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BANKING SECTOR

Thane Branch of WIRC

Information Technology Centre


BATCH NO: THANE-05/10/53

BATCH PERIOD: MAY-2010

PROJECT ON BANKING SECTOR IN INDIA


PRESENTED BY
PUNITH RAO
Registration No: WRO0337839

Address:9/170,jai shastri nagar,mulund(w),Mumbai-82


CONTACT NO.9870749258
Email ID:punitrao18@yahoo.com

Date:
(Punith rao)
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Contents
Introduction.........................................................................................................................3
Origin of the word “Bank”...................................................................................................4
TYPES OF BANKS IN INDIA...................................................................................................6
Types of retail banks:....................................................................................................9
Types of investment banks:.......................................................................................11
Both combined :...........................................................................................................11
ORIGIN AND NATURE OF BANKING...................................................................................14
HOME.................................................................................................................................19
DEFINITION OF BANK.........................................................................................................19
HOME.................................................................................................................................22
The National Banking System............................................................................................22
HOME.................................................................................................................................32
Indian Banking Industry.....................................................................................................32
HOME.................................................................................................................................33
Nationalization:..................................................................................................................33
Easy bank...........................................................................................................................38
HOME.................................................................................................................................39
NET Banking.......................................................................................................................39
HOME.................................................................................................................................40
REGULATORY.....................................................................................................................40
RESERVE BANK OF INDIA...........................................................................................40
HOME.................................................................................................................................44
:-Conclusion:-.....................................................................................................................44

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BANKING SECTOR IN INDIA


HOME

Introduction :-

A banker or bank is a financial institution whose


primary activity is to act as a payment agent for
customers and to borrow and lend money.
An institution where one place and borrow money and
take care of financial affairs; A branch office of such
an institution.
The first modern bank was founded in Italy in Genoa
in 1406.
Banking dates back to 1786, the first bank established
in India, then the nationalisation of banks in 1969 and
recently the liberalisation of the same since 1991.

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HOME

Origin of the word “Bank”

The name bank derives from the Italian word banco


"desk/bench", used during the Renaissance by
Florentine bankers, who used to make their
transactions above a desk covered by a green
tablecloth. However, there are traces of banking
activity even in ancient times.
In fact, the word traces its origins back to the
Ancient Roman Empire, where moneylenders would
set up their stalls in the middle of enclosed
courtyards called macella on a long bench called a
bancu, from which the words banco and bank are
derived. As a moneychanger, the merchant at the
bancu did not so much invest money as merely
convert the foreign currency into the only legal
tender in Rome—that of the Imperial Mint.

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The earlierst evidence of money-changing activity is


depicted on a silver drachm coin from ancient
Hellenic colony Trapezus on the Black Sea, modern
Trabzon, c. 350-325 BC, presented in the British
Museum in London. The coin shows a banker's
table (trapeza) laden with coins, a pun on the name
of the city.
In fact, even today in Modern Greek the word
Trapeza (Τράπεζα) means both a table and a bank.

A bank is licensed by a government.Its primary


activity is to lend money. Many other financial
activities were allowed over time..
The level of government regulation of the banking
industry varies widely, with counties such as
Iceland, the United Kingdom and the United States
having relatively light regulation of the banking
sector, and countries such as China having relatively
heavier regulation (including stricter regulations
regarding the level of reserves).

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HOME

TYPES OF BANKS IN INDIA

The term bank is generally used to refer to


commercial banks; however, it can also be used to
refer to savings institutions, savings and loan
associations, and building and loan associations.

A commercial bank is authorized to receive demand


deposits (payable on order) and time deposits
(payable on a specific date), lend money, provide
services for fiduciary funds, issue letters of credit,
and accept and pay drafts. A commercial bank not
only serves its depositors but also can offer
installment loans, commercial long-term loans, and
credit cards.

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A savings bank does not offer as wide a range of


services. Its primary goal is to serve its depositors
through providing loans for purposes such as home
improvement, mortgages, and education. By law, a
savings bank can offer a higher interest rate to its
depositors than can a commercial bank.
A SAVINGS AND LOAN ASSOCIATION (S&L) is
similar to a savings bank in offering savings
accounts. It traditionally restricts the loans it makes
to housing-related purposes including mortgages,
home improvement, and construction, although,
some S&Ls have entered into educational loans for
their customers. An S&L can be granted its charter
by either a state or the federal government; in the
case of a federal charter, the organization is known
as a federal savings and loan. Federally chartered
S&Ls have their own system, which functions in a
manner similar to that of the Federal Reserve
System, called the Federal Home Loan Banks
System. Like the Federal Reserve System, the
Federal Home Loan Banks System provides an
insurance program of up to $100,000 for each
account; this program is called the Federal Savings
and Loan Insurance Corporation (FSLIC). The
Federal Home Loan Banks System also provides
membership options for state-chartered S&Ls and
an option for just FSLIC coverage for S&Ls that can
satisfy certain requirements.

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A building and loan association is a special type of


S&L that restricts its lending to home mortgages.
The distinction between these financial
organizations has become narrower as federal
legislation has expanded the range of services that
can be offered by each type of institution.
Banks' activities can be divided into retail banking,
dealing directly with individuals and small
businesses; business banking, providing services to
mid-market business; corporate banking, directed at
large business entities; private banking, providing
wealth management services to high net worth
individuals and families; and investment banking,
relating to activities on the financial markets. Most
banks are profit-making, private enterprises.
However, some are owned by government, or are
non-profit organizations.
Central banks are normally government-owned and
charged with quasi-regulatory responsibilities, such
as supervising commercial banks, or controlling the
cash interest rate. They generally provide liquidity
to the banking system and act as the lender of last
resort in event of a crisis.

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Types of retail banks:


National Bank of the Republic, Salt Lake City 1908
National Copper Bank, Salt Lake City 1911

 Commercial bank: the term used for a normal


bank to distinguish it from an investment bank.
After the Great Depression, the U.S. Congress
required that banks only engage in banking
activities, whereas investment banks were
limited to capital market activities. Since the
two no longer have to be under separate
ownership, some use the term "commercial
bank" to refer to a bank or a division of a bank
that mostly deals with deposits and loans from
corporations or large businesses.
 Community Banks: locally operated financial
institutions that empower employees to make
local decisions to serve their customers and the
partners.
 Community development banks: regulated
banks that provide financial services and credit
to under-served markets or populations.
 Postal savings banks: savings banks associated
with national postal systems.
 Private banks: banks that manage the assets of
high net worth individuals.

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 Offshore banks: banks located in jurisdictions


with low taxation and regulation. Many
offshore banks are essentially private banks.
 Savings bank: in Europe, savings banks take
their roots in the 19th or sometimes even 18th
century. Their original objective was to provide
easily accessible savings products to all strata of
the population. In some countries, savings
banks were created on public initiative; in
others, socially committed individuals created
foundations to put in place the necessary
infrastructure. Nowadays, European savings
banks have kept their focus on retail banking:
payments, savings products, credits and
insurances for individuals or small and
medium-sized enterprises. Apart from this
retail focus, they also differ from commercial
banks by their broadly decentralised
distribution network, providing local and
regional outreach—and by their socially
responsible approach to business and society.
 Building societies and Landesbanks:
institutions that conduct retail banking.
 Ethical banks: banks that prioritize the
transparency of all operations and make only
what they consider to be socially-responsible
investments.
 Islamic banks: Banks that transact according to
Islamic principles.
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Types of investment banks:

 Investment banks "underwrite" (guarantee the


sale of) stock and bond issues, trade for their
own accounts, make markets, and advise
corporations on capital market activities such as
mergers and acquisitions.
 Merchant banks were traditionally banks which
engaged in trade finance. The modern
definition, however, refers to banks which
provide capital to firms in the form of shares
rather than loans. Unlike venture capital firms,
they tend not to invest in new companies.
Both combined :
 Universal banks, more commonly known as
financial services companies, engage in several
of these activities. For example, Citigroup is a
large American bank involved in commercial
and retail lending, with subsidiaries in tax
havens offering offshore banking services to
customers in other countries. Other large
financial institutions are similarly diversified
and engage in multiple activities. In Europe and
Asia, big banks are very diversified groups that,
among other services, also distribute insurance
—hence the term bancassurance, a portmanteau
word combining "banque or bank" and
"assurance", signifying that both banking and
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insurance are provided by the same corporate


entity.
Public Sector Banks in India.
Private banking in India.
Rural banking in India.
Foreign Banks in India.

Public Sector Banks in India


Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharastra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
IDBI Bank

State Bank of India


State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Saurastra
State Bank of Travancore
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Private banking in India.


Bank of Punjab
Bank of Rajasthan
Catholic Syrian Bank
Centurion Bank
City Union Bank
Dhanalakshmi Bank
Development Credit Bank
Federal Bank
HDFC Bank

Rural banking in India


Haryana State Cooperative Apex Bank Limited.
National Bank for Agriculture and Rural Development
(NABARD).
Sindhanur Urban Souharda Co-operative Bank.
United Bank of India.

Foreign Banks in India


ABN-AMRO Bank
Abu Dhabi Commercial Bank
Bank of Ceylon
BNP Paribas Bank
Citi Bank
China Trust Commercial Bank
Deutsche Bank
HSBC
JPMorgan Chase Bank
Standard Chartered Bank
Scotia Bank
Taib Bank
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HOME

ORIGIN AND NATURE OF BANKING

The term bank is supposed to be derived from


banco, the Italian word for bench, the Lombard Jews
in Italy having benches in the market-place where
they exchanged money and bills. When a banker
failed, his bench was broken by the people, and he
was called a bankrupt.
This derivation of the term, however, is probably
wrong. "The true original meaning of banco,"says
MacLeod,"is a heap, or mound, and this word was
metaphorically applied to signify a common fund,
or joint stock, formed by the contributions of a
multitude of persons."
A brief account of the first banking operations in
Venice will dispel the haze enveloping this subject.
In 1171 the financial condition of Venice was
strained in consequence of the wars in which the
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people were engaged. The great council of the


republic finally determined to raise a forced loan.
Every citizen was obliged to contribute the
hundredth part of his possessions to the State,
receiving therefor interest at the rate of five per cent.
The public revenues were mortgaged to secure the
interest, and commissioners were appointed to pay
the interest to the fundholders and to transfer the
stock. The loan had several names in Italian,
Compera, Mutuo, but the most common was Monte,
a joint stock fund. Afterward, two more loans were
contracted, and in exchange for the money
contributed by the citizens, the commissioners gave
stock certificates bearing interest, and which could
be sold and transferred.
* Principles of Economic Philosophy, vol. I, p. 547.
At this period the Germans were masters of a great
part of Italy, and the German word Banck came into
use as well as its Italian equivalent Monte. The
Italians ere long changed Banck into Banco, and the
public loans or debts were called Monti or Banchi.
Thus an English .writer, Benbrigge, who wrote in
1646, mentioned the "three bankes" at Venice, by
which he meant the three public loans, or Monte,
that we have described. Likewise Count Cibrario,
who wrote a work on Political Economy in the
Middle Age, says, "it is known that the first Bank, or
Public Debt, was erected at Venice in 1171." Other
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proof of the same nature might be added to show


that Banco in Italian meant a fund formed by
several contributions; and the Bank of Venice was
really the first funding system, or system of public
debts.
"A banker," says Gilbart “is a dealer in capital, or,
more properly, a dealer in money. He is an
intermediate party between the borrower and the
lender." The difference between the rate received by
the banker, for the use of the money loaned by him,,
and the rate he has to pay for it, is his profit.
"By this means he draws into active operations those
small sums of money which were previously
unproductive in the hands of private individuals,
and at the same time furnishes accommodation to
those who have need of additional capital to carry
on their business." In other words, a bank is a
means for organizing capital whereby its full power
may be utilized. The function of a bank in storing
up capital, and thus increasing its power, has been
likened to that of a dam put across a stream. Before
the erection of the structure, the waters coursed their
way through wood and meadow, contributing, it is
true, to the diversity and beauty of the scene, beside
satisfying a needful want of man and beast. To the
poet, the stream gave forth an unregarded music,
while a De Quincey would hearken with profound
emotion and awe to the "sound-pealing anthems, as
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if streaming from the open portals of some


illimitable cathedral." But by storing up the waters,
a force is collected which can be used for running
the largest factory, and thus ministering in a very
potent way to advance the material prosperity of
man.
There are several kinds of banks. They may be
divided first into private and public banks. Private
banks are conducted by individuals without
incorporation. They are very numerous in our
country. The number given in the Banker's Almanac
and Register, not in-cluding brokers, for the year
1884, was 3,387. They exist in all the States and
Territories. Some of them have flourished for a long
period, and are regarded very sound, and worthy of
the highest credit.
Chartered banks may be divided into two classes:
those organized and existing under the laws of the
United States; and State institutions. The latter may
be again divided into Deposit and Discount banks,
Savings banks and Trust companies. Each class will
be described hereafter.
The business of banking consists (1) in receiving
deposits of money on which interest may or may not
be allowed; (2) in making advances of money,
principally in the way of discounting notes; (3) in
effecting the transmission of money from one place

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to another. This is true of the ordinary banks of


deposit and discount, both State and National.
The disposable means of a bank consists (1) of the
capital paid down by the shareholders; ( 2 ) the
money deposited with it by its customers; (3) the
notes it can circulate; (4) the money it receives in the
course of transmission, and which, of course, it must
repay at another place.
The expenses of a bank may be thus classified: rent,
taxes and repairs of the banking-house, salaries of
officers, stationery and postage. To this may be
added interest upon deposits, if allowed.The profits
of a bank consist of that portion of its total receipts,
including discount, interest, dividends and
commissions, which exceed the total amount of
expenses.

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HOME

DEFINITION OF BANK

The definition of a bank varies from country to


country.
Under English common law, a banker is defined as a
person who carries on the business of banking,
which is specified as

 conducting current accounts for his customers


 paying cheques drawn on him, and
 collecting cheques for his customers.
In most English common law jurisdictions there is a
Bills of Exchange Act that codifies the law in
relation to negotiable instruments, including

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cheques, and this Act contains a statutory definition


of the term banker: banker includes a body of
persons, whether incorporated or not, who carry on
the business of banking' (Section 2, Interpretation).
Although this definition seems circular, it is actually
functional, because it ensures that the legal basis for
bank transactions such as cheques do not depend on
how the bank is organised or regulated.
The business of banking is in many English
common law countries not defined by statute but by
common law, the definition above. In other English
common law jurisdictions there are statutory
definitions of the business of banking or banking
business. When looking at these definitions it is
important to keep in mind, that they are defining
the business of banking for the purposes of the
legislation, and not necessarily in general. In
particular, most of the definitions are from
legislation that has the purposes of entry regulating
and supervising banks rather than regulating the
actual business of banking. However, in many cases
the statutory definition closely mirrors the common
law one. Examples of statutory definitions:

 "banking business" means the business of


receiving money on current or deposit account,
paying and collecting cheques drawn by or paid
in by customers, the making of advances to
customers, and includes such other business as
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the Authority may prescribe for the purposes of


this Act; (Banking Act (Singapore), Section 2,
Interpretation).

 "banking business" means the business of


either or both of the following:
1. receiving from the general public money on
current, deposit, savings or other similar
account repayable on demand or within less
than [3 months] ... or with a period of call or
notice of less than that period;
2. paying or collecting cheques drawn by or paid
in by customers
Since the advent of EFTPOS
(Electronic Funds Transfer at Point Of
Sale), direct credit, direct debit and
internet banking, the cheque has lost
its primacy in most banking systems as
a payment instrument. This has led
legal theorists to suggest that the
cheque based definition should be
broadened to include financial
institutions that conduct current
accounts for customers and enable
customers to pay and be paid by third
parties, even if they do not pay and
collect cheques

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HOME

The National Banking System

As we have seen, the business of banking consists


in getting a common fund of money, and in lending
a part of it. With this general conception is
associated the discounting of bills of exchange, the
collection of notes and drafts and the issuing of
circulating notes. The business may be conducted
by one person, who is called a banker; or by
partners, as in any ordinary businesses, which also
are called bankers. Again, a number of men may
join their capital under a State law, and organize a
State bank or association, the capital of which is
divided into shares. Capitalists may also unite
under the laws of the United States, and form a
National banking association.
Under these varying forms a banking business is
done. We may look at the reasons why men prefer
one form to another. If a man has considerable
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means and enjoys the confidence of the community,


he may prefer to engage in banking alone,
unfettered by State or National laws. He may
conduct his business in his own way; and if the
people do not like it they need not patronize him. A
firm may do the same thing. They may be a law unto
themselves. But when men organize under a State
law, they are bound by the law. They are subject to
inspection. They must pay a tax on the amount, of
money used in their business. If they issue promises
to pay, a coin reserve must be kept to pay them. By a
National bank is meant not that the Government
owns or runs it, but authorizes its creation and
prescribes its mode of doing business. Every
association under this law, whether in Maine or in
Texas, is governed by the same principles, is subject
to the same inspection, uses the same blanks in
making returns to the Treasury Department at
Washington, and is under the same penalties for the
violation of any duty. All are treated \ alike. The
advantage to the people, of this system over any
other is, the existence of a power above the bank, to
which they can appeal if injustice is done. Another
advantage of this system is the general Government
having seen fit to permit these associations to issue
promises to pay, based on the security of United
States bonds held in Washington, for the absolute
and prompt payment of every note issued on such
security, the poorest and humblest citizen knows

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when he gets his pay on Saturday night in a


National bank bill, that he has the faith of the
Government behind his paper promise to pay. He
need not see what bank issued it; for any bank must
receive it for a debt due, and the Government must
pay for it in coin if the local banks fail.
The National banking system was based on the
system of banking existing in the State of New York
in 1862. That system had existed many years; it had
furnished adequate protection to bill-holders; and
in several respects was better than any system which
had preceded it. The Rev. Dr. John McVicker,
professor of Political Economy in Columbia College,
was the author of the system, and set it forth in a
letter to a member of the New York Legislature,
entitled, Hints relating to Banking, written in 1827.
As this is the principal banking system in the
country, and the only one by which banks now issue
notes of their own, the chief features are worth
describing in this place.
By the National law, banking associations may be
formed by five or more persons who must specify in
their articles of association the general objects for
thus uniting.
They must make "an organization certificate"
specifying:
 The name assumed by the association.
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 Its place of business.


 The amount of its capital stock and the number
of shares into which it is divided.
 The names and residences of the shareholders
and the number of shares held by each.
 A declaration that the certificate is made to
enable them to avail themselves of the
advantages of the act.
No association may be organized with a less capital
than $100,000, except that banks with a capital of not
less than $ 50,000, may, with the approval of the
Secretary of the Treasury, be organized in any place
with a population not exceeding 6,000 inhabitants.
In cities with a population exceeding 50,000 persons,
at least $200,000 capital is required. Any National
banking association designated for the purpose by
the Secretary of the Treasury, may become a
depository of public money and be employed as
financial agent of the Government.
Associations so designated must give satisfactory
security by the deposit of United States bonds, or
otherwise, for the faithful performance of their
duties.
The association may sue and be sued, elect directors,
who, in turn, may elect a president, vice-president,

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cashier and other officers; discount and negotiate


promissory notes, drafts, bills of exchange, and
other evidences of debt; receive deposits, buy and
sell exchange, coin and bullion; loan money on
personal security, issue and circulate its own notes,
and make all needful by-laws not inconsistent with
the Banking Act.
There must be at least five directors. Each director
must own at least ten shares of the stock; he holds
his office until the election and qualification of his
successor. Annual meetings are held in January. The
capital stock is divided into shares of $100 each, and
is transferable. The liability of a shareholder is
limited to a sum equal to the par value of his stock.
Before beginning business, fifty per cent, of the
capital stock of an association must be paid in, and
ten per cent, of the remainder monthly, until it is all
paid.
The next step is the transmission by the association
of a certificate to the Comptroller of the Currency
(who is the chief official of the Government in this
particular department) stating that fifty per cent, of
the capital has been paid, and that all the provisions
of the law with reference to organizing a bank have
been observed. He then makes such an examination
as may be thought necessary, and if he finds that the
law has been properly complied with, he gives to

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the association a certificate to that effect, and that it


is authorized to begin business. This certificate
must be published within sixty days from the time
of issuing it.*
Formerly the entire amount of bank notes which the
banks were permitted to issue was limited to
$300,000,000, but in 1875 the law. was changed, and
they can now issue as many as they please, provided
they have a certain amount of Government bonds
deposited with the Treasurer.
As a necessary preliminary to furnishing notes for
circulation, the Comptroller of the Currency under
the direction of the Secretary of the Treasury, is
entrusted with the important duty of engraving
plates in the best manner, to guard against
counterfeiting and fraudulent alterations, and to
print therefrom and number so many circulating
notes in blank as may be required to supply the
associations entitled to receive the same.
After these notes have been signed by the president
or vice-president and the cashier, they are issued,
and circulate the same as money, and are received at
par everywhere in payment of taxes excises, public
lands, and all other dues to the Government, except
for duties on imports; and also for all salaries and
other debts owing

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*The former Comptroller of the Currency, Mr. Knox,


issued a very useful Government publication of
forty pages, entitled Instructions and Suggestions of
the Comptroller of the Currency in regard to the
Organization, Extension and Management of
National Banks. It contains, among other matters,
many of the forms required by the National law, an
excellent set of by-laws, and a summary of the
principal restrictions and requirements of the
National bank law, which, with National Banking
Laws, is published by Homans Publishing Co. "by
the United States, except interest on the public debt
and in redemption of the legal-tender notes. They
are also a legal tender for any debt or liability to
every National banking association.
Every National banking association is required to
keep on deposit in the Treasury of the United States
a sum equal to five per centum of its circulation,
which sum is counted as part of its lawful reserve.
All notes of National banks worn, defaced,
mutilated, or otherwise unfit for circulation, are
forwarded to the Treasurer of the United States for
redemption. Such redemptions are reimbursed from
the five per cent, fund, and notes worn and unfit for
circulation are then forwarded to the Comptroller of
the Currency for destruction. After making a record
of the notes thus received, the Comptroller directs
their destruction in the presence of four persons.

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National banks having a capital of $150,000 or less


are required to keep on deposit with the Treasurer
of the United States, United States bonds equal in
amount to one-fourth of their capital stock. Other
banks are required to keep on deposit not less than
$50,000 in United States bonds. Upon a deposit of
bonds the association making the same is entitled to
receive from the Comptroller circulating notes equal
in amount to ninety per centum of the par value of
the United States bonds so deposited, but the total
amount of such notes issued to any association may
not exceed ninety per centum of the amount of its
capital stock actually paid in.
Every bank annually examines or has examined the
bonds deposited in the office of the United States
Treasurer, comparing them with the books of the
Comptroller, and with its own record of them, and if
the bonds exist and the record of them is correct,
executes a certificate to that effect to the Treasurer.
A National bank can hold real estate under the
following conditions and no others:
 The building needful to transact its business.
 Land mortgaged to it in good faith to secure
debts previously contracted.
 Land conveyed to it in satisfaction of debts
previously contracted in the course of business.
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 Land purchased under sales ordered by courts


in order to secure debts due to the bank.
 In the last three cases the real estate cannot be
held beyond five years.
The rate of interest which a bank may take on any
note, bill of exchange, or other evidence of debt is
the rate permitted by the laws of the State or
Territory where the bank is located.
Every bank in sixteen of the principal cities of the
United States must keep on hand always in lawful
money as a reserve fund, twenty-five per cent, of the
amount of its deposits; and the banks in other places
must keep on hand fifteen per cent, of their
deposits. The banks last mentioned, however, may
keep three-fifths of their reserve on deposit with
such of the National banks as may be selected by
them, approved by the Comptroller of the Currency,
and doing business in any of eighteen specified
principal cities of the United States.
National banks in any of the sixteen cities excepting
New York, may keep one-half of the required
twenty-five per cent, reserve on deposit in the City
of New York.
Whenever this reserve of twenty-five per cent, for
one class of banks and fifteen per cent, for the other,
falls below that amount, the bank can make no new
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BANKING SECTOR

loans, except by purchasing or discounting bills of


exchange payable at sight, nor make any dividend
until the requisite proportion of reserve to
circulation and deposits has been restored.
They cannot make loans on the security of their own
stock, except to prevent a loss on a debt previously
contracted, nor can they pledge their own notes of
circulation for the purpose of getting money to pay
in their capital stock.
They are also subject to examination by officers
appointed by the Government.
The banks must make reports to the Comptroller of
the Currency according to the forms which he
prescribes, exhibiting in detail the resources and
liabilities of the associations at the close of business
on any past day specified by him. The Comptroller
is required to call for not less than five such reports
during each year. These reports must be verified by
the oath of the president or cashier and attested by
the signatures of at least three of the directors.
In addition to the reports mentioned above, each
association is required to make a sworn report
within ten days after the declaration of any
dividend, of the amount of such dividend, and the
amount of the net earnings. In order to enable the
Treasurer to assess the duties, each association is
required to make a sworn return to the Treasurer of
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BANKING SECTOR

the United States of the average amount of its notes


in circulation.
.

HOME

Indian Banking Industry

Banking in India originated in the first decade of


18th century with The General Bank of India
coming into existence in 1786. This was followed by
Bank of Hindustan. Both these banks are now
defunct. The oldest bank in existence in India is the
State Bank of India being established as "The Bank
of Bengal" in Calcutta in June 1806. A couple of
decades later, foreign banks like Credit Lyonnais
started their Calcutta operations in the 1850s. At that
point of time, Calcutta was the most active trading
port, mainly due to the trade of the British Empire,
and due to which banking activity took roots there

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BANKING SECTOR

and prospered. The first fully Indian owned bank


was the Allahabad Bank, which was established in
1865.

By the 1900s, the market expanded with the


establishment of banks such as Punjab National
Bank, in 1895 in Lahore and Bank of India, in 1906,
in Mumbai - both of which were founded under
private ownership. The Reserve Bank of India
formally took on the responsibility of regulating the
Indian banking sector from 1935. After India's
independence in 1947, the Reserve Bank was
nationalized and given broader powers.

HOME

Nationalization:
By the 1960s, the Indian banking industry has
become an important tool to facilitate the
development of the Indian economy. At the same
time, it has emerged as a large employer, and a
debate has ensued about the possibility to
nationalize the banking industry. Indira Gandhi,
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BANKING SECTOR

the-then Prime Minister of India expressed the


intention of the GOI in the annual conference of the
All India Congress Meeting in a paper entitled
"Stray thoughts on Bank Nationalisation." The
paper was received with positive enthusiasm.
Thereafter, her move was swift and sudden, and the
GOI issued an ordinance and nationalised the 14
largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a
national leader of India, described the step as a
"masterstroke of political sagacity." Within two
weeks of the issue of the ordinance, the Parliament
passed the Banking Companies (Acquition and
Transfer of Undertaking) Bill, and it received the
presidential approval on 9th August, 1969.

A second dose of nationalisation of 6 more


commercial banks followed in 1980. The stated
reason for the nationalisation was to give the
government more control of credit delivery. With
the second dose of nationalisation, the GOI
controlled around 91% of the banking business of
India.

After this, until the 1990s, the nationalised banks


grew at a pace of around 4%, closer to the average
growth rate of the Indian economy.

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BANKING SECTOR

Nationalization – Pros
• Branch Expansion
– Banks started opening branches in rural
areas
– Post nationalization, 800% increase in no.
of branches

• Deposit Mobilization
– Banks contributed to the development of
banking habit among common people
through sustained publicity, extensive
branch banking and relatively prompt
service

• Expansion of Bank Credit


– Banks started mobilising deposites to
facilitate increasing demand for credit
from agricultural and industrial sector

• Diversification
– Merchant Banking and underwriting
– Mutual Funds and Retail Banking

• Nationalization – Cons
• Despite impressive quantitative achievements,
productivity and efficiency of systems suffered

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BANKING SECTOR

• Portfolio quality badly deteriorated

• Profitability eroded

• PSBs and FIs became weak, some were


making losses YoY
• Narasimham Committee Report 1991
• SLR which was initially at 25% was raised to
30% and then to 38.5%
• Rate of interest received on govt. securities was
much less than market rates
• Known as Tax on the banking system
• At the same time CRR was hiked up to 15%
• All in all 53.5% cash was with RBI
• Govt. used this liquidity to fund its own
expenditure mainly for paying govt employee
salaries
• Banking Regulation Act 1949
• Maintenance of adequate liquid assets in the
form of
– Cash
– Gold
– Government securities
– Government guaranteed securities
Equal to not less than 25% of their total
demand and time deposit liabilities
Primarily known as SLR
• Reforms based on NCR
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BANKING SECTOR

• SLR reduced from 38.5% to 25%

• CRR reduced from 15% to 5.75% as of today

• Decontrolled interest slabs

• Prudential norms on NPAs

• Capital adequacy norms

• Access to capital markets

• Freedom of operations to increase competitive


edge

• New private sector banks allowed

• Local area banks encouraged

• Supervision of commercial banks

• Recovery of debts

HOME
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BANKING SECTOR

Easy bank :-
Automatic Teller Machine (ATM)

The first bank to introduce the ATM concept


in India was the Hongkong and Shanghai Banking
Corporation (HSBC). It was in the year 1987. Now,
almost every commercial banks gives ATM facilities to
its customers.

The first bank to cross 1,000 marks in installing ATMs


in India is ICICI.SBI is following the concept of 'ATMs
in Quantity'. But Private Sector Banks have taken the
lead. ICICI, UTI, HDFC and IDBI counts more than
50% of the total ATMs in India.
Mobile Banking
"The account that travels with you". This is needed in
today's fast business environment with unending
deadlines for fulfillment and loads of appointments to
meed and meetings to attend. With mobile banking
facilities, one can bank from anywhere, at anytime
and in any condition or anyhow.
The following operations can be conducted through
advanced mobile phones.
Bill payments
Fund transfers
Check balances

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BANKING SECTOR

HOME

NET Banking
Net Banking is conducting ones banking or bank
account online through a computer and a net
connection. The system is updated immediately after
every transaction automatically. In other words it is
said that it is updated 'on-line, real time'. Through net
banking one can check the status of his/her account,
place queries and also can be facilitated with a wide
range of transactions simultaneously.

Net Banking has three basic features. They are as


follows:
The banks offer only relevant
information's about their products and
services to the mass.
Few banks provide interaction facility
between the banks and its customers.
Banks are coming up with arrangements
of utility payments, like telephone bills,
electricity bills, etc.

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BANKING SECTOR

HOME

REGULATORY

RESERVE BANK OF INDIA


India’s Central Bank

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BANKING SECTOR

Establishment
Established on April 1,1935 with share capita of five
crores on recommendation of Hilton young
commission.
RBI was Nationalized in year 1949.
The Central Office of the Reserve Bank was initially
established in Calcutta but was permanently moved to
Mumbai in 1937
The Governors of RBI is Dr. Duvvuri Subbarao.
Structure
RBI Have 20 Directors.
 The Governor.
 Fore deputy Governor.
 One Govt.Official from Ministry of
finance.
 Ten Nominate Director, Nominated
by Govt.
 Four Director to represent
Headquarter at Mumbai , Calcutta ,
Chennai &New Delhi.
 Appointed / Nominated for period of
four year.

RBI Office
Head office in Mumbai
Has 22 regional offices,
most of them in state capitals
Preamble
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BANKING SECTOR

The Preamble of the Reserve Bank of India describes


the basic functions of the Reserve Bank as:
"...to regulate the issue of Bank Notes and
keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency
and credit system of the country to its advantage."
Main Function (Act 1934)

Bank of Issue (under sec 22)

 RBI has sole right to issue one Rupees


Notes and small coins in country as
agent of government.
 RBI has separate issue department to
issue currency note.
 RBI maintain minimum reserve in Gold
and Foreign Exchange reserve of which
almost 55% should be Gold.
Main Function (Act 1934)
Banker to Government.

 RBI is banker ,agents and advisor of


central Government and all state
Government in India.
 RBI helps the Government to float new
loans and to Manage Public.
 RBI makes loans and advances to the
States local authorities.
Main Function (Act 1934)
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BANKING SECTOR

Banker’s Bank & Lender of Last Report.

 RBI maintains banking accounts of all


schedule bank.
 Every schedule bank have to keep
cash reserve a fix percentage of their
aggregate deposit liabilities.
 Bank always expect for help from RBI
in time of banking crisis.
Main Function (Act 1934)
Controller of Credit

 RBI holds the cash reserves of all


schedule banks.
 It holds credit operation of bank
through quantities.
 RBI has power to ask bank or whole
banking system not to lend particular
group.
 Every bank have to get license from
RBI for banking operation .RBI also
cancel this license.
 Every bank give weekly return
showing assets and liabilities in
details

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BANKING SECTOR

HOME

:-Conclusion:-
Thanks & Regards, From the Above we come to
know that:

 Banking Industry is the booming industry

 Banks plays an important role in the corporate


world

 Banking is the need of time

 Bank has an vital role in business as well as in


common life

 Bank is one of the most important service


sectors in the world

 It has various characertistics of its own

 Bank provides various employment


apportunities in urban as well as in rural areas

 Bank provides various services to the public


such as :
 ATM Facility
 Debit & Credit Cards

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BANKING SECTOR

 ECS Facility
 Demat Account
 Net Banking

 Bank has an key role in day to day business


activities

In the Sense Bank plays a significant role in


almost all the sectors in world

Date:
Place: Thane

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