BANK AND BANKING

 A bank is a financial institution that serves as a

financial intermediary.

Functions of bank are known as banking.

Evolution of Banking in India
 Presidency Banks: Bank of Bengal in 1809,Bank of
Bombay in 1840 & Bank of Madras in 1843
 Imperial Bank of India -1921
 Reserve Bank of India-1935
 State bank of India-1955
 Nationalisation of 14 Banks-1969
 Second Dose of Nationalisation –1980
 Narasimham Committee Reforms-1990s
 ICICI Merger- 2003
Indian Banking Sector:overview
Economy grew by 8.5% in the last fiscal,
central bank raised interest rates 7 times,
increasing the repo rate by 1.75% ,
the reverse repo rate by 2.25%,
Indian foreign exchange reserve were US$314.6 BILLION
as on july 8,2011
Significance of Banks
 Savings Mobilisation  Public Finance
 Remittance of Funds  Financing the Nation
 Well Developed Money  Risk Free Investment
market  Corporate Services
 Development of Capital  Social Banking
Market
Composition of Indian Banking System
 Reserve Bank of India
 Commercial Banks
 Development Banks
 Regional Rural Banks
 Co-operative Banks
 NABARD
 Land Development
Banks
 Exim Banks
Functions of commercial banks
A. Primary Functions
a) Accepting Deposits
b) Advancing Loans
B. Secondary Functions
a) Agency Functions
b) General utility Services
 a) Accepting Deposits
1) Fixed or Time Deposit Account
2) Current or Demand Deposit Account
3) Saving Deposit Account
4)
Recurring Deposit Account
 b) Advancing Loans
1) Cash credit
2) Overdraft
3) Demand Loans
4) Short Term Loans
 Besides many primary functions, these
banks also perform many secondary
functions..
1. Agency functions:
Banks act as an agent to their
customers in different ways.
2. General Utility Services:
Banks also provide certain
services of general utility.
 AGENCY FUNCTIONS
I. Collection and payment of various items:
Bank collect cheques,rent,interest and also make
payment of taxes, insurance premium.
II. Purchase of sale and security:
Banks are more knowledgeable with regard of
stock and share business, they provide security to
their customers.
III. Trustee and Executer:
Banks also acts as trustees and executers of the
property of their customers.
IV. Remitting of Money:
Banks remit money at distance place though bank
drafts.
V. Purchase and sale of foreign exchange:
Banks buy and sell foreign exchange, promoting
international trade.
VI. Letter of Reference:
Banks give information about economic position
of customers to domestic and foreign traders.
VII. Underwriting:
Banks Underwrite the sale of new shares.
 GENERAL UTILITY SERVICES
I. Locker facilities:
Banks provide locker facilities to their customers.
II. Traveler’s cheque and Letters of credit:
Banks issue traveler's cheque and letters of credit
to avoid the risk of carrying cash.
III. Business Information and Statistics:
Banks give advice to customers on financial
matters.
IV. Help in Transportation of goods:
Banks help big businessmen and industrialists in
transportation of goods from production centre
to consumption centers.
Difference b/w primary and secondary
functions:
Primary Functions Secondary functions
1.These are the main 1.These are the
activities of the bank. secondary
2. These are the main activities of the bank.
source of income of 2. These are not main
the source of income of
bank. the
3.These are obligatory bank.
on 3.These are not
the part of bank obligatory
performance. on the part of bank
performance.
 Central Bank :
It is an apex institution of the monetary and banking structure of
a country. A central bank has the authority to regulate and
control the banking business and monetary system of a country.

Central bank of india is Reserve Bank of India. RBI was set up in

1935 under the RBI act of 1934.It was nationalized in 1949.
Main functions of RBI are
•Bank of issue
•Financial advisor to the state( banker also)
•Banker to bank
•Custodian of foreign exchange reserves
•Lender of the last resort
•Bank of central clearance and transfer
•Controller of credit
 Controller of credit
1.Quantitative Methods
•Bank rate policy
•Open market operation
•Variable reserve ratio
2. Qualitative control

• Margin requirement
• Credit Rationing
• Regulation of consumer credit
• Direct action
.