Basic Roles banks in Indian Economy

1. Subject Expert
Ms. Anamika Jaiswal
Role of Banks on economy

2. Objective of the Study
 The concept and importance of Banks
 The Role of Banks on economy

3. Definition of Bank
Bank is a lawful organization, which accepts
deposits that can be withdrawn on demand. It
also lends money to individuals and business
houses that need it.

4. Nationalization of Banks
 The act of taking an industry or assets into
the public ownership of a national
government or state.
 Nationalization took place in two phases,
with a first round in 1969 covering 14
banks followed by another in 1980
covering six banks.

5. Reasons for Nationalization
 Private commercial banks were not fulfilling the social and
developmental goals of banking
 The developmental goals of financial intermediation were not being
achieved other than for some favored large industries and
established business houses.
 To ensure that credit allocation occur in accordance with plan
priorities.
 Reduce the hold of moneylenders and make more funds available
for agricultural development. Nationalization of bank was to actively
involve in poverty alleviation and employment generation programs.

6. Importance of Banking
 It encourages savings habit amongst people and thereby makes funds available for productive
use.
 It acts as an intermediary between people having surplus money and those requiring money for
various business activities.
 It facilitates business transactions through receipts and payments by cheques instead of currency.
 It provides loans and advances to businessmen for short term and long-term purposes.
 It also facilitates import export transactions.
 It helps in national development by providing credit to farmers, small-scale industries and self-
employed people as well as to large business houses which lead to balanced economic
development in the country.
 It helps in raising the standard of living of people in general by providing loans for purchase of
consumer durable goods, houses, automobiles, etc.

7. Functions of Banks
 Primary Functions: include accepting deposits, granting
loans, advances, cash, credit, overdraft and discounting
of bills.
 Secondary functions: include issuing letter of credit,
undertaking safe custody of valuables, providing
consumer finance, educational loans, etc.

8. Challenges faced by the banking
sector
 Customer satisfaction
 To provide several personnel services
 Competition
 Managing Technology
 Market Discipline and Transparency
 Development of skill of bank personnel
 Changing needs of customers
 Manpower planning

9. Opportunities for Banking Industry
 Rural area customers
 Good customer services
 Internet Banking
 Offering various channels
 Product Differentiation
 Expansion

10. Growth of Indian Banking
 The banking system in India is the most
extensive. The total asset value of the entire
banking sector in India is nearly US$ 270 billion.
The total deposits is nearly US$ 220 billion.
 Banking sector in India has been transformed
completely. Presently the latest inclusions such
as Internet banking and Core banking have
made banking operations more user friendly and
easy.

11. TYPES OF BANK
 SAVINGS BANK
 COMMERCIAL BANKS
 INDUSTRIAL BANKS OR DEVELOPMENT BANKS
 LAND DEVELOPMENT BANKS OR AGRICULTURAL
BANKS
 INDIGENOUS BANKS
 CENTRAL/FEDERAL/ NATIONAL BANKS
 COOPERATIVE BANKS
 EXCHANGE BANK

12. SAVINGS BANK
 Saving Banks are established to create
saving habit among the people.
 These banks are helpful for salaried
people and low income groups.
 The deposits collected from customers are
invested in bonds, securities etc.

13. COMMERCIAL BANKS
 Commercial banks are established with an
objective to help businessman.
 These banks collect money from general public.
• It give short-term loans to businessmen by way
of cash-credits, over drafts etc.
 It provide various services like collecting
cheques, bill of exchange, remittance money
from one place to another place.

14. INDUSTRIAL BANKS /
DEVELOPMENT BANKS
 These banks collect cash by issuing shares
and debentures.
 It provide long-term loans to industries.
The main objective of these banks is to
provide
 Long-term loans for expansion and •
modernization of industries.

15. LAND DEVELOPMENT BANKS /
AGRICULTURAL BANKS
 Land mortgage of land development banks
are also known as Agricultural Banks.
 These are formed to finance agricultural
sector. • It also help in land development.

16. INDIGENOUS BANKS
 It means ‘Money Lenders’.
 They collect deposits from general public and
grant loans to the needy persons out of their
own funds as well as from deposits.
 These indigenous banks are popular in villages
and small towns.
 It perform combined functions of trading and
banking activities.

17. CENTRAL/FEDERAL/ NATIONAL
BANKS
 Every country of the world has a Central bank.
 In India, RBI ,In USA, Federal Reserve ,In UK, Bank of
England .
 These central banks are the bankers of the other banks.
 It provide specialized functions i.e. Issue of paper
currency, Working as bankers of government,
Supervising and controlling foreign exchange.
 A Central Bank is a non-profit making institution. • It
does not deal with the public, it deals with other banks.

18. COOPERATIVE BANKS
 Cooperative Banks are registered under
the Cooperative Societies Act, 1912.
 It give credit facilities to small framers,
salaried employees, small-scale industries
etc.
 These banks are available in rural as well
as urban areas.

19. EXCHANGE BANK
 These banks are mainly concerned with
financing foreign trade.
 Hong Kong Bank, Bank of Tokyo, Bank of
America are the examples of Foreign
Banks working in India.

20. ROLE OF BANKS IN THE ECONOMIC
GROWTH
 Capital Formation
 Monetization of Debts
 Regional Balance
 Consultancy Services
 Modernization of Business
 Regulation of Economic Activity
 Influence on Interest Rates
 Elastic Money Supply
 Promotion of Enterprise
 Development of Trade and Commerce

21. Banks are Entrepreneurs
 In recent days, banks have assumed the role of developing
entrepreneurship particularly in developing countries like India.
 It includes the formation of project ideas, identification of specific
projects suitable to local conditions, inducing new entrepreneurs to
take up these well-formulated projects and provision of counseling
services like technical and managerial guidance.
 Banks provide 100% credit for worthwhile projects, which is also
technically feasible and economically viable. Thus commercial
banks help for the development of entrepreneurship in the country.

22. Banks as Employers
 After the nationalization of big banks, banking
industry has grown to a great extent.
 Bank’s branches are opened in almost all the
villages, which leads to the creation of new
employment opportunities.
 Banks are also improving people for occupying
various posts in their office.

23. Encouraging Right Type of
Industries
 The banks help in the development of the right
type of industries by extending loan to right type
of persons.
 They help not only for industrialization of the
country but also for the economic development
of the country.
 They grant loans and advances to
manufacturers whose products are in great
demand.

24. Recent Trends in Banking Sector
 Digitization
 Enhanced Mobile Banking
 UPI (Unified Payments Interface
 Block Chain
 Artificial Intelligence Robots
 The rise of Fintech Companies
 Digital-Only Banks
 Cloud Banking
 Biometrics
 Wearables

25. THANK YOU