TO THE PRESENTATION
ONRRBs and
COMMERCIAL BANKS
BANKING
Crowther’s Definition banking “ Bank is an institution which collects money from those who have in spare and lend this money out to those who require it.”
All those institutions which are in the business of banking are called financial institutions.
COMMERCIAL BANKS
A commercial bank (or business bank) is a type of financial institution and intermediary.
It is a bank that provides transactional, savings, and money market accounts and that accepts time deposits
Classification of commercial banks
Scheduled banks :- included in the Second Schedule of RBI Act 1934
Non scheduled commercial banks :- Banks which are not included in the Second Schedule of RBI Act 1934.
Scheduled banks:
1.Public Sector Banks :- majority of stake is held by the government.
Eg. SBI, PNB, Syndicate Bank,etc.
2.Private Sector Banks :- majority of stake is held by private individuals.
Eg. ICICI Bank, IDBI Bank, etc.
3.Foreign Banks :- Head office outside the country in which they are located.
Eg. City Bank, Standard Chartered Bank,. etc.
IN INDIA
27 public sector banks 29 private sector banks 36 foreign banks 196 RRBs 4 local area banks
ROLE OF COMMERCIAL BANKS
processing of payments by way of telegraphic transfer, internet banking, or other means
issuing bank drafts and bank cheques accepting money on term deposit lending money by overdraft, installment loan,
or other means safekeeping of documents and other items in
safe deposit boxes cash management and treasury merchant banking and private equity financing
FUNCTIONS
Functions of Commercial Banks1.Primary functions a) accepting deposits b) granting loans and advances
2. Secondary functions a) Issuing credit b) foreign exchange c) Standing guarantee
d. Undertaking safe custody
e .Business information
f. Issuing demand drafts
g. Transfering money
h. Provide credit
Functions of commercial banks 1. Accepting deposits 2. Advancing Loans3. Discounting Bills of exchange4. Agency services5. General servicesCredit Creation: It is one of the most outstanding function of
commercial banks. A bank creates credit on the basis of its primary deposits.
1. Accepting Deposits
i) Demand or Current Account Deposits: A depositor can withdraw it in part or in
full ,at any time he likes, without notice It carries no interest
ii) Fixed Deposits :
Fixed deposits for 15days
to few years, Withdrawn at
expiry of term, High rate of
interest, A source of investment
iii) Saving Bank Deposits:
small saving deposits, salaried
people, less rate of interest
money can be withdrawn through cheques
2. Advancing Loans
Important means of earnings for the banks
ways of advancing loan
a. By allowing an over draft facility
b. Loans by creating a deposit
3.Discounting Bills Of Exchange The seller can give handy
to a bank ,which will give him
cash against it ,Bank charges interest on it
4. Agency Services Collection of bills, cheques
Collection of dividends,
interest, premium Purchase
and sale of shares …,etc
5.General services Traveller’s cheques
Supplying trade information
Economic surveys
• The Narasimham committee on rural credit recommended the establishment
• The government passed the Regional Rural Act, 1976.
• Establishment of 19 Regional Rural Banks (RRBs)
Initially, five RRBs were set up and sponsored by Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India
GOAL : to developing the rural economy development of agriculture
1. trade, commerce, industry and other activities in the rural areas
2. credit and other facilities
3. particularly to small and marginal farmers, agricultural labourers, artisans and small farmers
Objectives RRBs established with the explicit
objective of
1. Bridging the credit gap in rural areas
2. Check the outflow of rural deposits to urban areas
3. Reduce regional imbalances and increase rural employment generation
Each RRB is sponsored by a public sector bank- provides assistance in several ways
Functions
RRB is required to undertake the business of
1. granting loans and advances to small and marginal farmers and labours
2. granting loans and advances to artisans‚ small entrepreneurs and persons of small means engaged in trade‚ commerce‚ industry or other productive activities
forty percent of their advances are accounted for the priority sector- 25% should go to weaker section
Regional Rural Banks in India 30 Regional Rural Banks in India, under SBI in 13
states across 2000 branches 2000
84 REGIONAL RURAL BANKS AS ON JANUARY 1, 2010
Others Haryana State Cooperative Apex Bank Limited National Bank for Agriculture and Rural
Development Sindhanur Urban Souharda Co-operative Bank United Bank of India Syndicate Bank
RRBs are jointly owned by GoI,
the concerned State Government and Sponsor Banks (27 scheduled commercial banks and one State Cooperative Bank)
The issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively.
Vyas Committee (2004): RRBs reduced from 196 to 133 as on 31 March, 2006 and to 96 as on 30 April 2007.
Government initiated a process of structural consolidation of RRBs by amalgamating RRBs
sponsored by the same bank within a State.
The amalgamated RRBs would provide better customer service
Recapitalization of RRBs - 27 RRBs having negative net worth as on 31stMarch, 2007,
identified to be recapitalized in a phased manner. The total amount of recapitalization was assessed at Rs. 1,795.97 crore.
District Coverage
RRBs covered 525 out of 605 districts as on 31 March 2006
After amalgamation, RRBs have become quite large covering most parts
40 RRBs covered two districts and 16 RRBs covered a single district each
important segment of the Rural Financial Institutions (RFI) for financial inclusion