BANKS IN INDIA

Reserve Bank of India (RBI)

Establishment of RBI

The reserve bank of India was

established on April 1,1935 in accordance with the

provisions of the reserve bank of India Act, 1934.

The central office of the reserve bank

was initially in Calcutta but was permanently moved

to Mumbai in 1937. the central office is where the

governor sits and where policies are formulated.

Objectives of RBI

• To maintain the internal value of the nation’s currency.

• To preserve the external value of the currency

• To secure reasonable price stability.

• To promote economic growth with rising levels of employment, out and real income

Functions of a RBI

• Monetary policy functions• Currency issue and management• Maintaining value of currency• Anchor economic growth expectation• Monetary regulation and management• Regulation of interest rates• Financial sector regulation and supervision• Exchange management and control• Credit control• Liquidity management• Clearing and settlement • Development of financial market• Policy oriented research• Collection of data and publication of reports• Institution building

Role of the Reserve Bank of India

• Banker to the government• Banker to the banks• Bank’s supervision• Monetary regulation and management• Foreign exchange and management• Promotional functions

Supervisory/regulatory function of RBI

• Licensing of banks• Approval of capital, reserves and liquid assets of

banks• Branch licensing policy• Inspection of banks• Control over management• Audit • Credit information service• Deposit insurance • Training and banking education

RBI –organization structure

Commercial Banks

Definition of Commercial Banks

• An institution which accepts deposits, makes business loans, and offers related services.

• Commercial banks also allow for a variety of deposit accounts, such as current, savings, and time deposit.

• These institutions are run to make a profit and owned by a group of individuals.

• Commercial banks offer services to individuals; they are primarily concerned with receiving deposits and lending to businesses.

Nationalized Commercial Banks        

Sl. No Name of Banks Year of Incorporation

1 Allahabad Bank 1865

2 Andhra Bank 1923

3 Bank of Baroda 1908

4 Bank of India 1906

5 Bank of Maharashtra 1935

6 Canara Bank 1906

7 Corporation Bank 1906

8 Dena Bank 1938

9 Indian Bank 1907

10 Oriental Bank of Commerce 1943

11 Punjab National Bank 1895

12 Syndicate Bank 1925

13 UCO Bank 1943

14 Union Bank of India 1919

15 United Bank of India 1950

16 Vijaya Bank 1931

Nationalized Commercial Banks

Functions of Commercial Bank

Primary Functions

―Accepting Deposits :•Current Deposits•Saving Deposits•Fixed deposits•Recurring Deposits•Miscellaneous Deposits.

―Granting Loans and Advances :Short-term Loans Cash Credit Overdraft Discounting of Bills.Long-term Loans Demand Loan Term Loan.

Secondary Functions :

― Agency Services :

• Collection and payment of cheques and bills on behalf of the customer;• Collection of dividends, interest and rent, etc. on behalf of the customer, if so instructed by them;• Payment of rent, interest, insurance premium, etc. on behalf of customers, if so instructed;• Acting as agents or correspondents on behalf of customers for other banks and financial institutions at home and abroad.

― General utility Services :

• Issuing letters of credit and travellers' cheques;• Underwriting of shares, debentures, etc.;• Safe-keeping of valuables in safe deposit locker;• Supplying trade information and statistical data useful to customers;• Acting as a referee regarding the financial status of customers;• Undertaking foreign exchange business

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Recent Development in Commercial Banking

• Interest rate deregulation• Electronic Clearing Services (ECS)• Electronic Funds Transfer (EFT)• The opening of new clearing houses, interconnection of clearing houses through the Indian Financial Network (INFINET)• The development of a Real-Time Gross Settlement (RTGS) System• Centralized Funds Management System (CFMS)• E-banking• E-payment• Automated teller machines(ATM)• Negotiated Dealing System (NDS)• The Structured Financial Messaging System (SFMS).

FOREIGN BANKS

What is Foreign Bank ????

• A foreign bank is a bank that was established in a different country and is also serving customers of another country.

• Foreign banks operate in India, just the way the local banks do.

• They are bound by all the rules and regulations that are applicable to banks based out of India and they are governed by the Reserve Bank of India that controls/governs all banks operating in India.

Some of the foreign banks that operate in India are:

• Citibank• HSBC• Standard Chartered• Barclays• Etc.

Foreign Branch Bank

• Banks often open a foreign branch in order to provide more services to their multinational corporation customers.

• However, operating a foreign branch bank may be considerably complicated because of the dual banking regulations that the foreign branch needs to follow.

For example :- • suppose the Bank of America opens a foreign branch bank in Canada.

The branch would be legally obligated to follow both Canadian and American banking regulations.

Characteristics Of Foreign Banks

• They tend to increase the efficiency of the local banking system, bring in more sophisticated financial services and have the ability to nurse weak banks back to health.

• It plays a great role in boosting Indian economy and also lends to those who needs it.

• It also bought latest techniques to serve the customers in the most effective manner and known for introducing several banking practices.

Contd..

• Foreign banks are also known for uprooting the unemployment in India by offering lots of job opportunities .

• It offers good packages and tantalizes the sense of youngsters by offerings several other job facilities.

• Besides, it also contributed its tremendous effort to improve Indian foreign exchange market.

CO-OPERATIVE BANKS

Definition • 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. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services (loans, deposits, banking accounts…). In India co-operative banks are regulated with the RBI and governed by Banking Regulations Act 1949 and Co-operative Societies Act, 1965.

The Co-operative Banks Act, of 2007 (the Act) defines a co-

operative bank as a co-operative registered as a co-operative bank in terms of the Act whose members –

• Are of similar occupation or profession or who are employed by a common employer or who are employed within the same business district.

• Have common membership in an association or organisation, including a business, religious, social, co-operative, labour or educational group.

• Have common membership in an association or organisation, including a business, religious, social, co-operative, labour or educational group.

• Reside within the same defined community or geographical area.

Establishments

• Co-operative bank performs all the main banking functions of deposit mobilisation, supply of credit and provision of remittance facilities.

• Co-operative Banks belong to the money market as well as to the capital market.

• Co-operative Banks provide limited banking products and are

functionally specialists in agriculture related products. However, co-operative banks now provide housing loans also.

• • UCBs provide working capital loans and term loan as well.

The chief functions of Co-operative banks are :

• To attract deposit from non-agriculturist.

• To use excess funds of some societies temporarily to make up for shortage in another.

• To supervise and guide affiliated societies.

Finance Function:

Cooperative banks in India finance rural areas under: • Farming • Cattle • Milk • Personal • Finance

Cooperative banks in India finance urban areas under: • Self-employment • Industries • Small scale units • Home finance • Consumer finance • Personal finance

Types of co-operative banks

Classification of co-operative banks:

The Co-operative banking structure in India comprises of: • Urban Co-operative Banks• Rural Co-operatives

Some co-operative banks are scheduled banks, while others are non-scheduled banks. For instance, State Co-operative banks and some Urban Co-operative banks are scheduled banks but other co-operative banks are non-scheduled banks. Scheduled banks are those banks which have been included in the second schedule of the Reserve bank of India act of 1934.

The banks included in this schedule list should fulfil two conditions.• 1. The paid capital and collected funds of bank should not be less than

Rs. 5lac.• 2. Any activity of the bank will not adversely affect the interests

of depositors.

SCHEDULED BANKS

Introduction

• Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.

Classification

SCHEDULED BANKS

PUBLIC SECTOR SCHEDULED BANKS

PRIVATE SECTOR SCHEDULED BANKS

SCHEDULED FOREIGN BANKS

STATE BANK OF INDIABANK OF BARODA

BANK OF INDIACORPORATION BANK

AXIS BANKHDFC BANKICICI BANK

KOTAK MAHINDRA BANK

CITI BANK N.CBANK OF TOKYO LTD.BARCLAYS BANK PLCDRESDNER BANK AG

Functions

• Transfer of funds • Acceptance of deposits • Offering those deposits as loans for various

purpose• Purchase of houses, equipments, capital

investment purposes etc.• The Indian Government presently hires the

scheduled banks banks for various purposes like tax collection and refunds, payment of pensions etc.

Campus Overview

907/A Uvarshad, GandhinagarHighway, Ahmedabad – 382422.

Ahmedabad Kolkata

Infinity Benchmark, 10th Floor, Plot G1,Block EP & GP, Sector V, Salt-Lake, Kolkata – 700091.

Mumbai

Goldline Business Centre Linkway Estate, Next to Chincholi Fire Brigade, Malad (West), Mumbai – 400 064.

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