Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India. Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks, 31 private banks and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. INTRODUCTION
By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy also at the same time, it has emerged as a large employer. The GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19,1969. A second dose of nationalization of 6 more commercial banks followed in 1980. REFORMS IN BANKING NATIONALISATION
In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks. LIBERALISATION
The central bank of the country is the Reserve Bank of India (RBI) & is the main banking regulator in INDIA. The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 with a share capital of Rs 5 crores on the basis of the recommendations of the Hilton Young Commission. The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. BANKING REGULATOR
<ul><li>ISSUE OF BANKNOTES </li></ul><ul><li>BANKER TO GOVERNMENT </li></ul><ul><li>BANKER TO OTHER BANKS </li></ul><ul><li>SUPERVISORY FUNCTIONS </li></ul><ul><li>CONTROLLER OF LIQUIDITY IN MARKET </li></ul><ul><li>CONTROLLER OF CREDIT </li></ul><ul><li>MAINTENANCE OF FOREIGN RESERVE </li></ul>MAJOR FUNCTIONS OF RBI
CRR Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks. PRESENT CRR IS -> 5%
SLR SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit. PRESENT SLR IS -> 24%
PRESENT REPO RATE IS -> 4.75% REPO RATE Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.
PRESENT REV REPO RATE IS -> 3.25% REV. REPO RATE Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. Banks are always happy to lend money to RBI since their money are in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. It can cause the money to be drawn out of the banking system.
PRESENT BANK RATE IS -> 6% BANK RATE Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply.