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Indian Banking System Introduction

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Introduction to Banking INDIAN BANKING SYSTEM PUBLIC SECTOR BANKS = SBG + PSBs + IDBI Bank PRIVATE SECTOR BANKS IN INDIA (Old + New) Cooperative Banks; Regional Rural Banks (RRBs) INDIAN BANKS OPERATIONS ABROAD Local Area Banks (LABs) – 4 are functional now! PRE-REFORMS DEVELOPMENT CREDIT GUARANTEE FUND TRUST FOR SMALL INDUSTRIES 06/06/22 BANKING 2009 1
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Page 1: Indian Banking System Introduction

Introduction to Banking INDIAN BANKING SYSTEM

PUBLIC SECTOR BANKS = SBG + PSBs + IDBI Bank

PRIVATE SECTOR BANKS IN INDIA (Old + New)Cooperative Banks; Regional Rural Banks

(RRBs)INDIAN BANKS OPERATIONS ABROADLocal Area Banks (LABs) – 4 are functional now!PRE-REFORMS DEVELOPMENTCREDIT GUARANTEE FUND TRUST FOR SMALL

INDUSTRIES

04/07/23 BANKING 2009 1

Page 2: Indian Banking System Introduction

BANKING DEFINED… DERIVED FROM FRENCH WORD “BANQUE”

MEANING A BENCHALSO, FROM GERMAN WORD “BACK” MEANING

A JOINT STOCK FUNDHISTORY………….. BANK OF ENGLAND – 1694 ADBANK OF HINDUSTAN, INDIA – 1770LARGE SCALE CLOSURES DURING 1929-32THREE PRESIDENCY BANKS – BANK OF BENGAL

(1809), BANK OF BOMBAY (1840) AND BANK OF MADRAS (1843) IN CALCUTTA, BOMBAY AND MADRAS…. ALL 3 MERGED AS IMPERIAL BANK OF INDIA IN 1919 – LATER BECAME STATE BANK OF INDIA IN 1955

04/07/23 BANKING 2009 2

Page 3: Indian Banking System Introduction

DEVELOPMENTS…MANY MORE BANKS ALSO OPENED…………CRISIS BETWEEN 1913-1917 – 588 BANKS

FAILEDBANKING COMPANIES (INSPECTION

ORDINANCE) ISSUED IN JANUARY 1946; BANKING COMPANIES (RESTRICTION OF BRANCHES) ACT PASSED IN FEBRUARY 1946

THE BANKING COMPANIES ACT PASSED IN FEB 1946

AMENDED AS BANKING REGULATION ACT, 1949

04/07/23 BANKING 2009 3

Page 4: Indian Banking System Introduction

DEVELOPMENTS…2RBI ACT, 1934 WAS PASSED (1ST APRIL, 1935)FIRST CENTRAL BANK OF THE COUNTRYTOOK OVER FUNCTIONS FROM IMPERIAL

BANKRBI NATIONALISED ON 01.01.1949IMPERIAL BANK OF INDIA PARTIALLY

NATIONALISED AS STATE BANK OF INDIA IN 1955

IN 1959, SEVEN SUBSIDIARIES ADDED TO STATE BANK GROUP – BIKANER & JAIPUR, HYDERABAD, INDORE, MYSORE, PATIALA, SAURASHTRA AND TRAVANCORE……………….

04/07/23 BANKING 2009 4

Page 5: Indian Banking System Introduction

DEVELOPMENTS…319TH JULY, 1969 – GOI TOOK OVER CONTROL OF 14

PRIVATE BANKS WITH DEPOSITS OVER Rs 50 CRs15TH APRIL, 1980 – SIX MORE BANKS WITH DTL

EXCEEDING Rs 200 CRORES NATIONALISEDIN 1993, NEW BANK OF INDIA WAS MERGED WITH

PUNJAB NATIONAL BANK…………(BOTH ARE PSBs)NOW, WE HAVE SBI + SIX SUBSIDIARIES AS

SBGROUP (AFTER MERGER OF SB SAURASHTRA WITH SBI), 19 PUBLIC SECTOR BANKS, AND IDBI BANK LTD (AFTER REVERSE MERGER WITH IDBI)

04/07/23 BANKING 2009 5

Page 6: Indian Banking System Introduction

PRIVATE BANKS IN INDIARBI (1934) NATIONALISED IN 1948……………… IMPERIAL BANK OF INDIA (1919) WAS CONVERTED TO STATE

BANK OF INDIA IN 195514 PRIVATE BANKS NATIONALISED IN 1969AGAIN, 6 MORE NATIONALISED IN 1980BANK OF RAJASTHAN, DHANALAKSHMI, FEDERAL, SOUTH

INDIAN, CATHOLIC SYRIAN, J&K, KARNATAKA, KARUR VYSYA……(Old Private Banks)

ECONOMIC AND BANKING SECTOR REFORMS IN 1991-93 – NEW GENERATION BANKS IN 1994 – CAPITAL OF Rs 100 / Rs 300 CRORES

HDFC – FIRST TO SET UP A NEW PVT BANK…FOLLOWED…BANK OF PUNJAB, CENTURION BANK,

GLOBAL TRUST BANK, ICICI BANK, IDBI BANK, INDUSIND BANK, TIMES BANK, UTI BANK (NOW AXIS)

LATER, KOTAK MAHINDRA BANK AND YES BANK….11 NEW PRIVATE BANKS STARTED BUT TODAY… 6 ONLY!

04/07/23 BANKING 2009 6

Page 7: Indian Banking System Introduction

INDIAN BANKS’ ABROADOCT 20, 2005 : 14 INDIAN BANKS OPERATING

ABROAD9 PUBLIC SECTOR (BOB, SBI, BOI, PNB, IB, UCO,

CANARA, SYNDCIATE BANK) AND 5 PRIVATE SECTOR BANKS (ICICI BANK, INDUSIND, BANK OF PUNJAB, HDFC BANK and Bharat Overseas Bank)

SPREAD ACROSS 42 COUNTRIES WITH 101 BRANCHES

INCLUDE 6 OFFSHORE UNITS, 6 JOINT VENTURES, 17 SUBSIDIARIES, 30 REPRESENTATIVE OFFICES

PL SEE RBI WEBSITE FOR LATEST POSITION…….

04/07/23 BANKING 2009 7

Page 8: Indian Banking System Introduction

LOCAL AREA BANKSLAUNCHED BY RBI ON 24.08.1996 (PC as Fin

Min)TO DEVELOP BACKWARD AND LESS

DEVELOPED DISTRICTS IN THE COUNTRYMINIMUM CAPITAL OF Rs 500 LAKHSINDIVIDUALS, TRUSTS, SOCIETIES AND

CORPORATES AS PROMOTERS…TO OBTAIN ‘IN PRINCIPLE’ APPROVAL FROM

RBITO APPROACH REGISTRAR OF COMPANIES…TO COVER THREE CONTIGUOUS DISTRICTS

04/07/23 BANKING 2009 8

Page 9: Indian Banking System Introduction

LOCAL AREA BANKS …21. COASTAL AREA LAB LTD., VIJAYAWADA, AP2. CAPITAL LAB LTD., PHAGWARA, NAVSARI, GUJARAT3. KRISHNA BHIMA SAMRUDDHI LAB LTD.,

MAHABOOBNAGAR, AP4. SUBHADRA LAB LTD., KOLHAPUR, MAHARASHTRA

5. SOUTH GUJARAT LAB SUFFERED LOSSES AND WAS MERGED WITH BANK OF BARODA ON JUNE 25, 2004

RBI REVIEWED POLICY AND DECIDED TO STOP LABs

04/07/23 BANKING 2009 9

Page 10: Indian Banking System Introduction

PRE-REFORMS …1. LEAD BANK SHEME, DECEMBER 19692. COOPERATIVE BANKS – URBAN AND RURAL3. REGIONAL RURAL BANKS, OCT 02, 1975 (196 -

now 96)4. SOME IMPORTANT FINANCIAL

INSTITUTIONS1. NABARD2. EXIM BANK3. NHB4. HUDCO5. HDFC6. IDBI 7.IFCI 8.IIBI 9.ICICI 10.SIDBI 11.IDFC 12.PFC

13.LIC 14.UTI 15.DICGC 16.CGTSME 17.ECGC ………04/07/23 BANKING 2009 10

Page 11: Indian Banking System Introduction

Indian Financial System (Source: RBI)

Page 12: Indian Banking System Introduction

Indian Financial System

MoF,GOI, New DelhiRBI/SIDBI/NABARD

SEBI / NHB /IRDA / PFRDA

Development Finance Institutions

IFCI, IDBI, ICICI,IIBI, IDFC

EXIM Bank, IL&FS,

Banks – SB Group,Public / RRBs /

Private-Old & New/Foreign / LAB / Coop

NBFCs, Chit Funds,Nidhi Cos, Postal /

Nat’l Small Savings /Ins Cos/HFCs/CRAs/

Credit Card Cos

Financial Services : IFS 1204/07/23

Page 13: Indian Banking System Introduction

Indian Financial SystemCommercial Banks

27 Public Sector (7 SB Group, 19 Nationalised & IDBI Bank)23 Private Sector (17 Old and 6 New) 2,800 plus Co-operative Banks !96 RRBs, 4 Local Area Banks !!29 Foreign Banks

More than 70,000 bank branchesAverage popln served per branch : 15,000 !!!Over 35,000 ATMs – on-site, off-site & Bio-Metric

04/07/23Financial Services : IFS 13

Page 14: Indian Banking System Introduction

Indian Financial System (2)

Development Finance InstitutionsLIC, GIC & its 4 SubsidiariesUTI, DICGC, ECGC, EXIM Bank, ICICI, IFCI, IDBI, IIBI, NABARD, SIDBI, NHB, SHCIL, NSDL, CDSL, IIFCL

SFCs, SIDCs, ITCOs, AFC, etcSTCI, DFHI, IDFC, IL & FS, etc

04/07/23Financial Services : IFS 14

Page 15: Indian Banking System Introduction

Indian Financial System (3)Government Sector

National Savings Organisation (NSCs, NSS, IVPs, KVPs, PPF etc)

Post Office Savings, RD Accounts

Employees Provident Fund Orgn., etc.

04/07/23Financial Services : IFS 15

Page 16: Indian Banking System Introduction

Indian Financial System (4)Non Banking Financial Companies

Nidhi CompaniesChit Fund CompaniesInvestment CompaniesHire Purchase CompaniesLease Finance CompaniesHousing Finance CompaniesStock Exchanges,., Broking CosCredit Rating Agencies, RNBCs.,etc.,etc.Mutual Funds, CIBIL, ARCs, Insurance Cos

04/07/23Financial Services : IFS 16

Page 17: Indian Banking System Introduction

State Bank GroupSTATE BANK OF INDIA – 1955Seven Subsidiaries in 1957

STATE BANK OF HYDERABADSTATE BANK OF MYSORESTATE BANK OF BIKANER & JAIPURSTATE BANK OF TRAVANCORESTATE BANK OF INDORESTATE BANK OF PATIALASTATE BANK OF SAURASHTRA* (since merged

with SBI)

04/07/23Financial Services : IFS 17

Page 18: Indian Banking System Introduction

Com Bkg 2008 ALM 2008 18

Reserve Bank of India

Scheduled Banks

Commercial banks Co-operatives

RRBs (96)Foreign Banks (29)

Local Area Banks 4Public Sector Banks

(27)

StateCO-operatives

(16)Urban Co-operatives

(52)

Private Sector Banks(23)

New (6)Old (17)

IDBI BankState Bank of India& Associates (7)

Nationalised & PSBs (19)

Page 19: Indian Banking System Introduction

BALANCE SHEET OF A BANK

Com Bkg 2008 ALM 2008 19

Economic FactorsBanks

Economic Policies

Liabilities Assets

Capital Cash and Balances at RBIReserves and SurplusDepositsBorrowings InvestmentsOther Liabilities and Provisions AdvancesContingent Liabilities Fixed Assets

Other Assets

Balance with banks and money at call and short notice

Balance Sheet of a Bank

Page 20: Indian Banking System Introduction

YearDeposits

(Rs.in Crores)

Credit(Rs.in Crores)

Total Business(Rs.in Crores)

Credit/DepositRatio(%)

1950-51 882 547 1,429 62

1960-61 1736 1336 3,072 77

1970-71 5,906 4,684 10,590 79

1980-81 37,988 25,371 63,359 66

1990-91 1,92,541 1,16,301 3,08,842 60

2000-01 9,62,618 5,11,434 14,74,052 53

2006-07 25,94,259 19,23,192 45,17,451 74

Com Bkg 2008 ALM 2008 20

EVOLUTION OF BANKING SINCE 1950

Page 21: Indian Banking System Introduction

RBI Data as on June 26, 2009

ALM 2008 21Com Bkg 2008

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Bank Credit (% to GDP)

                                                          


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