rrb ppt

TO THE PRESENTATION

ONRRBs and

COMMERCIAL BANKS

BANKING

Crowther’s Definition banking “ Bank is an institution which collects money from those who have in spare and lend this money out to those who require it.”

All those institutions which are in the business of banking are called financial institutions.

COMMERCIAL BANKS

A commercial bank (or business bank) is a type of financial institution and intermediary.

It is a bank that provides transactional, savings, and money market accounts and that accepts time deposits

Classification of commercial banks

Scheduled banks :- included in the Second Schedule of RBI Act 1934

Non scheduled commercial banks :- Banks which are not included in the Second Schedule of RBI Act 1934.

Scheduled banks:

1.Public Sector Banks :- majority of stake is held by the government.

Eg. SBI, PNB, Syndicate Bank,etc.

2.Private Sector Banks :- majority of stake is held by private individuals.

Eg. ICICI Bank, IDBI Bank, etc.

3.Foreign Banks :- Head office outside the country in which they are located.

Eg. City Bank, Standard Chartered Bank,. etc.

IN INDIA

27 public sector banks 29 private sector banks 36 foreign banks 196 RRBs 4 local area banks

ROLE OF COMMERCIAL BANKS

processing of payments by way of telegraphic transfer, internet banking, or other means

issuing bank drafts and bank cheques accepting money on term deposit lending money by overdraft, installment loan,

or other means safekeeping of documents and other items in

safe deposit boxes cash management and treasury merchant banking and private equity financing

FUNCTIONS

Functions of Commercial Banks1.Primary functions a) accepting deposits b) granting loans and advances

2. Secondary functions a) Issuing credit b) foreign exchange c) Standing guarantee

d. Undertaking safe custody

e .Business information

f. Issuing demand drafts

g. Transfering money

h. Provide credit

Functions of commercial banks 1. Accepting deposits 2. Advancing Loans3. Discounting Bills of exchange4. Agency services5. General servicesCredit Creation: It is one of the most outstanding function of

commercial banks. A bank creates credit on the basis of its primary deposits.

1. Accepting Deposits

i) Demand or Current Account Deposits: A depositor can withdraw it in part or in

full ,at any time he likes, without notice It carries no interest

ii) Fixed Deposits :

Fixed deposits for 15days

to few years, Withdrawn at

expiry of term, High rate of

interest, A source of investment

iii) Saving Bank Deposits:

small saving deposits, salaried

people, less rate of interest

money can be withdrawn through cheques

2. Advancing Loans

Important means of earnings for the banks

ways of advancing loan

a. By allowing an over draft facility

b. Loans by creating a deposit

3.Discounting Bills Of Exchange The seller can give handy

to a bank ,which will give him

cash against it ,Bank charges interest on it

4. Agency Services Collection of bills, cheques

Collection of dividends,

interest, premium Purchase

and sale of shares …,etc

5.General services Traveller’s cheques

Supplying trade information

Economic surveys

• The Narasimham committee on rural credit recommended the establishment

• The government passed the Regional Rural Act, 1976.

• Establishment of 19 Regional Rural Banks (RRBs)

Initially, five RRBs were set up and sponsored by Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India

GOAL : to developing the rural economy development of agriculture

1. trade, commerce, industry and other activities in the rural areas

2. credit and other facilities

3. particularly to small and marginal farmers, agricultural labourers, artisans and small farmers

Objectives RRBs established with the explicit

objective of

1. Bridging the credit gap in rural areas

2. Check the outflow of rural deposits to urban areas

3. Reduce regional imbalances and increase rural employment generation

Each RRB is sponsored by a public sector bank- provides assistance in several ways

Functions

RRB is required to undertake the business of

1. granting loans and advances to small and marginal farmers and labours

2. granting loans and advances to artisans‚ small entrepreneurs and persons of small means engaged in trade‚ commerce‚ industry or other productive activities

forty percent of their advances are accounted for the priority sector- 25% should go to weaker section

Regional Rural Banks in India 30 Regional Rural Banks in India, under SBI in 13

states across 2000 branches 2000

84 REGIONAL RURAL BANKS AS ON JANUARY 1, 2010

Others Haryana State Cooperative Apex Bank Limited National Bank for Agriculture and Rural

Development Sindhanur Urban Souharda Co-operative Bank United Bank of India Syndicate Bank

RRBs are jointly owned by GoI,

the concerned State Government and Sponsor Banks (27 scheduled commercial banks and one State Cooperative Bank)

The issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively.

Vyas Committee (2004): RRBs reduced from 196 to 133 as on 31 March, 2006 and to 96 as on 30 April 2007.

Government initiated a process of structural consolidation of RRBs by amalgamating RRBs

sponsored by the same bank within a State.

The amalgamated RRBs would provide better customer service

Recapitalization of RRBs - 27 RRBs having negative net worth as on 31stMarch, 2007,

identified to be recapitalized in a phased manner. The total amount of recapitalization was assessed at Rs. 1,795.97 crore.

District Coverage

RRBs covered 525 out of 605 districts as on 31 March 2006

After amalgamation, RRBs have become quite large covering most parts

40 RRBs covered two districts and 16 RRBs covered a single district each

important segment of the Rural Financial Institutions (RFI) for financial inclusion