Development of Banking Sector in India

Satya Prakash State Bank Learning Centre, Jabalpur

Origin of the word Bank

The term Bank is derived from the Latin word Banco which means bench. In Italian market place there used to be bench where traders used to exchange money and bills.

Why Bank ?
Security to the savings of customers. Control the supply of money and credit Public confidence in the working of the financial System Increase savings Avoid concentration of focus of financial powers Equal norms and conditions (i.e. rate of interest, period of lending etc) to all types of customers

What Is a Bank

A bank is a financial intermediary that

accepts deposits and channels those deposits into lending activities, either directly or through capital markets.

A bank connects customers with capital

deficits to customers with capital surpluses.

Functions of Banks in India

The Functions of the Bank includes: Receiving from the general public money on current account, savings bank or other similar account repayable on demand or term deposit repayable after a pre-defined period or with a period of call or notice of less than that period Paying or collecting cheques drawn by or Deposited by customers Remittances Transfer of Money

Functions of Banks in India

Lending money by way of overdraft, Term loan or otherwise Trade Finance Activities LCs, BGs, Bills etc. Foreign Exchange Business Safekeeping of documents and other items in safe Custody Safe Deposit Lockers Cash Exchange Acting as a 'financial supermarket' for the sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products

Origin of Banking
The first bank was probably the religious temples People stored gold in these temples Owners felt that temples were the safest places

First record of loans in the 18th century BC in

Babylon By the temple priests to merchants.

Origin of Banking
Greek temples as well as private and civic entities conducted financial transactions such as loans, deposits, currency exchange etc. There is evidence of money remittance

Accepting payment at one port.

Making payment at other port. Saving the client the danger of carting coinage with him

on his journey.

Origin of Banking
Ancient Rome perfected administrative aspect of banking

the

Greater regulation of financial institutions and financial practices. Charging interest on loans and paying interest on deposits became more highly developed and competitive.

Origin of Banking
The Bank of Venice is perhaps the first ever regular bank in the banking history and was established in 1157 followed by these banks as under:
Bank of Barcelona in 1401 Bank of Genoa(Italy) in 1407 Bank of Amsterdam in 1609

Origin of Banking in India

Can be traced back to almost the Vedic period.

Manu, a great Hindu jurist, had devoted a section of his work explaining the deposits and advances and he even laid down certain rules on rates of interest. Through out Mauryan period and later on desi bankers played some role in the economy of the country.
During the Moghul period the indigenous bankers started playing a vital role in lending money and financing of the foreign trade and commerce.

Development of Banking in India

Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan in 1790, both of which are now defunct.

Development of Banking in India

The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806 ( soon became Bank of Bengal Then came Bank of Bombay-1840 Bank of Madras-1843
All these three were known as presidency banks

Development of Banking in India

Presidency bank were established under charters from the British East India Company. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act. The three banks merged in 1921 to form the Imperial Bank of India, Pursuant to the provisions of the State Bank of India Act (1955) Imperial Bank of India became the State Bank of India.

The Bank of Bengal

Development of Banking in India

Union Bank was established by the merchants of Kolkata in 1839 but it failed in 1948 Allahabad Bank is the oldest joint stock bank which was established in 1865 and is still functioning. The first Indian Joint Stock Bank was Oudh Commercial Bank established in 1881 in Faizabad but failed in 1858 The next was the Punjab National bank, established in Lahore in 1895 and is one of the largest banks in India

Development of Banking in India

Foreign banks

The Comptoire dEscompte de Paris 1860

HSBC 1869 Around 20th century, the exchange banks, mostly owned by Europeans, concentrated on financing foreign trade.

Development of Banking in India

Between 1906 to 1911, inspired by Swadeshi movement, local businessman and political figures started founding banks of and for Indian community. A number of banks established during that period are still present. Bank of India Corporation bank

Indian bank
Bank of Baroda Canara Bank & Central Bank of India

Development of Banking in India

Reserve Bank of India was established on 1st April 1935 under Reserve Bank of India Act It was a private shareholders institution till 1947.

Post Independence

Mark the end of a regime of Laissez-faire for the Indian banking 1949 : Enactment of Banking Regulation Act. 1955 : Nationalisation of State Bank of India. 1959 : Nationalization of SBI subsidiaries. 1961 : Insurance cover extended to deposits. 1969 : Nationalisation of 14 major Banks. 1971 : Creation of credit guarantee corporation. 1975 : Creation of regional rural banks. 1980 : Nationalisation of six banks.

Post Independence
By 1990s 91% of banking business in India was under the government banks. In 1993 merger of New bank of India with Punjab National bank

Until 1990s, the nationalized banks grew at the pace of around 4%, closer to the average rate of growth of Indian economy.

After liberalization of Indian Economy

New Generation tech-savvy banks:

Global Trust Bank (the first-latter merged with Oriental Bank of Commerce)

Axis Bank (earlier UTI bank), ICICI Bank, HDFC Bank

Kotak Mahindra Bank, Yes bank , Indusind bank, ING Vysya Bank etc.

After liberalization of Indian Economy

Next Stage FDI up to 74% Liberalized licensing policy

WTO & GATT

Current Status

State Co-operative Banks-16 Urban Co-operative Banks-52 Regional Rural Banks - 82 No. of bank branches more than 85000

IMPORTANT INDICATORS No. of Commercial Banks (a) Scheduled Commercial Banks Regional Rural Banks (b) Non-Scheduled Commercial Banks Number of Offices of Scheduled Commercial Banks in India ^ Population per office (in thousands) Deposits of Scheduled Commercial Banks in India (`.Crore) Credit of Scheduled Commercial Banks in India (`.Crore) Scheduled Commercial Banks Advances to Priority Sector (`.Crore) Share of Priority Sector Advances in Total Credit of Scheduled Commercial Banks (per cent) Credit Deposit Ratio

June 1969 89 73 16

March 2002 298 294 196 4

March 2005 288 284 196 4

March 2008 175 171 91 4

March 2010 169 165 82 4

8262
64 4646 3599 504

66190
16 1131187 609053 205604

68355
16 1732858 & 1124300 400775

76050
15 3196939 2361914 824773

85393
13.8 4492826 3244788 1138398

14.0 77.5

34.8 53.8

36.7 64.9

34.9 73.9

35.1 72.2

Now onwards
Use of Information Technology RTGS/NEFT ATM SFMS EFT ECS Towards Cash less Economy Financial Inclusion Mobile Technology Universal Banking

Wish u all a happy & prosperous future