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Evolution of Banking in India

1770

1809

1840

1843

Bank of Madras

Bank of Bombay

Bank of Bengal

Bank of Hindostan

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Imperial Bank of India

1921

Bank ofMadras

Bank ofBombay

Bank ofBengal

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Milestones In the Indian Banking Industry

1921 CONSOLIDATION OF PRESIDENCY BANKS INTO IMPERIAL BANK OF INDIA

1935 Formation of Reserve Bank of India in the private Sector

1947 India wins freedom

1949 Nationalisation of Reserve Bank of India

1955Nationalisation of Imperial Bank of India and formation ofState Bank of India

1959 SBI Subsidiaries Act passed associate banks were formed

1969 Nationalisation of 14 Banks

1976 Regional Rural banks were started

1980 Nationalisation of 6 more Banks

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Post-Independence Era

Banking sector playing significant role in the overall developmentof the Indian economy

Various social upliftment & self employment schemes successfullyimplemented

Implemented Basle norms and operating at par with global banks

Strengthened banking system through prudential norms

Introduced several legislations to help fast recovery of NPAs

Priority sector lending still continuing for sectoral growth

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BankingActivities

Retailbanking

BusinessBanking

Corporate

BankingDealings

PrivateBanking

InvestmentBanking

UniversalBanking

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2.Banking Statistics

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Type of Bank Branches Deposits Advances

State Bank of India 1569 948 966

SBI Associates 893 291 219

14 Nationalised Banks 4314 2627 1813

Total Public Sector banks 6596 3866 2998

Private banks 1666 774 574

All Commercial Banks 8262 4640 3572

Share of PSB 80% 83% 84%

Statistics as on 1969 ( Rupees in Crore)

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Significant roles played by banks inNational Development

Capital formation

Creation of credit

Focus on rural and semi-urban development

Development of SME sector

Helping Agri, SSI and weaker sections

Development of infrastructure through project financing

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Milestones, Post-Nationalization

1970

Focus shifted from trade & business to Agriculturalfarm credit and small scale industries-

Social Control over Banks was introduced- NationalCredit Council was set up to set lending targets forcommercial banks

1972Lead bank System was launched to provide thrust torural and backward areas

1978 Deposit Insurance and Credit Guarantee Corporationwas established

1979 IRDP Integrated Rural Development Programme waslaunched to benefit the rural populace

1983 Scheme for Self Employment for Educated Youth wasintroduced

1988Introduction of Capital Adequacy norms under Baslecommittee

1991 Financial sector reforms introduced

1992Securities Scam- shocked the banking system andcapital markets

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Roles

Promotion of export trade

Financial inclusion and micro finance

Payment & settlement system

Foreign exchange transactions

Reducing concentration of wealth

Encouraging students for higher education

Effective use of technology for world standard banking

Liberalised Housing Loans for better standard of living

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Banking system -Broad Classification

PSB Others

Private Sector Banks: Oldand New generation-26

Foreign Banks-21

Regional Rural Banks

Co-operative Banks

State Bank group: SBI and5 associates; ( SB

Saurashtra & SB Indoresince merged)

Nationalised banks-19

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Technology Adoption

The growth new technologies over the past ten yearshas triggered a revolution in the banking sector in a bigway

Out of 27 PSBs 15 have been fully computerised

ATMs all over the country

Internet Banking

Electronic Payment services

Electronic fund Transfer-NEFT

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Technology..

Cheque Truncation

Data Warehousing & archiving

Data Mining

Effective MIS systems

RTGS

MICR Clearing Technology

Phone Banking

Mobile Banking

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Technology & Innovation

Business Process Re-engineering

Bancassurance

Cross selling

Credit cards and Mutual funds

Sale of gold to retailers and metal gold loans

Gold deposit schemes

Correspondent banking financial inclusion

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Risk Management Tools

Adoption of Basle norms and thrust for riskmanagement

Systematic Credit risk assessment for loans

Operations risk mgt. DRPM

Rating agencies CRISIL, CARE,FITCH etc

KYC norms and AML measures

CIBIL data base

DRT and Sarfaesi legislations

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Latest trends

Private banking & Wealth Management- Citi Bankepisode has brought a stigma recently

Mobile Banking - future in financial inclusion

70 crores mobile connections promises ample scope forbanking for everyone in their handsets

Consolidation in banking industry

Scope for Mergers & amalgamations

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Opportunities and Challenges

1. Market is seeing discontinued growth driven by new products andservices and so includes opportunities in

Credit cards

Consumer Finance

Wealth Management in the Retail Segment

Investment Banking on whole sale banking side.

Banks will no longer enjoy wind fall Treasury Gains .

Competition from Foreign Banks.

Increasing Consumer Demand for enhanced institutionalcapabilities and service level from banks due to demographic shifts

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REGULATORY AND LEGAL ENVIRONMENT

Ensuring soundness of the system by fixing benchmarksstandards for capital adequacy and prudential norms for keyperformance parameters.

Adoption of best practices especially in areas like risk

management, credit delivery etc.

Adoption of good corporate governance practices

Creation of institutional framework to protect the interest of

depositors

Regulating the entry and exit of banks including cross-borderinstitutions

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Challenges Ahead

Successive drive the socio-economic agenda of the govt.

Rethinking on branch expansion: now there is trend to go back tobrick& mortar from click & mouse banking

Unbanked areas still remains unattended

Banks looking for only profitable avenues/centres

Ensure continuity with change

Equip youngsters to be good leaders in the next decade wheremassive retirement is taking place

Value systems to be in place for social commitments and effectivemanagement of public money

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Conclusion

Change without continuity is chaos

Continuity without change would be sloth

(Max De Pree)

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Questions?

Good day!