
The RRBs were owned by three entities with their respective shares as follows:
• Central Government → 50%
• State government → 15%
• Sponsor bank → 35%

31. Commercial Banks
30
Scheduled Banks
Public Sector Banks
Regional Rural Banks
Expansion and Amalgamation
• 12606 branches by 1985.
• Khusrau Committee,1989(Agricultural
Credit Review Committee) suggested
to merge RRBs with sponsor banks.
Source : RBI

32. • States of Tripura, Nagaland, Manipur, Mizoram, Arunachal Pradesh and
Meghalaya have state-level RRBs. Gujarat and Karnataka too have demanded
formation of state level RRB.
Commercial Banks
31
Scheduled Banks
Public Sector Banks
Regional Rural Banks
Expansion and Amalgamation
• In 2005 based on Dr. Vyas Committee recommendations amalgamation of RRBs was
started in 2005.
• RRBs were asked to have CRAR of at least 7% by 31 March 2011 and at least 9%
from 31 March 2012 onwards.
• A fund of Rs. 100 crore to be set up each year for training and capacity building of
the RRB staff.

33. Commercial Banks
32
Scheduled Banks
Public Sector Banks
Regional Rural Banks
The Regional Rural Banks (Amendment) Bill, 2015
• Sponsor banks is required to provide managerial and financial assistance for
the first five years. The Bill removes the five year limit, thus allowing such
assistance to continue beyond this duration.
• Authorized capital: The Act provides for the authorized capital of each RRB to
be Rs. 5 crore. Authorized capital can not be reduced below Rs 25 lakh. The Bill
raised the amount of authorized capital to Rs 2,000 crore with lower limit of
Rs. 1 crore.
• Change in the limit of share holding by central government, state government
or sponsor bank.

34. Commercial Banks
33
Scheduled Banks
Public Sector Banks
Regional Rural Banks
The Regional Rural Banks (Amendment) Bill, 2015
• Closure and balancing of books: The Bill changed the date od closure and
balancing to March 31 to bring the Act in uniformity with the financial year.
• Directors elected by shareholders to be based on percentage equity share held
by share holder .
• 635 Districts
• 17856 Branches
• GNPA 5.03
• Profit Rs. 3281 Cr.
• Assets Rs. 351295 Cr.
Current Status of RRBs
Source:RBI,2014.

35. Commercial Banks
34
Non Scheduled Banks
History
The Local Area Banks (LABs) are small private banks, conceived as low cost structures
aimed to provide efficient and competitive financial intermediation services in a limited
area of operation, i.e., primarily in rural and semi-urban areas, comprising three
contiguous districts.
• Started in 1996,after announcement of then finance minister.
• 227 applications received by RBI.
• ‘in principle’ approvals for establishment of 10 LABs were issued and 3
applications are under examination.
• 5 banks were licensed under section 22 of Banking Regulation Act 1949. Of
these, only 4 LABs are functioning at present. 1 application is pending.

36. Commercial Banks
35
Non Scheduled Banks
Criteria needed to apply for LAB
• Minimum start-up capital of Rs. 5 crore.
• The promoters of the bank may comprise of private individuals, corporate
entities, trusts and societies.
• The promoters of these banks were required to bring in the entire minimum
share capital up-front.
• Family among the promoter group could not hold equity of more than 40% of
capital.
Current Scenario
• Financially successful but failed to serve its purpose.
• Allowed to open only 5-6 branches by permission of RBI.

37. Commercial Banks
36
Non Scheduled Banks
Bank Assets
(INR Cr.)
Profit
(INR Cr.)
Branches
Capital Local Area Bank
(Jalandhar)
1139.8 14.22 38
Costal Local Area Bank
(Vijaywada)
535.1 6.93 39
Krishna Bhima Samruddhi Local Area Bank
(Mahabubnagar)
168.7 10.6 19
South Gujarat Local Area Bank NA NA NA
Source: Balance sheet of respective banks,2014.

38. Co-operative Banks
37
Urban Co-operative Banks
A co-operative bank is a financial entity which belongs to its members, who are at the
same time the owners and the customers of their bank.
• Often created by people belonging to the same local or professional
community or sharing a common interest.
• More than 200 million members.
• 67% penetration in villages .
• 46% of the total rural credit.
Urban Cooperative Banks (UCBs) are the banks which are registered as cooperative
societies under the provisions of, either the State Cooperative Societies Act of the State
concerned or the Multi State Cooperative Societies Act, 2002.

39. Co-operative Banks
38
Urban Co-operative Banks
Duality of Control- Banking related functions (viz. licensing, area of operations, interest
rates etc.) are governed by RBI and registration, management, audit and liquidation, etc.
governed by State Governments as per the provisions of respective State Acts.
Deposits Rs. 276900 cr.
Assets Rs. 337000 cr.
Source:RBI’s report on co-operative banks,2013.

40. Co-operative Banks
39
Rural Co-operative Banks
• Short term- Seasonal agricultural operations, primary weavers.
• Long Term - Long term lending to cultivators by way of floatation of debentures
in vital areas such as Minor Irrigation, Farm Mechanization etc.
Source:RBI’s report on co-operative banks,2013.

41. Co-operative Banks
40
Rural Co-operative Banks
Short Term Lending Banks
State Co-operative Banks
SCBs are the apex institutions in the three-tier cooperative credit structure,
operating at the state level.
• Every state has a state cooperative bank. SCB grants loans to District Central
Cooperative Banks and regulates their activities.
• SCB gets loans from RBI.
• SCB acts as a link between RBI and District Central Cooperative Banks.
Borrowings of SCBs are mainly from the Reserve Bank of India and the rest
from state governments.

42. 41
• The working area of these banks is limited to one district only.
Types
i. Cooperative Banking Unions whose membership is open only to
cooperative societies. This exists in Punjab, Haryana, Rajasthan, Orissa and
Kerala.
ii. Mixed Central Cooperative Banks whose membership is open
to both individuals and cooperative societies.
• The duration of loans vary from one year to three years.
• DCCB plays a bridge role between the state cooperative banks and
primary credit.
Co-operative Banks
Rural Co-operative Banks
Short Term Lending Banks
District Central Co-operative Banks

43. 42
Co-operative Banks
Rural Co-operative Banks
Short Term Lending Banks
PACCS
• Primary Agricultural Cooperative Credit Society are village level institution
which directly deals with rural people.
• It provides short term credit facilities to the agriculture sector. Minimum 10
persons of a village can form a primary credit society.
• The management of the society is under the control of an elected body.
• The working capital of the primary credit societies, comes from their own funds,
deposits, borrowings and other sources.

44. 43
Co-operative Banks
Rural Co-operative Banks
Long Term Lending Banks
SCARDBs and PCARDBs
• SCARDB -State Co-operative Agriculture and Rural Development Banks
• PCARDB -Primary Co-operative Agriculture and Rural Development Banks
• The PCARDBs make long-term lending for schemes associated with increasing
the agricultural output such as digging of bore-well, farming machinery etc.
• SCARDB is aimed at raising resources of for long term lending to cultivators by
way of floatation of debentures in vital areas such as Land Development,
Horticulture, Wasteland Development, Rural Housing, Rural Warehouses, Non-
Farm Sector and Animal Husbandry.

45. 44
Co-operative Banks
SCBs DCCBs PACBs SCARDBs PCARDBs
Assets(INR cr.) 1,47900 257300 165000 29400 26200
Profit(INR cr.) 500 1400 -2000 -200 -200
NPA(% of loan outstanding) 6.8 9.7 26.8 33.1 38.6
Source: RBI’s report on co-operative banks,2013.
Comparison of Co-operative Banks

46. 45
Credit Information System
Benefits
• Reduced cost of intermediation.
• Efficient pricing, target and monitoring of loans.
• Reduced credit defaults, reduced average interest rates.
• More capital for further credit growth.
• Objective and transparent scrutiny/processing of credit proposals.
• Monitoring of build-up of systemic of unregulated sectors.
• Disciplined and better credit behavior.

47. Credit Information System
2000
2004
2005
Credit Information Bureau (India ) Limited.
46
Consumer Bureau 4 million .Currently 260 million records.
2006
2010
2011
Commercial Bureau 0.7 million records .Currently 12 million records.
Equifax and Experian.
High Mark Credit Information Services.
Credit Information Companies (Regulation) Act.

48. Credit Information System
01
CIBIL
55%
10%
7%
5%
5%
5%
5%
5% 3%
Share Holding Pattern TransUnion International Inc 55%
ICICI Bank Ltd 10%
State Bank of India 7%
Indian Overseas Bank 5%
The Hongkong and Shanghai Banking
Corporation 5%
Union Bank of India 5%
Bank of India 5%
Bank of Baroda 5%
Allahabad Bank 3%

49. Credit Information System
48
CIBIL
Functioning
• Credit Information
Report (CIR)
• CIBIL TransUnion Score

50. • Credit Information Report (CIR)
01

51. Credit Information System
50
CIBIL
Factors Affecting CIBIL TransUnion Score
CIBIL TransUnion Score
• Ideal above 750
• NA or NH
• Late payment or defaults in the recent past.
• High utilization of credit limits.
• Percentage of unsecured loans.
• Credit hungry behavior.

52. Credit Information System
51
CIBIL
CIBIL TransUnion Score 2.0
• Risk index score range for credit history of less than 6 months.
• Well defined NA/NH.
• Lower Score .
NA/NH interpretation
Individual has no credit history & it has not been reported.
Individual has credit history but none that is reported in the 24 months prior to
enquiry.

53. Credit Information System
52
Aditya Puri Committee Recommendations
On International Standards
• Free credit reports to each customer and customer’s views on disputed items
in the credit information reports.
• Easier rectification through bank branch.
• Access to employers.
• More inclusive information covering utilities and criminal convictions.
Example - Tax statements, individual’s income and other personal financial
information, utility payment records/telecom data, cheque bouncing,
bankruptcies and court judgments.

54. Credit Information System
53
Aditya Puri Committee Recommendations
On increasing coverage of credit information
• Membership of all commercial banks and financial institutions, including HFCs
and SFCs .
• Allow co-operative banks and NBFCs with asset base of Rs. 100 crore.
• Consistency of data formats.
• Common Data Quality Index.
On data formats

55. Credit Information System
54
Aditya Puri Committee Recommendations
On credit information report
• Common classification of Credit Scores.
• Details of co-borrower and guarantor.
• Data on property mortgages through CERSAI.

56. Payment Banks
55
Objective
Improve financial inclusion by
i. Small savings accounts .
ii. Payments/remittance services to migrant labor workforce, low income
households, small businesses, other unorganized sector entities and other users.
Regulations and Requirements
• Minimum capital requirement is Rs. 100 crore.
• Minimum 40% promoter stake for the first five years.
• Foreign share holding as per FDI norms for private banks.

57. Payment Banks
56
• Voting right of any shareholder is capped at 10% and any acquisition of
over than 5% will require approval of the RBI.
• Deposit per costumer should not exceed Rs. 1,00,000.
• 25 % of its branches must be in the unbanked rural area.
• The bank must use the term "payments bank" in its to differentiate it from
other types of bank.
• 75 % of demand deposits in government securities/treasury bills with maturity
up to one year .
• 25 % of demand deposits with other scheduled commercial banks.

58. Payment Banks
57
Scope of activities
• Acceptance of demand deposits.
• Issuance of ATM/debit cards.
• Bank Credit from another bank.
• Issuance of financial products like mutual fund units, insurance and pension
products.
• Acceptance of utility bills.

59. Payment Banks
58
Potential
• Contribute to PMJDY.
• Payment Wallets.
• Last mile reach and easy deposits for low income group and daily wage earners.
• Rs. 14 trillion (Rs .14 lakh crore) per annum for credit needs.

60. Payment Banks
59
Entities that have received the license

61. Small Banks
60
Objective (RBI)
Financial inclusion by -
i. Provision of savings vehicles.
ii. Supply of credit to small business units; small and marginal farmers; micro and
small industries; and other unorganized sector entities, through high
technology-low cost operations.
Regulations and Requirements
• Minimum paid-up equity capital of Rs. 100 crore.
• Promoters –
i. Resident individuals/professionals with 10 years of experience in banking and finance.
ii. Companies and societies owned and controlled by residents.

62. Small Banks
61
• Promoter's contribution should be at least 40 % ,can be brought down to 26 in
12 years.
• 75 % of its Adjusted Net Bank Credit (ANBC) to priority sector lending.
• At least 50 per cent of loan portfolio should constitute loans and advances of
up to Rs. 25 lakh.
• Maximum loan size and investment limit exposure to single/group should
not exceed 15% of capital funds.
• For the first three years, 25 per cent of branches should be in unbanked rural
areas.
RBI has received 72 applications. These will be evaluated by an external
advisory committee headed by Usha Thorat (Ex Deputy Governor RBI).