BANKING SECTOR

PROJECT ON
BANKING SECTOR
IN INDIA
PRESENTED BY:-
KIRAN MAHAJAN
FYBMS
SEMISTER:-2

Submitted to

K J SOMAIYA COLLEGE OF SCI &

COMM

ACKNOWLEDGEMENT

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 BANKING SECTOR

I wish to thank all those Skillful persons who helped me to

make this project possible.

I wish To Thank Mr. Shyam S.Bhatia who gave me

opportunity for development of this project and provided me
with required information.

My sincere thanks to Prof (HOD of

B.M.S DEPARTMENT) for her kind approval to prepare and
submit report.

I also thank Mam who provided us with

suggestions.

With Due regards, I express my sincere thanks to The

Principal of our college for having facilitated us with
essential Infrastructure and resources without which this
project had been impossible to implement.

Contents
Contents........................................................................................................... 2
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 BANKING SECTOR
Origin of the word “Bank”................................................................................5
......................................................................................................................... 5
TYPES OF BANKS IN INDIA .........................................................................7
Types of retail banks:..................................................................................10
Types of investment banks:........................................................................13
Both combined :..........................................................................................13
ORIGIN AND NATURE OF BANKING.................................................................16
DEFINITION OF BANK......................................................................................19
The National Banking System.........................................................................22
....................................................................................................................... 22
Indian Banking Industry..................................................................................23
Nationalization:..............................................................................................24
NET Banking
....................................................................................................................... 28
REGULATORY..................................................................................................29
RESERVE BANK OF INDIA................................................................................29
Conclusion:-....................................................................................................31

BANKING SECTOR IN
INDIA
Introduction :-

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 BANKING SECTOR

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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 BANKING SECTOR

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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 BANKING SECTOR

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
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sector, and countries such as China

having relatively heavier regulation
(including stricter regulations regarding
the level of reserves).

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.
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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.

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

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 BANKING SECTOR

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.
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.

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 BANKING SECTOR

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.

Types of retail banks:

• Commercial bank: the term used for a
normal bank to distinguish it from an
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 BANKING SECTOR

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.
• Offshore banks: banks located in
jurisdictions with low taxation and

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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

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 BANKING SECTOR

make only what they consider to be

socially-responsible investments.
• Islamic banks: Banks that transact
according to Islamic principles.
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
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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 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
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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
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
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 BANKING SECTOR

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

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.
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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
people were engaged. The great council
of the republic finally determined to raise
a forced loan.
"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.
There are several kinds of banks. They
may be divided first into private and
public banks. Private banks are
conducted by individuals without

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 BANKING SECTOR

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 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

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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.

DEFINITION OF BANK

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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 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.
• "banking business" means the
business of either or both of the
following:

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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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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.

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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 and prospered. The first
fully Indian owned bank was the
Allahabad Bank, which was established in
1865.

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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.

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, 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
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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.

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
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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

• Banking Regulation Act 1949

• Maintenance of adequate liquid
assets in the form of
– Cash
– Gold
– Government securities
• Access to capital markets

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• Freedom of operations to increase

competitive edge

• New private sector banks allowed

• Local area banks encouraged

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.

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The following operations can be conducted through

advanced mobile phones.
Bill payments
Fund transfers
Check balances

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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REGULATORY

RESERVE BANK OF INDIA

India’s Central Bank

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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.

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

Preamble

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
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stability in India and generally to operate the currency

and credit system of the country to its advantage."

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
 ECS Facility

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 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

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