Banking

Introduction
The word bank is used in the sense of a
commercial bank.
It is of Germanic origin though some
persons trace its origin to the French word
Banqui and the Italian word Banca.
It referred to a bench for keeping, lending
and exchanging of money or coins in the
market place by money lenders and
money changers.

Bank in India
In India, modern banking is now 200
years old. Upto 1935, the country
lacked a true central bank and it was
in that year RBI Began its operations.
In the absence of a true central bank,
the government had monopoly right
to issue currency and the Imperial
Bank of India, itself a commercial
bank, operated as bankers bank.

Imperial Bank of India

The Imperial bank of India was created by
amalgamating the Three Presidency bank
which were operating in the phase of I
World War and before.
1.Bank of Bengal, the 1st Presidency Bank
established in 1806 also known as Bank of
Calcutta
2.Bank of Bombay established in the year
1840
3.Bank of Madras established in the year
1843.

Definitions
Chambers Twentieth Century Dictionary
Defines a bank as an institution for the
keeping, lending and exchanging, etc of
money.
According to Kent, bank is an
organization whose principal
operations are concerned with the
accumulation of the temporarily idle
money of the general public for the
purpose of advancing to others for
expenditure.

Indian Banking System

Reserve Bank of India
(Central Bank & Monetary Authority)
Apex
Banking
Institutions

Industrial
Development
Bank of India
(IDBI)

Industrial
Investment
Bank of India
(IIBI)

Small Industries
Development
Bank of India
(SIDBI)

ExportImport Bank
(EXIM Bank)

National
Housing
Bank (NHB)

National Bank for

Agricultural & Rural
Development
(NABARD)

Banking Institutions

Commercial
Banks

Regional
Rural Banks

Public Sector
Banks

State
Bank
Group

Private Sector
Banks

State Cooperative
Banks
Central /
District Cooperative
Banks

Nationaliz
ed Banks

Indian

Co-operative
Banks

Foreign

Primary Credit
Societies

Structure & Organization of

Banks
In India, financial market is still
characterized by the existence of both the
organized & the unorganized segments.
Institutions in the organized market have
grown significantly & are playing an
increasingly important role.
The unorganized sector, comprising the
money lenders & indigenous bankers, cater
to the credit needs of the large number of
persons.

Types of Banks

Commercial Bank
Exchange Banks
Industrial Banks
Agricultural Banks
Cooperative Banks
Saving Banks
Central Bank

Commercial Bank
Before their nationalization, these commercial
banks were mainly engaged in financing
organized trade, commerce & industry, but their
nationalization made them actively involved in
financing agriculture, small businesses and small
borrowers also.
The commercial banks may be divided under a
number of sub-categories on the basis of
ownership and control of management.
1.Scheduled Banks
2.Non-scheduled Banks

Scheduled Banks
A scheduled bank is so called because it has
been included in the Second Schedule of the RBI
Act, 1934. To be included in the schedule, a
bank must satisfy the following 3 conditions:
a. It must have a paid up capital & reserves of an
aggregate value of at least Rs. 5 Lakh.
b. It must satisfy the RBI that it affairs are not
conducted in a manner which are detrimental to
the interest of depositors;
c. It must be a corporation or co-operative society
and not a partnership or a single owner firm.

Non-Scheduled Bank
Banks whose name do not enter in
the Second Schedule of the RBI Act,
1934 are called non-scheduled
banks.

Scheduled Banks
They are divided into
a.Public Sector Banks
b.Private Sector Banks

Functions of Commercial
Banks
1. Accepting Deposits
2. Advancing Loans
a. Cash Credit
b. Call Loans
c. Overdraft
d. Discounting of Bills of exchange
3. Credit Creation
4. Financing foreign trade
5. Agency services
6. Miscellaneous services.

Role of Commercial Banks in a

Developing Country

Mobilizing savings for capital formation

Financing industry
Financing trade
Financing agriculture
Financing consumer activities
Financing employment generating
activities
Helps in monetary policy.