Banking Industry

Bank: Bank is a lawful organisation which accepts deposits, also grant loans to the individual.

Function of Bank: 

  1. Encouraged Saving habit
  2. Provides Loans
  3. Business transaction facilitate through cheque.
  4. Enhances standard of people(by providing loan for car and house).
  5. Import/Export Business through transaction.

History Background:

Bank of Hindustan(1770) – First Bank

  • Established in 1770
  • In Calcutta(Now Kolkata)
  • Managed by European

Bank of Bengal(1806)
Bank of Bombay(1840)
Bank of Madras(1843)
These 3 above banks also called as Presidency Bank and they all merged and made Imperial Bank of India.

Oudt Commercial Bank(1881)

  • Established in 1881 with limited liability
  • Managed By Indian Board
  • In Faizabad

Punjab National Bank(1894)

  • Purely Indian Bank
  • Oldest Bank which is also existing now.

Imperial Bank(1995)

  • Nationalized Bank

SBI 7 associate Bank formed(in 1959)

  1. State Bank of Bikaner & Jaipur
  2. State Bank of Hyderabad
  3. State Bank of Patiala
  4. State Bank of Travancore
  5. State Bank of Mysore
  6. State Bank of Indore
  7. State Bank of Saurashtra

Last two associate Banks (State Bank of Indore , State Bank of Saurashtra) are merged with main SBI. So there are currently 5 SBI associate bank exists.

Central Bank: Reserve Bank of India (RBI) established on 1st April 1935 under RBI Act 1934 on the recommendation of John Hilton Young Commission. RBI nationalized on 1st Jan 1949 paid up of capital of 5 crore.

  • RBI has Governor and four deputy Governor.
  • Originally its headquarter was Kolkata but transfer to Mumbai in 1937.
  • RBI emblem is “Tiger under a Palm Tree”.
  • First Governor of RBI was Sir Osborne Smith and first Indian Governor was C.D Deshmukh.
  • Financial year of RBI runs from July 1 to June 30.
  • RBI continued to serve as Central Bank to Burma until Japanese occupation of Myanmar in Apr 1947. RBI continued to serve as Central Bank of Pakistan until June 1948.
  • Minimum Reserve System : Asset of issue department consist of 200 crore (115 crore should be in form of Gold)

Noted:

  • Not deal with public
  • Banker’s Bank
  • Interest on deposits and Loans is fixed by Central Bank
  • Foreign Exchange Rate
  • Govt. Expenditure supervised
  • Issue Currency

Scheduled Bank: These banks are those whose name is appears in 2nd schedule of RBI Act 1934. All PSB(Public Sector Bank) , Foreign Bank, RRB(Regional Rural Bank) and Co-operative Bank are Schedule Bank. Scheduled Bank should satisfy the condition of paid up capital and reserves requirement of not less than Rs. 5 Lakh.

Non-Scheduled Bank :  These banks are those whose name is not appear in 2nd  scheduled of RBI Act 1934.

Commercial Bank : These banks offer banking service to individual and business.Accept the deposits from public and disperse loan to them.Example – SBI , PNB etc.

  • Primary (Example : – Credit card)
  • Secondary (Example : – Locker facilities)

In Primary, there comes Loan and Advances. Loans can be for long-term or short-term but Advances for short-term period.

In Secondary, Locker facilities is given to user.

Public Sector Bank : All those banks in which govt shareholding is 51% or more is called Public Sector Bank. All nationalized Bank, Statutory Banks are public Sector Banks.

Total PSB : 27 (19 nationalized bank, SBI and 5 its associates, Mahila Bank, IDBI)

Statutory Bank : These banks are those which registered under parliament Act. SBI is a statutory Bank registered under State Bank of India Act 1955. IDBI is also a statutory Bank.

Nationalized Bank : Those banks which were private bank and converted into public bank. In 19th July 1969, 14 banks are nationalized which have capital 50 crore and on 15th April 1980 , six banks were also nationalized which have capital 200 crore. PNB is largest Nationalized Bank.These banks are govt undertaking.

For Examples – Bank of Baroda, Bank of Maharashtra. IDFC Bank

Private Sector Bank : Those banks in which Govt. shareholding is less than 50% and have more owned shareholding and investments.

Total Private Bank: 26(ICICI,HDFC, Axis Bank,Yes Bank etc.)

Foreign Bank :  Banks those are registered through banks exists in Foreign Countries.

Total Foreign Banks : 46

Regional Rural Bank(RRB) : Those banks are formulated for Agriculture Economy and Rural Development. Narshimah Committee recommended to set up these banks. RRB act came in effect in 1976. These banks are sponsored by public sector banks in which Central Govt shareholding is 50%, Bank shareholding(Ex. PNB,BOI,BOM) is 35% and State Govt shareholding is 15%.

Total RRB : 56

Cooperative Bank : These banks are set up to provide finance to agriculture, rural industries and to trade and industries of urban areas but upto a limited extent.

Total Coperative banks : 43

Other Public Bank : 

  • IDBI Bank
  • IDBI Bank  was established in 1964 by an Act of Parliament to provide credit and other financial facilities for the development of the fledgling Indian industry.
  • This Banks is apex of Industrial Development Area.

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