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INTRODUCTION
* Commercial banks are very important
segment of the money market .
* They play a very important role in theeconomy by mobilizing savings from various
sectors, which is the foundation for the
growth and development of economy .
* With the growth and development of the
economy the commercial banks grow along
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STRUCTURE OF INDIAN
BANKING SYSTEM IT CAN BE EASILY CLASSIFIED INTO TWO
CATEGORIES:
Organized sector Unorganized sector
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INDIAN
BANKINGSYSTEM
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RESERVE BANK OF INDIA
Reserve bank is the central bank of India and
hence, is the leader of the Indian banking
system
Reserve bank of India came into existence in
1935
It is making efforts for the improvement of
banking system ever since.
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ORGANISED SECTOR
Main constituents of the organized sector arecommercial banks .
These may be scheduled or non scheduledbanks.
In the present scenario there is only one bankin the non scheduled banks while all the other
banks come under scheduled category . Out of the scheduled banks the public banks
hold an important place
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Public sector banks
They stared with the setting up of state bank
of India ,in 1955,by taking over IMPERIAL
BANK OF INDIA
In next 5 years the princely states banks were
made associated with the STATE BANK OF
INDIA. These banks taken together were
known as State Bank of India Group or SBI
GROUP . Thus the group consists of :
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State bank of India
State bank of Hyderabad
State bank of Patiala
State bank of Travancore
State bank of Bikaner & Jaipur State bank of Mysore
State bank of Saurashtra
State bank of Indore
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N ationalizedbank
In JULY 1969 , 14 banks with a deposit base of
Rs. 50 crores or more were nationalized
In 1980 ,six more private sector banks werenationalized bringing up the total number of
the banks nationalized to 20 . These banks
were :
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1. BANK OF BARODA
2. PUNJAB NATIONAL BANK3. BANK OF INDIA
4. CANARA BANK
5. CENTRAL BANK OF INDIA6. UNION BANK OF INDIA
7. INDIAN BANK
8. INDIAN BANK OVERSEAS9. SYNDICATE BANK
10.U C O BANK
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11.ALLAHABAD BANK
12.UNITED BANK OF INDIA13. ORIENTAL BANK OF COMMERCE
14.CORPORATION BANK
15.VIJAYA BANK16.DENA BANK
17.BANK OF MAHARASHTRA
18.ANDHRA PRADESH19.PUNJAB & SIND BANK
20.NEW BANK OF INDIA
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Later on new bank of India merged with
Punjab National Bank ,in 1993-94
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Re asons responsible for the
strain in the banking sector1. Stress on the quantitative and hurried increase in loanswithout proper assessment and the expense of quality of assets
2. Politically motivated or influenced sanctions of loans ,loan
melas and waiver of loan3. Indiscriminate expansion of banking activities ignoring the
canons of the banking that is , safety , productivity andprofitability .
4. Diversificaton of banking operations in the unconventional
areas without giving proper attention either tosystematic development to back up successfulimplementations of these new activities or to building upinfrastructure facilities
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5. Lack of expertise within the banks to handle this complexbanking scenario and not much effort to improve the
quality of personnel within the banking sector byequipping to handle the growing challenges effectively
6. Lack of effective management information system andcontrol leading to blurred accountability at all the levels
7. Pressure on achieving the targets mechanically due to
somewhat political pressure in decision making in certainareas , and the interference of the midddlemen in thefield of loans to weaker sections of the society leading tounethical practices in the banking
8. Growing complacent attitude of the trade unions of both
officers and workmen staff ,which has partially led to thedeterioration of customer services
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FEATURES1. Area of the RRB is limited only to the region ,
comprising of some districts of the state
2. They grant loan only to the rural agriculturesector and small artisans
3. Lending rate would be lesser than thecommercial banks
4. Intended to eliminate money lenders
5. They are supplement to the effort of co-
operative banks6. RRBs are sponsored by commercial banks
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Banks in those days mainly focussed upon the agro
sector. Regional rural banks in India penetrated
every corner of the country and extended a helpinghand in the growth process of the country.
SBI has 30 Regional Rural Banks in India known as
RRBs. The rural banks of SBI is spread in 13 statesextending from Kashmir to Karnataka and Himachal
Pradesh to North East. The total number of SBIs
Regional Rural Banks in India branches is 2349(16%). Till date in rural banking in India, there are
14,475 rural banks in the country of which 2126
(91%) are located in remote rural areas.
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Apart from SBI, there are many other banks which function for the
development of the rural areas in India. These banks are listed below:
Andhra PradeshBiharAndhra Pradesh Grameena Vikas Bank
Andhra Pragathi Grameena Bank Deccan Grameena Bank
Chaitanya Godavari Grameena Bank
Saptagiri Grameena Bank
ChhattisgarhChhattisgarh Gramin Bank
Surguja Kshetriya Gramin Bank
Durg-Rajnandgaon Gramin Bank Satpura Kshetriya Gramin Bank
Madhya Bharath Gramin Bank
Chambal-Gwalior Kshetriya Gramin Bank
Rewa-Sidhi Gramin Bank
Sharda Gramin Bank GujaratDena Gujarat Gramin Bank
Baroda Gujarat Gramin Bank
Saurashtra Gramin Bank
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Gurgaon Gramin Bank
Jammu & KashmirJammu Rural Bank
Ellaquai Dehati Bank
Kamraz Rural Bank
AssamAssam Gramin Vikash Bank
Langpi Dehangi Rural Bank
JharkhandJharkhand Gramin Bank
Vananchal Gramin Bank
Madhya PradeshNarmada Malwa Gramin Bank Satpura Kshetriya Gramin Bank
Madhya Bharath Gramin Bank
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Rewa-Sidhi Gramin Bank
Sharda Gramin Bank
Ratlam- Mandsaur Kshetriya Gramin Bank Vidisha Bhopal Kshetriya Gramin Bank
Mahakaushal Kshetriya Gramin Bank
Jhabua Dhar Kshetriya Gramin Bank
Chambal-Gwalior Kshetriya Gramin Bank
Madhya Bihar Gramin Bank
Bihar Kshetriya Gramin Bank
Uttar Bihar Kshetriya Gramin Bank
Kosi Kshetriya Gramin Bank
Samastipur Kshetriya Gramin Bank
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KarnatakaKarnataka Vikas Grameena Bank
Pragathi Gramin Bank
Cauvery Kalpatharu Grameena Bank
Krishna Grameena Bank
Chikmagalur-Kodagu Grameena Bank
Visveshvaraya Gramin Bank
Ra jasthanBaroda Rajasthan Gramin Bank
Marwar Ganganagar Bikaner Gramin Bank Rajasthan Gramin Bank
Jaipur Thar Gramin Bank
Hodoti Kshetriya Gramin Bank
Mewar Anchalik Gramin Bank OrissaKalinga Gramya Bank
Utkal Gramya Bank
Baitarani Gramya Bank
Neelachal Gramya Bank
Rushikulya Gramya Bank
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Uttar PradeshPurvanchal Gramin Bank
Kashi Gomti Samyut Gramin Bank
Uttar Pradesh Gramin Bank
Shreyas Gramin Bank
Lucknow Kshetriya Gramin Bank
Ballia Kshetriya Gramin Bank
Triveni Kshetriya Gramin Bank
Aryavart Gramin Bank
Kisan Gramin Bank
Kshetriya Kisan Gramin Bank
Etawah Kshetriya Gramin Bank
Rani Laxmi Bai Kshetriya Gramin Bank
Baroda Western Uttar Pradesh Gramin Bank
Devipatan Kshetriya Gramin Bank Prathama Bank
Baroda Eastern Uttar Pradesh Gramin Bank
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ManipurManipur Rural Bank
MizoramMizoram Rural Bank UttaranchalUttaranchal Gramin Bank
Nainital Almora Kshetriya Gramin Bank
NagalandNagaland Rural Bank
TripuraTripura Gramin Bank
West BengalBangiya Gramin Vikash Bank
Paschim Banga Gramin Bank
Uttar Banga Kshetriya Gramin Bank MeghalayaKa Bank Nogkyndong Ri Khasi- Jaintia
Arunachal PradeshArunachal Pradesh Rural Bank
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PRIVATE SECTOR BANKS
On recommendations of the NARSIMHAMCOMMITTEE (which focused on the ways toimprove the structure , organization ,
functions, and procedures of financial sectorat large) RESERVE BANK OF INDIA , in 1993 ,announced guidelines for the entry of newcommercial banks .
As a result following banks started theiroperations:
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Indus In Bank Ltd
The UTI Bank Ltd.
HDFC Bank Ltd.
The ICICI Bank Ltd.
Global Trust Bank Ltd.
Centurion Bank Ltd.
The Times Bank Ltd.
IDBI Bank Ltd.
The Development Co-operative Bank Ltd.
The bank Of Punjab Ltd.
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Private banking in India was practiced since the
begining of banking system in India. The first
private bank in India to be set up in Private Sector
Banks in India was IndusInd Bank. It is one of the
fastest growing Bank Private Sector Banks in India.
IDBI ranks the tength largest development bank inthe world as Private Banks in India and has
promoted a world class institutions in India.
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The first Private Bank in India to receive an in
principle approval from the Reserve Bank of India wasHousing Development Finance Corporation Limited,
to set up a bank in the private sector banks in India as
part of the RBI's liberalisation of the
Indian Banking Industry. It was incorporated in August
1994 as HDFC Bank Limited with registered office in
Mumbai and commenced operations as
Scheduled Commercial Bank in January 1995.
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FEATURES OF PRIVATE BANKS
Introduce superior levels of technology andcustomer satisfaction
They are strategic in thinking and operations
They target specific products and customergroups rather than the entire financial sector
Most of them are targeting midsized corporate
They are specialized in certain segments likeinvestment , banking , trade finance and foreignexchange services
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CO-OPER ATIVE BANKS It consists of those banks which represent those
group of societies registered under the acts of thestates relating to the cooperative societies
IN 1949 a system of agricultural co-operativecredit was brought into being
Under this scheme , the short term credit hasbeen organized with the federal lined agriculturalprimary societies as the base , the district as the
federal organization at the intermediate level ,and the state co-operative banks as the apexinstitution .
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Co operative Banks in India are registered under the
Co-operative Societies Act. The cooperative bank is
also regulated by the RBI. They are governed bythe Banking Regulations Act 1949 and Banking Laws
(Co-operative Societies) Act, 1965.
Cooperative banks in India finance rural areas
under:Farming
Cattle
Milk
Hatchery
Personal finance
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Cooperative banks in India finance urban
areas under:Self-employment
Industries Small scale units
Home finance
Consumer finance
Personal finance
Some facts about Cooperative banks inIndiaSome cooperative banks in India are more
forward than many of the state and private
sector banks.
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According to National Federation of Urban Co-
operative Banks & Credit Societies Ltd
(NAFCUB) the total deposits & lendings of Cooperative Banks in India is much more than
Old Private Sector Banks & also the New Private
Sector Banks.
This exponential growth of Co operative Banks
in India is attributed mainly to their much
better local reach, personal interaction with
customers, their ability to catch the nerve of
the local clientele.
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COOPERATIVE
BANKING
STRUCTURE
Agricultural credit
Short term and
medium term
credit
State co-operative
banks
Central co-
operative banks
Primary
a ricultural credit Grain banks
Long term credit
Central land
development
banks
Primary land
development
banks
Non-agricultural
credit
State co-operative
banks
Central co-
operative bank
Primary non
agricultural
societies
Employees co-
o erative creditUrban co-
State industrial
banks
Central industrial
co-operative
banks
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1. STATE CO-OPER ATIVE BANK
RBI is not in a condition to deal directly withprimary credit societies or central co-operativebanks because of their large number
It provides funds to these societies through stateco-operative societies
The district or central co-operative cannotdirectly deal with each other
The major part of the share capital is provided bymember societies , the rest is generallycontribution from the state
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The main source of their deposits is again the
member societies and central co-operativebanks
As much as 98%of the advance of co-operativesocieties are to these societies
Of the total advances approximately 75%areshort term and 25%are medium termadvances
Almost two third of the advances of thestate co-operative banks is for agriculturalpurposes
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2. Central (district)co-operative banks
Central (district )co-operative banks
Federations of the
co-operative
societies
Co-operative societieswhose membership
may be acquired by
the co-operative
societies or individuals
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The main function of central co-operative
bank is to provide credit to the member
primary co-operative credit societies
They make give loan to individuals also
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3. PRIMARY CREDIT SOCIETIES
They have direct root with they people theyintend to serve
In rural areas they mainly serve cultivators
In urban areas they mainly serve theartisans,etc
The success of co-operative movement
depend upon them Share value being naminal is the main source
of the funds
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The lending is only to the members of the
society and every one can be a member
A large amount of 40% of the total also
perform non-credit functions
The interest rates are very low
These societies provide cheapest possible
credit to the members
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STRUCTURE
They have a two tier system
The apex body in the state is the state land developmentbank
At public contact level there are central land mortgage
banks or primary land development banks or braches of central land development bank
The organisation of these banks are differs from state tostate
At the national level ,state land development banks have
formed an association named ALL-INDIA LANDDEVELOPMENT BANKS UNION
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Ordinary debentures are fully guaranteed the
state government
The RBI contributes 20% of each debenture
series or the shortfall in the public
subscription , whichever is lower
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INDIGENOUS BANKERS
These are individuals and partnership firmsperforming the banking function
They also act as FINANCIAL INTERMIDIARIES
They are much larger than the commercial banks
According to the INDIAN CENTRAL BANKINGENQUIRY COMMITTEE (1931),
an indigenous banker is any individual or private firm receiving deposits and dealing in
hundies or lending money
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They provide finance for productive purposes
directly to trade and industries , and indirectly
, through money lenders and traders to
agriculturists w it whom they find it difficult to
establish direct relations
They keep in touch with the traders and small
industrialists and finance marketing on asizable scale
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MONEY LENDERS
Money lenders may be rural or urban ,
professional or non professional
They include large farmers , merchants ,
traders, arcadias, goldsmiths , village
shopkeepers , sardars of laborers ,etc
The methods and areas of operations differ
from money lender to money lender
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M AIN CHARACTERISTICS OF
M ONEY LENDERS
1. Their funds are their own
2. Their clients are mainly the weaker sections
of the society
3. Their loans are highly exploitative. They
charge very high rates of interest
4. Their operations are entirely unregulated
5. The credit is prompt and flexible
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FOREIGN BANKS They are here since British days. Some of them are as under
1. American Express Bank Ltd.
2. ANZ Grid lays Bank Plc.
3. Bank of America NT & SA
4. Bank of Tokyo Ltd.5. Banquc Nationale de Paris
6. Barclays Ban Deutsche Bank A.G.
7. Hongkong and Shanghai Banking Corporation
8. Citi Bank N.C.
9. Standard Chartered Bank.10. The Chase Manhattan Bank Ltd.
11. Dresdner Bank AG k Plc
Such new banks are :
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Such new banks are :
Barclays bank
Bank of ceylon
Bank indonesia international
State commercial bank of Mauritius
Development bank of Singapore
Overseas Chinese bank corporation China trust commercial bank
Krug Thai banking public company ltd
Cho hung bank Fuji bank
Toronto dominion bank