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Introduction to Banking

INDIAN BANKING SYSTEM


y PUBLIC SECTOR BANKS = SBG + PSBs + IDBI Bank y PRIVATE SECTOR BANKS IN INDIA (Old + New) y Cooperative Banks; Regional Rural Banks (RRBs) y INDIAN BANKS OPERATIONS ABROAD y Local Area Banks (LABs)

4 are functional now! y PRE-REFORMS DEVELOPMENT y CREDIT GUARANTEE FUND TRUST FOR SMALL INDUSTRIES
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BANKING DEFINED
y DERIVED FROM FRENCH WORD BANQUE MEANING A BENCH y ALSO, FROM GERMAN WORD BACK MEANING A JOINT STOCK FUND y HISTORY .. BANK OF ENGLAND 1694 AD y BANK OF HINDUSTAN, INDIA 1770 y LARGE SCALE CLOSURES DURING 1929-32 y THREE 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

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BANKING 2009

DEVELOPMENTS
y MANY MORE BANKS ALSO OPENED y CRISIS BETWEEN 1913-1917

588 BANKS FAILED y BANKING COMPANIES (INSPECTION ORDINANCE) ISSUED IN JANUARY 1946; BANKING COMPANIES (RESTRICTION OF BRANCHES) ACT PASSED IN FEBRUARY 1946 y THE BANKING COMPANIES ACT PASSED IN FEB 1946 y AMENDED AS BANKING REGULATION ACT, 1949

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BANKING 2009

DEVELOPMENTS 2
RBI ACT, 1934 WAS PASSED (1ST APRIL, 1935) FIRST CENTRAL BANK OF THE COUNTRY TOOK OVER FUNCTIONS FROM IMPERIAL BANK RBI NATIONALISED ON 01.01.1949 IMPERIAL BANK OF INDIA PARTIALLY NATIONALISED AS STATE BANK OF INDIA IN 1955 y IN 1959, SEVEN SUBSIDIARIES ADDED TO STATE BANK GROUP BIKANER & JAIPUR, HYDERABAD, INDORE, MYSORE, PATIALA, SAURASHTRA AND TRAVANCORE .
y y y y y
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DEVELOPMENTS 3
y 19TH JULY, 1969

GOI TOOK OVER CONTROL OF 14 PRIVATE BANKS WITH DEPOSITS OVER Rs 50 CRs y 15TH APRIL, 1980 SIX MORE BANKS WITH DTL EXCEEDING Rs 200 CRORES NATIONALISED y IN 1993, NEW BANK OF INDIA WAS MERGED WITH PUNJAB NATIONAL BANK (BOTH ARE PSBs) y 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)
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PRIVATE BANKS IN INDIA


y RBI (1934) NATIONALISED IN 1948 y IMPERIAL BANK OF INDIA (1919) WAS CONVERTED TO STATE BANK y y y y y y y y

OF INDIA IN 1955 14 PRIVATE BANKS NATIONALISED IN 1969 AGAIN, 6 MORE NATIONALISED IN 1980 BANK 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!
BANKING 2009 6

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INDIAN BANKS ABROAD


y OCT 20, 2005 : 14 INDIAN BANKS OPERATING ABROAD y 9 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) y SPREAD ACROSS 42 COUNTRIES WITH 101 BRANCHES y INCLUDE 6 OFFSHORE UNITS, 6 JOINT VENTURES, 17 SUBSIDIARIES, 30 REPRESENTATIVE OFFICES y PL SEE RBI WEBSITE FOR LATEST POSITION .

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BANKING 2009

LOCAL AREA BANKS


y LAUNCHED BY RBI ON 24.08.1996 (PC as Fin Min) y TO DEVELOP BACKWARD AND LESS DEVELOPED

DISTRICTS IN THE COUNTRY y MINIMUM CAPITAL OF Rs 500 LAKHS y INDIVIDUALS, TRUSTS, SOCIETIES AND CORPORATES AS PROMOTERS y TO OBTAIN IN PRINCIPLE APPROVAL FROM RBI y TO APPROACH REGISTRAR OF COMPANIES y TO COVER THREE CONTIGUOUS DISTRICTS

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BANKING 2009

LOCAL AREA BANKS 2


1. COASTAL AREA LAB LTD., VIJAYAWADA, AP 2. CAPITAL LAB LTD., PHAGWARA, NAVSARI, GUJARAT 3. KRISHNA BHIMA SAMRUDDHI LAB LTD.,

MAHABOOBNAGAR, AP 4. 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
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PRE-REFORMS
1. 2. 3. 4.
1. 2. 3. 4. 5. 6.

LEAD BANK SHEME, DECEMBER 1969 COOPERATIVE BANKS URBAN AND RURAL REGIONAL RURAL BANKS, OCT 02, 1975 (196 - now 96) SOME IMPORTANT FINANCIAL INSTITUTIONS
NABARD EXIM BANK NHB HUDCO HDFC IDBI 7.IFCI 8.IIBI 9.ICICI 10.SIDBI 11.IDFC 12.PFC 13.LIC 14.UTI 15.DICGC 16.CGTSME 17.ECGC
BANKING 2009 10

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Indian Financial System


(Source: RBI)

Indian Financial System


MoF,GOI, New Delhi RBI/SIDBI/NABARD SEBI / NHB / IRDA / PFRDA

Development Finance Institutions IFCI, IDBI, ICICI, IIBI, IDFC EXIM Bank, IL&FS,
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Banks SB Group, Public / RRBs / Private-Old & New/ Foreign / LAB / Coop
Financial Services : IFS

NBFCs, Chit Funds, Nidhi Cos, Postal / Natl Small Savings / Ins Cos/HFCs/CRAs/ Credit Card Cos
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Indian Financial System


yCommercial Banks
y 27 Public Sector (7 SB Group,

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

y More than 70,000 bank branches


y Average popln served per branch : 15,000 !!! y Over 35,000 ATMs on-site, off-site & Bio-Metric
Financial Services : IFS 13 2/20/2012

Indian Financial System (2)


y Development Finance Institutions
y LIC, GIC & its 4 Subsidiaries y UTI, DICGC, ECGC, EXIM Bank, ICICI,

IFCI, IDBI, IIBI, NABARD, SIDBI, NHB, SHCIL, NSDL, CDSL, IIFCL y SFCs, SIDCs, ITCOs, AFC, etc y STCI, DFHI, IDFC, IL & FS, etc
Financial Services : IFS 14 2/20/2012

Indian Financial System (3)


yGovernment Sector
y National Savings Organisation y (NSCs, NSS, IVPs, KVPs, PPF etc) y Post Office Savings, RD Accounts y Employees Provident Fund Orgn., etc.

Financial Services : IFS

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Indian Financial System (4)


y Non Banking Financial Companies
y Nidhi Companies y Chit Fund Companies y Investment Companies y Hire Purchase Companies y Lease Finance Companies y Housing Finance Companies y Stock Exchanges,., Broking Cos y Credit Rating Agencies, RNBCs.,etc.,etc. y Mutual Funds, CIBIL, ARCs, Insurance Cos

Financial Services : IFS

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State Bank Group


y STATE BANK OF INDIA 1955 y Seven Subsidiaries in 1957 y STATE BANK OF HYDERABAD y STATE BANK OF MYSORE y STATE BANK OF BIKANER & JAIPUR y STATE BANK OF TRAVANCORE y STATE BANK OF INDORE y STATE BANK OF PATIALA y STATE BANK OF SAURASHTRA* (since merged with SBI)

Financial Services : IFS

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Reserve Bank of India Scheduled Banks


Commercial banks
Foreign Banks (29) RRBs (96) Urban Co-operatives (52) Local Area Banks 4

Co-operatives
State CO-operatives (16)

Public Sector Banks (27)

Private Sector Banks (23) New (6)

Old (17)

State Bank of India & Associates (7)


Com Bkg 2008 ALM 2008

IDBI Bank

Nationalised & PSBs (19)


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BALANCE SHEET OF A BANK


Banks Economic Factors Economic Policies
Balance Sheet of a Bank Liabilities Capital Reserves and Surplus Deposits Borrowings Other Liabilities and Provisions Contingent Liabilities Assets Cash and Balances at RBI Balance with banks and money at call and short notice Investments Advances Fixed Assets Other Assets
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Com Bkg 2008

ALM 2008

EVOLUTION OF BANKING SINCE 1950


Year Deposits (Rs.in Crores) Credit (Rs.in Crores) Total Business (Rs.in Crores) Credit/ Deposit Ratio(%) 62 77 79 66 60 53 74

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2006-07

882 1736 5,906 37,988 1,92,541 9,62,618 25,94,259

547 1336 4,684 25,371 1,16,301 5,11,434 19,23,192

1,429 3,072 10,590 63,359 3,08,842 14,74,052 45,17,451

Com Bkg 2008

ALM 2008

20

RBI Data as on June 26, 2009


Agg Deposits Rs 39,71,651 crores Investments Rs. 12,74,935 crores Bank Credit Rs. 27,57,210 crores

Cash-Deposit Ratio : 6.04

Credit-Deposit Ratio : 69.42

Com Bkg 2008

ALM 2008

21

Bank Credit (% to GDP)


y

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