Banking in India

History

first banks were the Bank of Hindustan, which was established in 1770  and the General Bank of India, established in 1786 but failed in 1791

The largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It originated and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was renamed as the Bank of Bengal. This was one of the three banks founded by a presidency government, the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843. The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the State Bank of India in 1955

Some extra about SBI

At present its Five subsidiaries are  State Bank of Bikaner & Jaipur ,  State Bank of Mysore ,  State Bank of Travancore,  State Bank of Patiala and State Bank of Hyderabad

In 2016 the Govt has cleared the proposal to merger associate bank of SBI and BMB( Bhartiya Mahila Bank ) with SBI

Difference

Schedule banks are listed in the 2nd schedule of the RBI act 1934.

Non Schedule banks  - are not listed under this act . Their paid up capital & collected funds must be less than 5 lakh . E.g- Micro Finance institutions & Local areas banks

Commercial banks – deals with the deposits and loans of business organisation ,it issues bank cheques and drafts

Public sector banks- banks where majority  stake is held by govt.( like 51% Govt. , 49% private ). Shares of these  banks are listed on stock exchange. Total PSB= 22 in india

Private sector bank- in which majority of the share capital is held by private individuals . E.g- ICICI, AXIS , HDFC

Foreign bank- these are registered and their headquarters in a foreign country e.g- HSBC, CITI bank , Standard chartered bank

Regional Rural bank ( RRB)-  also known as Gramin bank. Providing banking facilities to rural and semi-urban areas.  RRB Act 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. These were set up on the recommendations of The narshimham committee

the first RRB, the Prathama Bank ( Moradabad) authorised capital of Rs. 5 crore at its starting. Also on 2 October 1975 , 5-RRB were set up with a total authorised capital Rs. 100 crore  which later augmented to 500 crore .RRB were owned by the Central Government, the State Government and the Sponsor Bank (Any commercial bank can sponsor the regional rural banks) who held shares in the ratios as follows Central Government – 50%, State Government – 15% and Sponsor Banks – 35%.. Till 2015= 56 RRB total

Co-operative bank- owned by their customers . It provides banking and finicial services on no profit no loss basis

RBI allowed these banks to install ATM , issue debit cards , mobile wallets upto 10,000

Goverened by Co-operative socities Act-1912

Anonya Co-operative bank ltd. Is first bank in vadodara ( Gujarat)

UCB( Urban co-operative bank)- registered & governed by State Govt.( under RBI)

SCB(  State Co-operative bank)- co operatives banks of states

RBI

It commenced its operations on 1 April 1935 in accordance with the Reserve Bank of India Act, 1934

The RBI was nationalised on 1 January 1949.

Total  21-member central board of directors: the governor; four deputy governors

Headquartered at Mumbai, Kolkata, Chennai and the capital New Delhi

First Governor – Sir os borne smith ( british) ,, CD deshmukh ( First Indian ).. Present Governor is Urjit patel

Bank terms

Bank rate  the official minimum rate at which the central bank of the country is ready to rediscount approved bills of exchange or lend on approved securities.

Open Market Operation (OMO)- The open market operation refers to the purchase and/or sale of short term and long term securities by the RBI in the open market. Normally during the inflation period in order to reduce the purchasing power, the RBI sells securities and during the recession or depression phase she buys securities and makes more money available in the economy through the banking system

Repo rate – the rate at which RBI lends Short term Money to the banks Against securities

Reverse repo rate –e rate at which the RBI borrows money from commercial banks for short bperiods

Cash reserve ratio ( CRR)- It specifies the Fraction of the total Deposits of banks that they are Obliged to keep with RBI . Banks in India are required to hold a certain proportion of their deposits in the form of cash.

SLR - Statutory Liquidity Ratio-every commercial bank is required to maintain liquid assests in the form of Gold , RBI approved securities with itself before providing credit to its customers ( Maximum limit ios 40 %)

Base Rate – Minimum interest rate of a bank below which it can not lend except in case allowed by RBI . Each bank has its own Base rates ( I july 2010 ) it replaced the BPLR – benchmark prime lending Rate

RBI Grants new bank Licence

a minimum of 500 cr of money to start a ban

The Bank should ensure that atleast 25% of it's branches are in non-urban areas.

The banks should ensure that atleast 40% of it's total Lending goes to the Priority Sector (Agriculture, education, SHGs etc.). This is called PSL.

If all this is done, then it can be rightly called a Scheduled Commercial Bank. It would be regulated under the Banking Regulations Act, 1949and the Reserve Bank of India Act, 1934.

New banks In India

Bandhan bank Indian banking and financial services company headquartered in KolkataWest Bengal.[2] Bandhan, which started as a micro-finance company in 2001, received banking licence by Reserve Bank of India in 2014.. Mr. Chandra Shekhar Ghosh .. The RBI licensing norms stipulate that a new bank must have a 500 crore capital. Bandhan Bank starts with a capital base of 2,570 crore and this will be raised to 3,052 crore

The IDFC Bank  received a universal banking licence from the RBI in July 2015 On 6 November 2015, IDFC Bank was listed , headquarters in Mumbai  .. Net worthy 21000 crore

Bhartiya Mahila Bank ( BMB) Former Indian Prime Minister Manmohan Singh inaugurated the system on 19 November 2013 on the occasion of the 96th birth anniversary of former Indian Prime Minister Indira Gandhi

Bank exclusively for women, the bank allows deposits to flow from everyone, but lending will be predominantly for women. India is the third country in the world to have a bank especially for women, after Pakistanand Tanzania

The bank merged with State Bank of India on 1 April 2017. The merger would mean 103 branches and business of Rs. 1,600 crores added to SBI

Failed bank

Payment banks in india

Recommended by nachiket mor committee

On 27 nov 2014  RBI released the final guidelines for payment banks RBI gives license to 11 entities to launch payment on 19 aug 2015

Cash limit = 1 lakh rs

Cant offers loans , credit cards

Capital required – 100 crore

Bharti Airtel launched India's first live payments bank named Airtel payment bank in March 2017

India Post Payments Bank

Government of India owned payments bank operating under the Department of PostsMinistry of Communication

Inaugurated on 1 September 2018.

On 19 August 2015 India Post got licence to run a payments bank from Reserve Bank of India

The bank offers savings and current accounts up to a balance of Rs 1 Lac.

inaugurated on 30 January 2017 at Raipur and Ranchi( After airtel and paytm )

Headquarter – New delhi

MUDRA Bank

Micro Units Development and Refinance Agency Bank .. Without security loan

Founded  8 April 2015

Headquarters   -- mumbai

The MUDRA banks were set up under the Pradhan Mantri MUDRA Yojana scheme. It will provide its services to small entrepreneurs

Shishu (शिशु):  Allowed loans up to 50,000 

Kishore (किशोर):  Allowed loans up to 5 lakh 

Tarun (तरुण):  Allowed loans up to 10 lakh 

Govt. share of budget for MUDRA

40% to Shishu

35% to Kishor

25% to Tarun

Those eligible to borrow from MUDRA bank are

Small manufacturing unit

Shopkeepers

Fruit and vegetable vendors

Artisans

100% subsiiary of SIDBI  Small Industries Development Bank of India

Types of bank Accounts

1.Current  Account

2.Saving Account

3.RD- Recurring Deposit Account

4.FD- Fixed deposit account

5.Joint Account

6.No-Frill Account/BSBDA ( basic Saving bank deposit Account )

7.PPF ( Public Provident Fund)

8.Bank Acc. For Minor(0-18)

9.Nostro & vastro Accounts