Overview of Banking & fs in india 12022020

Overview of Banking &
Financial Services in India
Guest Lecture by
Prof Chowdari Prasad
Bangalore
Date February 12, 2020

2/21/2020 Orientationn of IBMR MBAs 2018-20 2

2/21/2020 Banking & Financial Services 2020 4

2/21/2020 5Banking & Financial Services 2020

2/21/2020 Introductory Seminar 13072016 9

Fin’l Services (108+10,082 NBFCs)
• Depository Services, Leasing, HP
• Stock Broking / Online Trading
• Merchant Banking / Issue Management
• Consumer Finance, Securitisation (ARCs)
• Credit Rating Agencies, Microfinance
• Venture Capital / Private Equity
• Mutual Funds, BD., Factoring, Forfaiting,
Credit Cards, Credit Info, HF, Insurance,etc

Valuable Quote from Ajim Premji

Indian Banking - Significant events
• Three presidency banks were established as Bank of Calcutta (1806),
Bank of Bombay (1840) and Bank of Madras (1843)
• In the early part of 20th century, on account of the Swadeshi movement
a number of joint stock banks were established by Indians like Bank of
India, Bank of Baroda and Central Bank of India.
• In 1921, the three presidency banks were merged and Imperial Bank of
India (IBI) was created carrying out commercial and central banking!
• During the period 1900 to 1925 many banks failed, and the Government
appointed in 1929 a Central Banking Enquiry Committee to trace the
reasons for the failure of banks.
• The Reserve Bank of India Act was passed in 1934 and the RBI came
into existence in 1935 and RBI was nationalised in 1949
• The Banking Regulation Act,1949 gave wide powers to RBI to act as the
regulator for banks in India

Banking in India
Banking in India is governed by Banking Regulation
Act, 1949 and Reserve Bank of India Act,1934
Banking in India is controlled/monitored
by RBI and Govt. of India
The controls for different banks are different
based on whether the bank/s is/are
a) statutory corporation
b) a banking company
c) a cooperative society

Banking Regulation Act,1949 (BR Act)
• BR Act covers banking companies and
cooperative banks, with certain modifications.
• BR Act is not applicable to
a) primary agricultural credit societies
b) land development banks
BR Act allows RBI (Sec 22) to issue licenses for banks and
BR Act deals with regulation, control over management,
suspension and winding up as well as levying of penalties

ADMINISTRATION AND OPERATIONS
1. BANKING REGULATIONS ACT, 1949
2. RESERVE BANK OF INDIA ACT, 1934
3. STATE BANK OF INDIA ACT, 1955 & SBI
SUBSIDIARIES ACT, 1959
4. DEPOSIT INSURANCE CORPORATION ACT,
1962
5. NEGOTIABLE INSTRUMENTS ACT, 1881
6. PRUDENTIAL NORMS, 1993
7. CONSUMER PROTECTION ACT 1986

DEPOSIT ACCOUNTS
1. THE INDIAN CONTRACT ACT,
1872
2. THE INDIAN PARTNERSHIP
ACT, 1931
3. THE NEGOTIABLE
INSTRUMENTS ACT, 1881
4. FOREIGN EXCHANGE
REGULATION ACT, 1973
(FEMA-2000)
5. BANKERS’ BOOKS EVIDENCE
ACT, 1891
6. INCOME TAX ACT, 1961
7. THE INDIAN SUCCESSION ACT, 1925
8. THE INDIAN TRUSTS ACT, 1882
9. THE INDIAN COMPANIES ACT, 1956
10. CONSUMER PROTECTION ACT,
1986
11. THE DEPOSITORIES’ ACT, 1996
12. BANKING OMBUDSMAN SCHEME,
1995
13. INFORMATION TECHNOLOGY ACT,
2000
14. KYC Norms, Anti Money
Laundering Laws, etc.

LOAN ACCOUNTS
1. THE INDIAN COMPANIES ACT, 1956
2. THE INDIAN TRUSTS ACT, 1882
3. INDIAN PARTNERSHIP ACT, 1931
4. INDIAN CONTRACT ACT, 1872
5. LIMITATION ACT, 1963
6. URBAN LAND (CEILING &
REGULATION) ACT, 1976
7. SICK INDUSTRIAL COMPANIES ACT,
1986
8. THE BILLS OF EXCHANGE ACT,
1906
9. THE NEGOTIABLE
INSTRUMENTS ACT, 1881
10.SMALL LOANS GUARANTEE
SCHEME, 1971
11. SMALL LOANS (SSI)
GUARANTEE SCHEME, 1981
12. FOREIGN EXCHANGE
REGULATION ACT, 1973 :
(FEMA – 2000)
13. STAMP ACT
14. HIRE PURCHASE ACT, 1972

LOAN ACCOUNTS……2
15. UNIFORM CUSTOMS AND
PROCEDURES FOR
DOCUMENTARY CREDITS – ICC
– 1993 – Publication No. 600
16. EXPORTS CREDIT
GUARANTEE SCHEME
17. CONSUMER PROTECTION
ACT, 1986
18. INDIAN STAMP ACT, 1899
19. REGISTRATION ACT,
20. TRANSFER OF PROPERTY
ACT
21. INCOME TAX ACT, 1961
22. BANKERS’ BOOK OF
EVIDENCE ACT, 1891
23. BANKING OMBUDSMAN
SCHEME, 1995
24. RECOVERY OF DUES TO
BANKS AND FINANCIAL
INSTITUTIONS ACT, 1993 (REG.
DEBT RECOVERY TRIBUNALS)
25. SARFAESI Act
26. Insolvency and Bankruptcy
Code

PERSONNEL ADMINISTRATION
• PAYMENT OF WAGES ACT
• BONUS ACT
• WORKMEN’S COMPENSATION ACT
• PROVIDENT FUND ACT
• GRATUITY ACT
• MINIMUM WAGES ACT
• AWARDS/AGREEMENTS

Indian Banking -Significant events
• In 1955, State Bank of India became the successor to the
Imperial Bank of India, under the State Bank of India Act,1955.
• In 1959, State Bank of India (Subsidiary Banks) Act was passed
to enable SBI to take over State Associated banks as SBI’s
subsidiaries (SBH, SBT, SBBJ, SBIn, SBP, SBM, SB Saurashtra)
• In 1969, the Government of India nationalised 14 major
commercial banks having deposits of Rs.50 crore or more
• In 1975 Regional Rural Banks were established under RRB Act
1976, which was preceded by RRB Ordinance in 1975
• In 1980, six more commercial banks were nationalised, with a
deposit of Rs.200 crore or more

Progress of banking in India
• In the liberalised, privatised and globalised (LPG)
environment (1991), banks operating in India
have diversified their banking activities by
offering Para Banking facilities like
• Merchant banking / Mutual funds
• ATMs/ Credit Cards/ Internet banking
• Venture capital funds, Factoring, Bancassurance
• Banking Sector Reforms (1991, 1998 and 2008) /
Prudential Norms, NPAs, Basel I, II and II Norms,
ALM, RM, DRTs, SARFAESI Act, IBC, etc...

CFS Reforms 1991 : Accepted
• Lowering SLR and CRR
• Prudential Norms
• Capital Adequacy Norms
• Deregulation of Interest Rates
• Recovery of Debts
• Competition from New Private Sector Banks
• Phasing Out Of Directed Credit
• Access to Capital Market
• Local Area Banks
• Supervision from commercial banks

CFS 1998 : Implemented
Recommendations by M Narasimham
• New areas
• New instruments
• Risk management
• Customer service
• Universal banking
• Information technology
• Increase in FDI limit
• Mergers And
Amalgamations
• Guidelines For Anti-
Money Laundering
• Managerial Autonomy
• Increase of inflow credit
• Strengthen technology
• Base Rate System Of
Interest Rates
• Adoption of global
standards
• Management of NPAs

11 Payment Banks licensed by RBI
: 2015
1 Aditya Birla Nuvo
2 Airtel M Commerce Services
3 Cholamandalam Distribution Services
4 Department of Posts
5 FINO PayTech
6 National Securities Depository
7 Reliance Industries
8 DilipShanghvi, (founder of Sun Pharmaceuticals)
9 Vijay Shekhar Sharma, (CEO of Paytm)
10 Tech Mahindra
11 Vodafone M-Pesa

10 Small Finance Banks
• Names of selected applicants (Sept 16, 2015)
1. Au Financiers (India) Ltd., Jaipur
2. Capital Local Area Bank Ltd., Jalandhar
3. Disha Microfin Private Ltd., Ahmedabad
4. Equitas Holdings P Limited, Chennai
5. ESAF Microfinance and Investments Private Ltd., Chennai
6. Janalakshmi Financial Services Private Limited, Bengaluru
7. RGVN (North East) Microfinance Limited, Guwahati
8. Suryoday Micro Finance Private Ltd., Navi Mumbai
9. Ujjivan Financial Services Private Ltd., Bengaluru
10. Utkarsh Micro Finance Private Ltd., Varanasi

National Bank for Agriculture and
Rural Development (NABARD)
• NABARD Act was passed in 1981 and set up in July,
1982;
• Started operations in Nov 1982 by taking over the
developmental and refinancing functions of
Agricultural Refinance and Development
Corporation (ARDC) and Agricultural Credit Dept of
Reserve Bank of India
• Basic objective of establishing an apex institution
in the field of agricultural and rural development
finance in such a way as to integrate the financing
of various institutions involved in the development
of rural areas.

Small Industries Development Bank of
India
• Started operations in April 1990 ; Head quartered in
Lucknow / Mumbai
• As a wholly owned subsidiary of IDBI (since reverse-
merged with IDBI Bank)
• Taking over the Small Industries Development Fund
and National Equity Fund
• Principal financial institution for the promotion,
developing and financing of SSIs
• Initially, its income was from indirect lending ie., re-
financing
• Direct/indirect lending are @50-50 ratio

10 Types of Banks in India
(1,20,000 Brs + 2,05,201 ATMs)
1. State Bank of India (incl 7
Associate Banks)
2. 11 Public Sector Banks
(after recent mergers)
3. Old Private Banks (SIB,
Karnataka, CSB, KV, …)
4. New Private Banks
(HDFC, Axis, ICICI, Yes,
Kotak Mahindra, IDBI… )
5. 3 Local Area Banks
(Coastal, KB and
Subhadra)
6. 10 Small Finance Bks
(Jana, Ujjivan, ESAF)
7. 7 Payments Banks
(Airtel, Paytm, etc)
8. 46 Foreign Banks (Citi,
HSBC, SC, ANZ, etc)
9. 45 Regional Rural
(Grameena) Banks
10. 33 SCBs + 54 UCBs
• 12+22+3+10+7+46+45+87=232

10 Banking Channels in India
• Variety of Branches
• Call Centres
• ATMs
• Mobile Banking
• Points of Sale
• Business
Correspondents (BCs)
• Internet / Online
• Digital Banking
• Phone Banking
• App based

Variety of Bank Branches
• Agricultural Development Branches (Rural)
• Campus Branches (Univ., College, Company)
• Commercial / Corporate Accounts Branches
• Foreign Branches (USA, UK, Germany, S’pore)
• Government A/c or Treasury Branches
• Industrial Finance / SME / Mid-Corp Branches
• Ladies / NRI / Overseas / Personal Banking
• Service Branches / Village / Satellite Branches

Role of Commercial Banks in the
Economic Development of a Country
1. Help Savings and investment
2. Banks promote capital formation
3. Banks help promotion of trade and industry
4. Investment in new enterprises
5. Development of Agriculture
6. Balanced Regional Development
7. Influence economic activities
8. Facilitate implementation of Monetary Policy
9. Export promotion and earning of Foreign
Exchange

Types of Bank Customers
• Agriculturists / Rural Artisans
• Individuals / Minors / Non-Resident Indians / Senior
Citizens
• Sole Proprietors / Small Business Firms
• Professionals / Engineers/ Lawyers / Doctors / CAs/
Architects / Consultants
• Partnership Firms / Commission Agents / Brokers
• Clubs / Associations / Societies / Trusts
• Private / Public Limited Companies
• MSME / Entrepreneurs
• Export-Import Firms
• Public Sector Enterprises
• Multi-National Companies
Retail n Wholesale Banking 45

Products & Services of a Bank – Customer
Segmentation : Personal / Corporate / SME /
NRI / International / Agricultural customers
• DEPOSITS (Short Term / Long Term)
– Current Accounts & Savings Bank Accounts (CASA)
– Recurring Deposits / Fixed Deposits/ Others
• ADVANCES (Fund based / Fee based)
– OD, Cash Credit, Demand Loans, Term Loans, Bridge Loans, etc
– Bills Discounting, Guarantees and Letters of Credit
– Car Loan, Educational Loan, Housing, Personal and Gold Loans
• OTHER SERVICES
– Safe Deposit Lockers, Safe Custody, PMS, Collections, Fexch.,
Remittances, Credit / Debit Cards, ATM Facility, Net Banking
• INVESTMENTS

Floating ATM of State Bank of India

10 Varieties of ATMs in India
1. On-site ATMs
2. Off-site ATMs
3. Solar based ATMs
4. Bio-metric ATMs (for
illiterate customers)
5. Floating ATMs (SBI)
6. Mobile ATMs (Van)
7. Micro ATMs
8. White-labelled ATMs
9. Brown-labelled ATMs
10. And now…..Talking
ATMs (for blind in
Canada : Oct 22,1997) -
from UBI in Ahmedabad
in Sept 2012;
-50 by NCR at India’s
Passport Offices!

Asset classification: The Committee on
Financial Sector (Narasimham, 1991)
recommended that the assets of the banks
should be classified into 4 categories:
Assets (Loans
&
Investments)
Standard
(Performing)
No provision
Sub-standard
(NPA)
10% provision
Doubtful
(NPA)
Secured
portion - 20-
50%
Unsecured -
100 %
provision
Loss assets
(NPA)
100%
provision

Committees of RBI for Technology in
Banks & Various Developments
• RBI formed 12 Working Groups and Expert Committees on
Mechanisation / Computerisation in the Banking Industry
(1982-2013)
• Major recommendations of these were on 1. MICR
Technology, 2.Use of standardized cheque forms/encoders,
3. Settlement operations in the Clearing Houses, 4.
Computerisation of branches by increasing their
connectivity, 5.Issues relating to Payments System, 6.
Cheque Clearing for Securities Settlement, 7. Electronic
Funds Transfer (EFT) System, 8.Electronic Banking, 9. ‘Doing
Banking by Using Technologies’ like - internet and
networking, 10.Cheque Truncation, etc., to increase
efficiency, 11. quick service, 12.productivity and
transparency.
5/2/2016 Digital Banking in India 52

Prudential norms for NPAs1985
First-ever system of NPA classification - ‘Health Code’ system
Classification of advances into eight categories ranging from 1
(Satisfactory) to 8 (Bad and Doubtful Debts)
1992
Prudential norms on income recognition, asset classification and
provisioning introduced
Restructuring guidelines introduced
Assets, where the terms of the loan agreement regarding
interest and principal is renegotiated or rescheduled after
commencement of production to be classified as sub-standard
 2001
90 day norm for NPAs introduced (effective from March 31, 2004)
specified asset classification treatment of restructured accounts
tightened

01 Agricultural Banking 02 Anywhere Banking 03 Any time Banking
04 Barefoot Banking 05 Branch Banking 06 Business Banking
07 Cooperative Banking 08 Commercial Banking 09 Convenience Banking
10 Core Banking 11 Corporate Banking 12 Correspondent
Banking
13 Central Banking 14Developmental Banking 15 Door Step Banking
16 E-Banking 17 Eco-Friendly Banking 18 Ethical Banking
19 Faceless Banking 20 Giri Giri Banking 21 Green Banking
22 Home Banking 23 International Banking 24 Internet Banking
25 Investment Banking 26 Inter-State Banking 27 Innovative Banking
28 Islamic Banking 29 Inclusive Banking 30 Lazy Banking
2/21/2020 69Introductory Seminar 13072016

31 Lean Banking 32 Lombard Banking 33 Mobile Banking
34 Narrow Banking 35 Online Banking 36 Overseas Banking
37 Palm Top Banking 38 Paper-less Banking 39 Personal Banking
40 Pigmy Banking 41 Priority Banking 42 Private Banking
43 Retail Banking 44 Relationship Banking 45 SMS Banking
46 Shadow Banking 47 Sustainable Banking 48 Tele-Banking
49 Transaction Banking 50 Universal Banking 51 Unit Banking
52 Video Banking 53 Virtual Banking 54 Village Banking
55 Wholesale Banking 56 Women’s World
Banking
Social? Micro? Gold / Tab / FB /
Community / Rural Banking???
2/21/2020 70Introductory Seminar 13072016

2/21/2020 71
IT & DEVELOPMENTS since 1970
• ALPMs
• CLEARING HOUSE
• CAR,CRR,SLR,PS,NPAs
• CREDIT/DEBIT CARDS
• NICNET,I-NET, RABMN
• INFINET, RBINET
• BANKNET, NDS, SFMS
• MICR, ATMs, SWIFT
• DEMAT, IT ACT-2000
• INTERNET BANKING
• ECS, EFT, SEFT, RTGS
• CROSS SELLING
• Interest Rate Deregulation
• ALM & RM, MIS
• CRM, KYC
• Core Banking Solutions
• KISAN /SME CARD
• CREDIT INFO BUREAU
• DISASTER MANAGEMENT
• Cheque Truncation
• CYBER CRIMES – HACKING,
PHISHING, VISHING,
PHARMING, TROJAN,
SKIMMING, ETC
• SMART CARDS
• Anti Money Laundering?
Introductory Seminar 13072016

Data from RBI @Jan 31, 2020
(Rs in Crores) and $ in Bn
1. Notes in Circulation : 22,84,706
2. Foreign Exchange Reserves : US$ 471.300
3. Aggregate Bank Deposits : 1,31,26,472
1. Demand Deposits (CASA) : 13,33,895
2. Time Deposits (FD and RD): 1,17,92,577
4. Bank Credit (Short & Long) 1,00,05,532
5. CRR 4%, SLR 19.75%, Credit Dep Ratio:
77.78

Bank Training Establishments
• Indira Gandhi Instt of Dev Research, Mumbai
• Institute for Dev of Research in Bk Tech, Hyd
• Bankers Training College, Mumbai
• Bankers Institute for Rural Development, Lkno
• National Instt of Bank Management, Pune
• College of Agricultural Banking, Pune
• Southern India Bankers Trg College, Bengaluru
• National Institute for Rural Development, Hyd
• All PSBs (SBI) and Pvt Banks also have Institutes
• Centre for Digital Financial Inclusion / Delhi /B’lore

South Indian Bank conducted a Campus Recruitment Drive
on 27th Jan'20. Jaidi Kamath cleared all the rounds and got
selected for the profile of Probationary Officer with the
annual package of Rs 9 lakhs.

JKSHIM team

Congratulations
• JKSHIM team consisting Meghana Suvarna and
Shridhara Shenoy G from our college attended
7th Asia-Pacific International Conference held at
Sydenham Institute of Management Studies,
Research and Entrepreneurship Education from
6-1-2020 to 7-1-2020 and got the 1st Prize as
"THE BEST PAPER" Award for the paper titled
"The association between Corporate
Governance Structure and Cost of Capital - The
Study of Indian Non-Financial firms”.

Congratulations !

Congratulations !!
• Team JKSHIM consisting of Chethan Nayak
and Sushma Kudva participated in Finance
event in USHUS 2019 - National level inter-
collegiate Management Event organised by
• Christ Deemed to be University in November
21st and 22nd, 2019 and secured 1st place.
• The team won Rs 9,500 cash prize and trophy.

Congratulations !!!
• JKSHIM team consisting Winston Dsouza and
@Chethan Nayak from second-year MBA has
been awarded as
• the runner-up of "Fin-dexterous" held at
Symbiosis Institute of Business Management,
Hyderabad hashtag#awards
hashtag#congratulation

Congratulations !!!!
• JKSHIM team consisting Pooja Upadhyay from
Second Year MBA and Manisha from First-year
MBA has been awarded as
• the First Prize winner of "Pirates of Black
Pearl" held at Symbiosis Institute of Business
Management, Hyderabad hashtag#awards
hashtag#congratulations

References
• https://en.wikipedia.org/wiki/Banking_in_India
• https://en.wikipedia.org/wiki/Bank
• http://www.iba.org.in/homepage.asp
• http://www.iibf.org.in/
• http://www.idrbt.ac.in/
• http://www.nibmindia.org/
• https://www.rbi.org.in/
• http://www.ibef.org/
• https://www.nabard.org/english/home.aspx
• http://www.sidbi.com/

Overview of Banking & fs in india 12022020

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